Boss changes salary/avc without permission

[Chocolatechip]

Hoping someone can give guidance.
My husband & his boss agreed to set up a pension for him a few months ago, finally. Both agreed they'd each add 8% of gross. Still waiting on amended contract but happy its all set up.
In July his boss said he wants to sell the business & was asking his accountant to look at the books.
We have now noticed since then my husband's wage slip is different & wages increased by 9€.
His salary has now decreased by 8% & no sign of the avc reduction.
I'm guessing his boss is now paying for both through employer contribution instead & has just reduced his salary? I've emailed for clarity.
The same wk his pay slip said week 1 insurable wks instead of wk 28..
So... is this of any extra benefit to my husband? Is the salary decrease an issue long term 're redundancy or pension. Why would his accountant do it this way? Presume is for employer tax reasons?
Thanks

 

[LDFerguson]

If an employer pays you salary and then you choose to pay some of it as an employee contribution or AVC into a pension scheme, you can claim back the Income Tax but not the PRSI or USC. If the employer reduces the salary and puts the same amount as an employer contribution into a pension scheme, the contribution avoids Income Tax, PRSI and USC and so this would be advantageous for both employer and employee. But Revenue are aware of this - it's known as salary sacrifice and is forbidden. If Revenue notice this, now or in the future, they'll charge PRSI and USC on the contributions as if they were paid as salary.

I'd get the employer to rectify this as soon as possible.

Regards,

Liam
www.FergA.com

 

[Chocolatechip]

If an employer pays you salary and then you choose to pay some of it as an employee contribution or AVC into a pension scheme, you can claim back the Income Tax but not the PRSI or USC. If the employer reduces the salary and puts the same amount as an employer contribution into a pension scheme, the contribution avoids Income Tax, PRSI and USC and so this would be advantageous for both employer and employee. But Revenue are aware of this - it's known as salary sacrifice and is forbidden. If Revenue notice this, now or in the future, they'll charge PRSI and USC on the contributions as if they were paid as salary.

I'd get the employer to rectify this as soon as possible.

Regards,

Liam
www.FergA.com

Thanks for your reply..
Had a reply by email yesterday to say all will be restored to the way it was...
Seeing as it was an advantage to my husband's pension though is there anything that can be done ? Ask for increase in employer contribution another way?

 

[LDFerguson]

Seeing as it was an advantage to my husband's pension though is there anything that can be done ? Ask for increase in employer contribution another way?

The potential advantage derived from the employer doing something that is forbidden. Now it seems they're correcting this. It will cost the employer more when they correct it, as they'll be paying more employer PRSI on his salary.

Your husband can certainly ask for an increase in the employer contribution, but the employer is under no obligation to give it.

 

[Chocolatechip]

The potential advantage derived from the employer doing something that is forbidden. Now it seems they're correcting this. It will cost the employer more when they correct it, as they'll be paying more employer PRSI on his salary.

Your husband can certainly ask for an increase in the employer contribution, but the employer is under no obligation to give it.

As he has only agreed in the last few months to contribute, will ask hubby to broach it next yr!
It's a pity it's not allowed as it benefits both employer & employee but just not revenue! Maybe that is something they may change in time to come.

 

[Steven Barrett]

As he has only agreed in the last few months to contribute, will ask hubby to broach it next yr!
It's a pity it's not allowed as it benefits both employer & employee but just not revenue! Maybe that is something they may change in time to come.

And therefore the people of Ireland