What is salary exchange?
Salary exchange is an arrangement where an employee gives up part of their future earnings or bonus in exchange for a non-cash benefit. This is particularly relevant and effective for pension contributions.
How does it work?
As salary is being Exchanged rather than paid, the employee does not pay National Insurance Contributions on the exchanged amount. In addition, the employer does not pay NICs on the amount of salary exchanged either. Therefore, the exchanged amount can be paid into the employee's pension plan as an employer contribution.
What are the benefits of salary exchange?