Employer: How does passing employers National Insurance Contribution savings (NICs) to employees work?
A fantastic feature of Cyclescheme is that employers make savings as well as employees.
For employers that want to go the extra mile, Cyclescheme can facilitate the passing on of employers National Insurance Savings (NICs) to their employees to enhance colleague savings further.
Employers can select to do this as part of their registration process (see image below), or they can contact us to set it up.
Employers typically save 13.8% on the total certificate value. However, we make a small adjustment which is explained below to ensure employers do not lose any money by offering this additional saving.
Typical employer savings:
- £1,500 certificate = £181.90
- £1,000 certificate = £121.26
- £500 certificate = £60.63
Where an employer has opted to pass NICs through to their employees, all their Hire Agreements will automatically factor this additional saving into the employee salary sacrifice deductions, there’s no need to try and calculate this yourself or account for this in any way. By providing your NIC rating (typically 13.8%) and how much of this saving you would like to pass on (0-100%), our system adjusts the employees' salary sacrifice to reflect this.
Please note ❗
Our system is unable to account individually for any employees that do not pay NICs (like certain under 21s or apprentices). If you choose to pass NICs savings to your staff, the value you allocate to pass on will be accounted for on all the requests you process.
An example of a lower-rate employee's savings with NICs passed on (and an ownership fee):
Helping hand ✋
Below is an explanation of how we calculate the total amount of NICs we pass on:
'Certificate value ÷ rate of NI' for example '£1,000 ÷ 1.138 (13.8%)' = £878.73
So the new amount for gross salary sacrifice is £878.73.
Employer NI Savings - £878.73 / 13.8% = £121.26 (£1000 - £121.26 = £878.73)
So in this scenario, we can see that the employer NICs matches the amount that the gross salary sacrifice has been reduced by, bringing the total to £1,000 (certificate value).
If we processed the calculation as simply 13.8% of £1,000 = £138.00, the total reduction in Gross Salary would be £862.00. However, this means that the Employer NICs would be £118.96:
£862 / 13.8% = £118.96 (a shortfall of £2.30)
Our process prevents the employer from making this small loss.