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What should I do if I’m using salary sacrifice?

Salary sacrifice is an arrangement where a worker agrees to give up part of their salary and in return their employer pays it into their pension pot as part of their employer contributions. Because of this the worker receives a lower salary.

If you’re going to use a salary sacrifice arrangement we recommend that you take specialist advice to make sure that it meets HM Revenue & Customs’ (HMRC) requirements and complies with your employer duties.

If you’re setting up NEST and have a salary sacrifice agreement with your worker, your contribution levels will need to be based on their post-sacrifice pay. When you set up NEST you’ll set up your group. If you’re using salary sacrifice you’ll need to set up a dedicated group for workers who are in your salary sacrifice arrangement.

When you’re creating a group for salary sacrifice you should use a ‘Custom’ earnings basis and enter zero for your worker’s contribution level. When you enrol your workers you should make sure that you allocate them to this group. Your contribution levels should include the total amount you’re paying for the worker. This will include any pay that the worker has sacrificed. For more information on creating a new group please see How do I add a new group once I’ve set up with NEST?

When you submit a contribution schedule for validation we’ll check that your contributions match these levels.

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