Using salary exchange to boost pension contributions and after-tax pay would also generate £1.8 billion in employee savings, Howden’s Employee Benefits research found.
The research found that in response to the NICs increase, 33% of SMEs are passing costs onto customers, which could lead to inflationary pressures in the wider economy. Meanwhile, 32% are freezing hiring, and 28% are delaying planned salary increases.
Only 29% of SMEs currently use salary exchange (also known as salary sacrifice) for pensions, which Howden says has the potential to deliver valuable savings at a time of critical economic pressures.
The research reveals a significant knowledge gap: 36% of SMEs are aware of salary exchange but have not explored it in detail, and 17% are not aware of it at all.
Cheryl Brennan, Managing Director UK Employee Benefits, Howden, said: "At a time when SMEs are under immense financial pressure and employees are struggling with the cost of living, salary exchange is a powerful, underused tool.
Our research shows that the majority of SMEs are missing out on significant savings that could be reinvested into their people and growth."
READ MORE
01/08/2025
View all >
08/10/2025
MTD for ITSA exemption applications
HMRC has opened up a service for landlords and self-employed to apply for exemption from Making Tax Digital (MTD) for Income Tax phase one.
HMRC to resume taking tax from accounts
HMRC has resumed its programme allowing direct recovery of money from debtors’ bank accounts.
Long-term sickness blighting UK economy
The UK must tackle its status as the sick man of the G7 if it wants to grow the economy, warns the British Chambers of Commerce (BCC).
Sign up to keep in touch to receive our latest news and industry updates.
* *
Yes, I would like to receive email updates providing me with the latest finance news, advice guides and details of future events.