Pensions and salary sacrifice

[gordano]

I have read on HMRC website that if salary is sacrificed for the employer to make direct pension contributions then the salary must still be at least the national minimum wage.

However if the employee is also the director/owner of the company they are not normally subject to minimum wage, would this still be the case if the director/owner received pension contributions as a salary sacrifice?

Example:
Director/owner takes £650 pcm salary and works 40 hours per week ... e.g. £3.75 per hour.
Director/owner receives contributions of £2000 pcm into their pension, direct from the company.
Can the director/owner do this or would they have to increase their salary to national minimum wage?

 

[UK Contractor Accountant]

What exactly has the Director sacrificed?

Are you saying his pay was £2650 per month - then sacrificed £2000 per month into a pension scheme??

 

[gordano]

The pay is currently £650 pcm and then dividends are taken. The plan was then to add pension contribution of £2000 direct from the employer (not salary).

 

[Newchodge]

I think the clue is in the title "salary sacrifice". What salary has been sacrificed?

 

[gordano]

The £2000 pension contribution will be paid instead of salary. Or to look at it another way there is a remuneration increase of £2000, instead of paying this as salary it is being paid as a pension contribution direct to the SIPP from the employer. In effect this £2000 can be viewed as a salary sacrifice?

 

[UK Contractor Accountant]

Salary sacrifices doesn't normally apply for Directors/Shareholders as they are able to manipulate their remuneration package to minimise their tax exposure.

What you describe is not a salary scrafice - it's just part of your remuneration package which is a fully allowable cost for the company with no issues regarding minimum wage exposure.