Employee Benefits
Salary Exchange Calculator
Calculate the benefits of salary exchange for both employees and employers.
Two big changes to Employer NI were introduced in the Autumn Budget
- Employers National Insurance increased from 13.8% to 15% in April 2025
- The rate at which the employer must start paying employer NI reduced from £9,100 per annum per employee to £5,000. This change in isolation is an additional £615 cost per employee per year, without taking into consideration the 1.20% increase on all salaries going from 13.8% to 15%
What is Salary Exchange?
A salary exchange arrangement enables employees to exchange part of their salary for a non-cash benefit from their employer, such as pension contributions. Salary Exchange is also sometimes referred to as Salary Sacrifice.
How does Salary Exchange Work?
An employee agrees to reduce their salary by an amount equal to their pension contribution. And in exchange, the employer then agrees to pay the employee’s salary exchange as an additional employer pension contribution.
Benefits of Salary Exchange
Employer
The employers saving can be passed onto the employees as additional pension contributions, or it could be retained by the employer to facilitate the purchase of additional employee benefits (other options available). The example below is based on a 5% employee and 5% employer contribution of basic salary.
Employee
The employee will save 8p for each £1 they exchange for earnings between £12,570 and £50,270, and 2p per £1 for earnings above £50,270.
The employees’ saving can either be added to their pension pot or used to increase their take-home pay (as per below example). With the compounding increase to employees living costs, this can be seen as a great benefit.
Salary Exchange Calculator
Discover how salary exchange can benefit both employees and employers through tax-efficient pension contributions
Enter Your Details
Employee Annual Savings
£120.00
More take-home pay per year
Total Employer Savings
£22,500.00
Annual savings across 100 employees
Take-Home Pay Comparison
Before Exchange
£23,919.60
After Exchange
£24,039.60
+£120.00 annually
Ready to Get Started?
Our team have a wealth of experience across all areas of Employee Benefits, including Salary Exchange. Contact us to learn more about implementing this for your organisation.
Important: This calculator is for guidance only and should not be regarded as financial advice.
Next Steps
To find out more about how Salary Exchange could benefit your business, please contact our team at eb@thomascarroll.co.uk