Charities are being urged to explore salary sacrifice arrangements for employee pension contributions to help mitigate the impact of rising national insurance costs.

The rate for employer NICs will rise from 13.8% to 15% from 6 April; adding an estimated £1.4bn to the annual national insurance bull for charities.

Financial experts have encouraged charities to implement salary sacrifice schemes to help reduce the impact of some of these costs to both the charity employer and to the employee.

Salary sacrifice allows employees to make pension contributions directly from their salary, reducing both the employee’s and employer’s NICs.

This can ultimately save charities money while also benefiting employees by increasing their take-home pay.

Quantum Advisory has said that while small charities may benefit from NIC exemption, charities with an income of over £1 million will need to “find ways to manage the additional costs, without compromising their ability to deliver vital services”.

“Salary sacrifice could be an option for charities to lower NICs for both the employee and employer,” the firms partner and actuary, Stuart Price said.

“It is a relatively straightforward way to save money but the barriers to these types of arrangement often stem from a lack of understanding of how salary sacrifice works, the benefits it provides and communication with employees.

The government’s National Insurance Contributions Bill, which was debated in the House of Lords on February 25, introduced an amendment exempting charities with an income of less than £1m from the increase.

However, large charities will not be eligible for the exemption and sector bodies have raised concerns about the additional financial pressures this will cause.

“There’s no one size fits all arrangement, but we strongly encourage all charities and in particular medium and larger charities to explore the salary sacrifice options available to them as soon as possible to minimise the impact of increasing NICs from April,” Price said.

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