Azets 16102023

Yorkshire companies benefit from ‘win-win’ staff pension opportunity

Richard Whitelock is a Partner and regional Head of Employer Solutions at Azets’ York office. Pension Salary Exchange has been rolled out to companies in Yorkshire by the Top 10 accountancy firm Azets, which has regional offices in Bradford, Leeds and York.

A growing number of companies in Yorkshire are implementing a beneficial tax planning arrangement amid the cost-of-living crisis.

The Pension Salary Exchange (PSE) can create savings for both businesses and their workers, helping employers to enhance their staff rewards package in order to attract and retain quality people.

With the UK experiencing well-documented labour shortages – job vacancies are just under one million – many firms in the county are reportedly being ‘out-salaried’ by competitors, hampering growth.

Market conditions have prompted local businesses to consider the HMRC-approved way of providing staff with net pay increases whilst making bottom-line savings at the same time.

Richard Whitelock is a Partner and regional Head of Employer Solutions at Azets’ York office.

He said: “The current economic climate and cost of living pressures mean that businesses, in many cases, don’t have spare funds to expand their staff reward package.

“To help attract and retain staff for companies, we have introduced PSE to many business in recent years “

Annual company savings have ranged between £5,000 and £50,000-plus for businesses employing between 10 to 130 employees.”

Richard added: “Employee retention is critical to many companies because it is expensive and time-consuming to replace quality staff – costs in relation to hiring, onboarding, training and mentoring, along with business disruption, soon mount up.

“Implementing PSE may mean staff may feel more rewarded and inclined to stay put, rather than having their heads turned by competitors.”

A form of salary sacrifice, PSE changes the way staff pension contributions are made.

Essentially, the employee stops making personal pension contributions and reduces their salary to match that saving.

At the same time the employer increases its contributions to ensure the employee’s pension fund receives the same as before in total.

This produces National Insurance Contributions (NIC) savings for both employer and employee.

“PSE is a win-win for both employers and employees, but many businesses still do not operate it or have not yet heard about it,” Richard said.

“It is important to note, however, that no salary exchange can take an employee’s salary below the National Minimum Wage (NMW) level, so those who are paid at or near NMW might not be able to take part.

“Businesses can either retain their annual PSE savings or reinvest them – in full or part – to boost their staff benefits package.

“The key benefit of PSE is that the cost of enhancing your staff rewards package can be in many cases entirely self-funded, helping the business to demonstrate its investment in its people for no actual extra cost.”

PSE also provides a “welcome increase” in take home pay for employees, again at no cost to the businesses; each employee can save typically between £10 and £25 per month, depending on salary level and marginal NIC rate.

Azets’ Employer Solutions and Payroll teams help with the initial implementation and ongoing running of the arrangement, and the Employee Benefits team advise on the options companies have to use their annual PSE savings for maximum benefit for their staff.

Richard added: “Private medical insurance, cash-back plans, staff discount vouchers and death-in-service cover are all popular options; our teams help source and introduce any of these options.”

He stressed that employers interested in PSE or any of the other popular options should seek professional advice.

If you are interested in finding out more about Employer Solutions at Azets, get in touch with Richard Whitelock, by emailing  or call 01904 464100.