Salary exchange

Salary exchange offers a way to set up pension payments that can allow both employers and their employees to make a saving. Throughout these pages you’ll find a series of tools designed to help you introduce the concept to your clients, along with all the information you need to help them make an informed decision. The information provided is based on our understanding of current tax laws. These laws and our understanding of them may change in the future. Tax treatment will depend on the individual circumstances of each client and may be subject to change in the future.

Salary exchange explained

Salary exchange is a way of making pension contributions that could allow both employers and employees to save money.

  • An employee agrees to give up part of their salary or bonus in exchange for a pension payment paid by their employer.
  • Employers pay lower NICs as a result of paying their employees a reduced salary.
  • Employees also pay lower NICs and possibly less income tax.
  • Employers are free to use their NIC saving how they wish. Some might use a portion of it to supplement their employees' pension plans.
  • Employees can use their savings to boost their pension provision or increase their take home pay.

At the moment, we believe that salary exchange doesn't work seamlessly with the auto-enrolment process. Employers can't make an agreement for salary exchange a pre-condition for auto-enrolment. However, employers can choose to operate salary exchange before or after the auto-enrolment process or use it as an alternative contribution basis to a default basis (without sacrifice). Alternatively, employers can look into amending contracts of employment to have the same effect as salary sacrifice. Employers may need to take expert advice on salary sacrifice before deciding what they want to do.

Salary exchange calculators

Our salary exchange calculators can help calculate the benefits that can be achieved through an agreed salary exchange between an employer and employee and demonstrate if it's the right option for your clients.

Our calculators allow for both individual and bulk calculations, and offer the following features:

  • A comprehensive set of input fields make it easy to capture information that reflects a wide variety of client circumstances.
  • Before and after scenarios highlight the benefits for employees and employers.
  • Select the proportion of employer's savings to redistribute to employees (0-100%).


Our bulk salary exchange input form is ideal for large group schemes. It will save you the effort of carrying out numerous calculations using our individual calculator and offers:

  • A scheme level snapshot of the saving the employer stands to make.
  • Before and after scenarios for each member, reflecting salary, NIC payments and pension contributions.


You can download the below calculators to help you do this. Scheme information must be typed or pasted into the inputs tab on the spreadsheet, then click the 'Calculate' button. Please ensure you are using the latest version of the calculator.


Please read the important notes included within each calculator before proceeding.

- UK Tax Rate Salary Exchange calculator (excluding Scottish Tax Rate) 

- Scottish Tax Rate Salary Exchange calculator


We've produced a series of guides you can use to explain salary exchange to your clients.