Placing a £2,000 cap on salary sacrifices will put even more pressure on SMEs that are already dealing with significant tax headwinds and financial challenges.
Salary sacrifice schemes have become a crucial tool for SME employers, enabling smaller firms to offer attractive pension and benefits packages without the cash flow implications of direct salary increases.
Restricting salary sacrifices will disproportionately affect SMEs’ ability to retain skilled staff and compete for talent against larger companies.
Following years of inflationary pressure, rising energy costs and increased regulatory compliance, many SMEs are operating on increasingly tight margins. With around 75% of businesses indicating that they won’t be able to absorb additional NI costs, the financial burden will fall on employees through reduced pension contributions or weaker benefits.
A salary sacrifice cap risks damaging confidence in workplace pensions at a time when we should be encouraging long-term saving. SMEs should seek professional advice now to understand potential impacts and explore alternative benefit structures before any changes take effect.
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