What other benefits might be affected by entering into a salary sacrifice scheme?

There are some state benefits that are earnings-related, i.e. based on an individual’s level of earnings.

Earnings-related benefits include:

• The State Second Pension
• Maternity Allowance (MA): According to the Inland Revenue, if a woman’s cash earnings fall below an average of £30 per week, she will lose her entitlement to MA. If her average earnings fall to between £30 and £115, she might still be entitled to MA but at a reduced or variable rate.

Any amount of an individual’s earnings which are sacrificed in return for a NICs exempt benefit such as childcare vouchers will not be included as part of the earnings for the purposes of calculating earnings-related benefits. Furthermore, if taxable earnings are reduced to below the Lower Earnings Limit, the entitlement to earnings related benefits would also be reduced.