NI rise set to boost employer interest in salary sacrifice

The 0.5% increase in employer and employee national insurance contributions, announced in the Pre-Budget Report, could boost employer interest in salary sacrifice arrangements.

Graham Farquhar, head of global employment at Ernst and Young, said: “This rise in NI will make [salary sacrifice] more attractive to employers, particularly [with regard to] pension contributions.”

As the increase is not due to come into effect until 2011, experts say employers will have time to put salary sacrifice arrangements in place where they have not already done so in order to help ease the burden of the rise in NICs.

The Pre-Budget report also included a higher rate tax of 45% for those on more than £150,000, a rise in fuel duty offsetting the 2.5% fall in VAT, and a delay in vehicle excise duty changes.