Salary Sacrifice at Northumbria
What is a salary sacrifice?
A salary sacrifice happens when you give up the right to receive part of your pay in return for a non-cash benefit, for example a Nursery place or childcare vouchers.
The scheme is approved at Northumbria by Her Majesty’s Revenue and Customs (HMRC).
What is the benefit to me of joining such a scheme?
Tax and National Insurance contributions are not paid on the sacrificed element of your salary.
For example:
You currently earn £25000 a year and choose to reduce your salary through a salary sacrifice scheme in order to receive childcare vouchers.
The value of the childcare vouchers is £2000 a year, therefore the total earnings upon which Tax and National Insurance is calculated is £23000.
What happens to my pension?
Pension contributions continue to be calculated on the pre sacrificed salary, therefore future pension benefits are not affected by the sacrificed amount. It is recommended that anyone with a personal pensions plan seek independent financial advice in case the reduction in pay affects the expected benefits on retirement.
How will this affect other state benefits?
When entering a salary sacrifice arrangement to replace part of cash pay with a benefit that does not attract tax and national insurance contributions, it is essential to understand what the sacrifice will mean in practical terms.
You should consider carefully the effect, or potential effect, that a reduction in pay may have on your entitlement to Working Tax Credits or Child Tax Credits and if necessary, discuss your situation with an independent financial adviser or contact your tax credit office.
You should also consider the impact that a reduction in pay may have on your State Pension, Maternity Allowance, Incapacity Benefits, or Jobseeker’s Allowance. You should contact the Department for Work and Pensions or the HMRC website for further information.
Is there anything else to consider?
The salary sacrifice amount cannot reduce your earnings below the National Minimum Wage or the Lower Earnings Limit for payment of National Insurance.
Also, as you will have agreed to receive lower earnings , any requests for salary information e.g. mortgage requests will be based on your earnings post-sacrifice.
What if I take maternity leave?
Statutory maternity pay is calculated on your gross earnings in a set period. This is usually the 2 pay days up to and including the 15th week before your expected week of childbirth, although the period may vary depending on when the 15th week falls.
You may continue to receive any salary sacrificed benefits whilst on maternity leave, however, as your pay will have been reduced during the average earnings calculation period, your statutory and occupational maternity pay will also be reduced.
Further information is available on the Maternity Benefits - FAQ's document.
Nursery Places
For further information about the Nursery and contact details, follow the link below:
Childcare - Northumbria Nursery
Childcare Vouchers
Northumbria University, in conjunction with Computershare Voucher Services has introduced a system whereby part of your salary can be exchanged for childcare vouchers, as part of its family friendly initiative.
Each parent or legal guardian working at Northumbria can receive Childcare Vouchers, which are non-taxable and exempt from National Insurance up to £243 per month depending upon your salary. Further details can be obtained from the Computershare Voucher Services or by emailing deborah.beck@northumbria.co.uk or telephone 0191 227 4567.
