In London on the 21st July a new survey by Howden, conducted with YouGov, has found that most UK small and medium-sized enterprises (SMEs) are failing to use salary exchange schemes, missing out on billions in potential National Insurance (NI) savings.
The poll of 523 senior SME decision-makers revealed that 68% of businesses do not currently use salary exchange to enhance pension contributions and after-tax pay. The missed opportunity amounts to an estimated £2.7 billion in employer NI savings and £1.8 billion for employees.
For someone earning £38,000, the scheme could boost pension contributions by 7.5% and increase take-home pay by 0.5%, funded through lower NI contributions.
Rising employment costs are already prompting SMEs to cut back. A third are passing higher NI costs onto customers, 32% have frozen recruitment, and over a quarter have postponed planned pay rises. Many had intended to prioritise salary increases, business growth, or hiring before the NI rise but have now shifted focus to cost containment.
Only 29% of SMEs use salary exchange for pensions, with adoption highest among larger SMEs. Awareness is patchy, with over a third of businesses knowing about the scheme but never exploring it, and 17% having no knowledge of it at all.
Cheryl Brennan, Howden’s UK Employee Benefits Managing Director, said salary exchange could offer much-needed financial relief: “At a time when costs are rising and employees are feeling the squeeze, this is a practical tool to improve both business resilience and workers’ long-term financial wellbeing.”
The findings come as pension reform is debated, with calls for employers to take a more active role in helping staff prepare for retirement.
Full info obtained here
