How To Cut Your Employers’ National Insurance Bill With Salary Exchange

Want To Cut Your Employer NI Bill? Salary Exchange Is Your Best Friend

With everyone feeling the pinch, you’re probably wondering how to lessen the impact of rising tax costs. In light of the latest budget, there’s never been a better time to think about offering Salary Exchange benefits to your workforce.

What Is Salary Exchange?

Salary Exchange (or Salary Sacrifice) is a smart, easy way for employees to swap part of their gross salary for a valuable benefit, like pension contributions or a big purchase such as a new bike, electric car, or household goods. This amount is taken directly from an employee’s gross pay, which often cuts down National Insurance contributions for both you and your people.

These schemes are a true win-win – allowing you to offer a stronger benefits package without extra costs, while helping your team feel more engaged and motivated.

What Can Employees Buy Through Salary Exchange?

One of the best things about Salary Exchange is the wide range of benefits that it offers. Here are just a few things your employees can purchase via the different Salary Exchange schemes:

• New bike, e-bike, and cycling equipment through Cycle to Work
• Lease for a new electric car (Class 1A (employers) will be reportable on the value of the benefit)
• Products from IKEA and Currys via Techscheme
• Childcare at local nurseries
• Workplace Pension contributions
• Days of annual leave through Holiday Trading
• Groceries
• Gym memberships.

However, it’s crucial to note that not all salary exchange schemes offer employer NI savings. The only benefits you don’t need to value (and therefore don’t have to report to HMRC as a salary sacrifice arrangement) are:

• Payments into pension schemes
• Employer-provided pensions advice
• Workplace nurseries
• Childcare vouchers and directly contracted employer provided childcare that started on or before 4 October 2018
• Bicycles and cycling safety equipment (including Cycle to Work).

We’ve got a super in-depth guide dedicated to Salary Exchange, how it works, and the details of all the different schemes. Check out our Employer’s Complete Guide.

How Does Salary Exchange Save National Insurance?

When an employee swaps part of their salary for a benefit, their gross pay goes down. This reduces the amount you (and your employees) need to contribute to NI.

Over a year, these savings can be substantial, especially for larger workforces or for high-value salary exchanges like Workplace Pensions or electric vehicles. Basically, lower gross pay = lower NI contributions.

It’s free to register for most Salary Exchange schemes. Even though you cover the cost of any initial purchases, you’ll get that money back through your employees’ salary swap – saving on National Insurance contributions in the process.

Nick Nelms
Senior Consultant, Employee Benefits

Not only does Salary Exchange save you money, but your employees also benefit from reduced NI contributions and, in some cases, lower income tax bills. This makes the scheme even more attractive to your workforce, as they get both a financial and lifestyle benefit (like pension contributions or a new bike) while reducing their own tax burden.

Example Salary Exchange Savings (from April 2025)

Let’s say you have an employee earning £40,000 a year who decides to exchange £4,000 of their salary for pension contributions. Here’s how it would break down:

The more employees who join the salary sacrifice pension scheme, the bigger the savings for your business! Based on the £600 saving above, take a look at how quickly your yearly National Insurance savings can add up as more of your team gets involved 👇.

It can be hard to navigate the various rules that come with Salary Exchange, so it’s best to chat to an expert so you can get the full picture. Give us a call on 02084327333 or email help@drewberry.co.uk to get started.

There’s lots to consider when setting up a Salary Sacrifice scheme. Your budget, your team’s priority and your employee engagement strategy will all be important factors affecting which employee benefit is right for employees.

We do this day in, day out. We’ll help you find the right Salary Exchange scheme to engage your workforce and make National Insurance savings.

Joe Toft
Senior Consultant, Employee Benefits

Getting Employee Buy-In For Salary Exchange

The benefits of Salary Exchange for employees speak for themselves: lowering tax bills while getting something in return is a huge win. But employees may be unaware or even sceptical of the advantages.

That’s where your communication game needs to be strong. Getting employees excited about Salary Exchange is all about clarity and showcasing the benefits. Here’s how to build enthusiasm and buy-in from your people.

Clearly Explain The Benefits

Make it easy for employees to see how these schemes help them. Explain that by swapping part of their salary, they can get valuable perks while paying less National Insurance.

Real-life examples can be powerful: “With a small salary swap, you could get that new bike you’ve been dreaming of!” And if you have an employee benefits platform such as My.Drewberry, your communication will be much more effective.

Focus On Financial Perks

Show your people how Salary Exchange can actually help them save money, especially with benefits like extra pension contributions or childcare. Walk them through specific numbers to demonstrate the tax savings and lower National Insurance contributions.

Offer A Range Of Choices

Employees are more likely to take advantage of a scheme if they have options that suit their individual needs. Depending on your industry, popular choices might include pension boosts, bicycles, car leasing, or tech gadgets. Giving people flexibility helps them feel they’re getting benefits tailored to them.

Provide Support And Answer Questions

Make yourself available to answer questions or provide one-on-one discussions. Some employees might hesitate due to uncertainty, so reassuring them and providing clarity is essential. Consider setting up informational sessions or offering time with your Employee Benefits Consultant.

Offering Salary Exchange schemes gives employees the flexibility to make their benefits work for them. If a team member wants to swap part of their salary for a particular perk, you’ve enabled them to prioritise their personal needs, whatever they may be.

Richard Noble
Senior Consultant, Employee Benefits

Use Success Stories

If other employees have had positive experiences with the scheme, share these stories! Testimonials can be very motivating. Highlighting how others are benefiting can create a sense of excitement and encourage people to jump on board.

Get Help From The Experts

While Salary Exchange schemes have clear benefits, there are some rules and conditions. Working with an adviser (like our Drewberry experts) ensures your scheme is compliant and structured in a way that maximises benefits while adhering to HMRC guidelines.

Our friendly team will handle all the heavy lifting for you: from finding the right scheme, rolling it out to employees, and measuring its performance. We’ll ensure everything’s compliant, making adjustments where needed based on employee feedback and changing tax regulations.

National Insurance Savings Made Simple With Drewberry

Our number one takeaway is that there’s never been a better time to think about Salary Exchange. Along with offering a diverse range of valuable perks to your team, it can also create huge savings on your employer National Insurance Contributions.

There’s lots to consider: your budget, your team’s priority and your employee engagement strategy will all be important factors affecting which scheme is right for you.

Our Drewberry experts are here to help, making sure you get the most suitable scheme for your people. To chat through your options, or to get started, call 02074425880 or email help@drewberry.co.uk.

Why Speak to Us?

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We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

• We are award winning 🏆 independent insurance advisers who work with all the leading UK insurers
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