Over the last few years, there has been much debate about whether Salary Sacrifice could be used alongside Auto-Enrolment (AE), and if so, whether this would meet both the spirit and the requirements of the legislation.

Much has changed and/or been clarified over the last 12 months, and it has become increasing apparent that Salary Sacrifice can play a part for many groupings of employees subject to AE, and possibly regardless of the scheme they use for the actual AE process.

The latest piece in this complicated jigsaw would appear to be the recent DWP paper on Scheme Certification requirements, which although more than a little confusing, does seem to loosen the certification tests for employers from the original direction of travel. If the phrase ‘Certification Test’ leaves you a little bemused, please read the link below from a (much) earlier post which gives you a feel for what this is all about. The actual criteria may well have changed, but the original intention of Certification still remains as per Steve Webb’s comments:

https://www.jelfgroup.com/blog/2011/07/scheme-certification-tests/

So, for the purpose of this post, let’s just assume that AE and Salary Sacrifice can snuggle up together. If that is the case, then employer’s should clearly be considering using Salary Sacrifice where appropriate.

Yet a recent poll by Payroll World Magazine found that only 45% of respondents were planning to use Salary Sacrifice alongside AE. Last week I was invited to add a post to the Payroll World Blog looking at this issue, and in that post I suggest that the other 55% might well be missing a trick:

https://www.payrollworld.com/blog/post/44/salary-sacrifice-and-auto-enrolment

Salary Sacrifice is certainly not right for every employer or grouping of employees, but where it is a good fit it can make a huge difference to the saving levels and the perception of the scheme by the workforce. As such, it certainly merits consideration for as long as this option is viable for all parties.

One final, but important, point. Whilst it is quite easy to implement Salary Sacrifice well and legally, it is equally easy to get it wrong by cutting corners. I would strongly urge you to take advice on this area rather than go it alone.

It’s also worth pointing out that whilst NEST may well be able to accept the contributions from this payment method, it is extremely unlikely that they will be able to help the employer with the process and communications of implementing Salary Sacrifice. Both are key to a successful and legal implementation.

Employer’s take note.

Best regards

Steve