Salary sacrifice, as the name suggests, involves an employee exchanging a portion of their salary for something else—such as additional vacation days, a company car, or extra contributions to their occupational pension. The latter has become increasingly common. In practice, it means the employee forgoes part of their gross salary, which is then redirected into their pension savings. This is a straightforward and tax-efficient way for those looking to boost their pension.
Who Is Salary Sacrifice Relevant For?
Before an employee even considers salary sacrifice, it's crucial to calculate whether it is truly beneficial. A key threshold to be aware of is that for 2025, the gross salary after salary sacrifice must exceed 54,200 kronor. Falling below this amount can negatively impact general pension, sickness benefits, and parental benefits.
It is always the employer's decision whether to offer salary sacrifice. To prevent misunderstandings, it's wise to have a clear policy outlining the applicable rules and to always draft an agreement with the employee. This agreement should specify the duration of the salary sacrifice arrangement, the termination process, and how the occupational pension is affected.
What Are the Advantages of Salary Sacrifice?
Approximately 8 out of 10 employers offer their employees the option to engage in salary sacrifice. It's a wise choice, as it is one of the most valued benefits when employees have their say. Offering salary sacrifice can make your company more appealing as an employer and help retain talent, all without incurring additional costs.
For employees, there are several reasons to consider salary sacrifice, especially regarding pension savings:
- With salary sacrifice, you can save more money than the salary you give up. This is because the company you work for should not profit from enticing employees to sacrifice salary. Since a lower salary payout for the company results in reduced social security costs, this needs to be adjusted with a higher contribution to the occupational pension.
- If you are close to the threshold for paying state tax, you can sacrifice the portion above that amount, thereby falling below the level for state tax. The money you sacrifice will still come back to you as a pensioner.
- You gain a stronger pension through advantageous savings. If you save within your collectively agreed pension plan, the fees are low. What you save is also tied to your pension, and you cannot access the money until you start withdrawing your occupational pension, which can be beneficial for those who find it hard to resist dipping into their savings.
- Salary sacrifice gives you the opportunity to retire earlier due to the enhanced pension.
Things to Consider for You as an Employer
As previously mentioned, it's crucial for employees to calculate the impact of salary sacrifice before making a decision. However, as an employer, there are several aspects you need to monitor:
- If the employee's earnings fall below the income ceiling for certain benefits after salary sacrifice, their sickness benefits, parental benefits, and temporary parental benefits will be reduced.
- The statutory retirement pension may also decrease under certain conditions.
- The ITP disability pension will be lower.
- Pay attention to how contributions to the regular occupational pension are affected. If the employee has a defined contribution pension where contributions are a percentage of the salary, you must ensure they are compensated for any loss in occupational pension.
- Remember that salary reviews should be based on the gross salary before salary sacrifice. Future occupational pensions, holiday pay, and salary supplements, such as on-call and overtime pay, should also be calculated on the salary before deductions.
- Inform employees about how salary sacrifice works and its potential consequences. Clear guidelines and a solid policy reduce the risk of misunderstandings.
On unionen.se, there are some calculation examples you can use to understand the potential effects of salary sacrifice (in Swedish).
How Do We Get Started?
The first step is to determine whether your company should offer salary sacrifice and under what conditions. After that, it's about developing a policy, informing employees, and establishing procedures to ensure the process is as secure and smooth as possible.
In our web-based payroll system, Flex HRM Payroll, there is support for managing salary sacrifice. Moreover, you have the option to establish regulations for amount limits based on the pension agreement, which triggers an alert for the administrator if an unauthorized amount is entered. Contact us if you want to learn more!
