Employer PRSA contributions vs salary sacrifice

Trying to work out the edges of how bonuses can legitimately be paid as employer pension contributions, and would appreciate any feedback on the situation below.

- PAYE employee, no bonus mentioned in employment contract
- Some employees are awarded bonuses each year. These can range from nothing at all upwards
- I have a separate email from the business saying the company may award me a bonus but whether it will, timing and amount are at its discretion and that it may pay any bonus as either an employer pension contribution or as cash (ambiguous as to whether they choose or I do)

I"m trying to work out if this could be considered salary sacrifice or if it is above board to be considered an employer contribution. I'm worried that the email is not explicit that the company will decide what form a bonus would take and not me, but maybe there's more to consider?

Thanks for any thoughts on the above.

Sounds very odd - dangling a bonus, or not, in front of you.

What is the company trying to achieve - is this a ploy to keep you in your current post without a salary increase?

They're a very good employer. They are very generous with bonuses in good years, but partly because the bonuses are sometimes so generous they want to ensure it's clear that there's no contractual entitlement to them.

There are strict rules regarding salary sacrifice which cover bonuses, both contractual and discretionary. Given the wording of the e-mail it suggests that the company has considered the issue (or taken appropriate advice) and has determined that paying this bonus as an employer pension contribution does not constitute salary sacrifice. I was in this position for quite a number of years and had discretionary (non-contractual) bonuses paid as employer pension contributions - the FD responsible was a stickler for the rules and wouldn't have touched this if it wasn't 100% above board. You could always contact the sender and (1) ask if the issue of salary sacrifice has been considered and (2) indicate which of the options is your preference.

My employer gives discretionary bonuses annually and employees are given the option to...

a. Have the bonus through payroll and be taxed accordingly - just like a normal gross salary for that month
b. Have some or all of the bonus paid to our PRSAs - which is tax-free, so we would get the full amount into the PRSA account

We can choose though.

redstar said:

My employer gives discretionary bonuses annually and employees are given the option to...

a. Have the bonus through payroll and be taxed accordingly - just like a normal gross salary for that month
b. Have some or all of the bonus paid to our PRSAs - which is tax-free, so we would get the full amount into the PRSA account

We can choose though.

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are they paid as EE or ER contribuitions to the PRSA, the OP is seeking to have increased ER contributions im sure.

EE contribution. Its equivalent to increasing my own pension contribution for that month by the bonus amount.

redstar said:

EE contribution. Its equivalent to increasing my own pension contribution for that month by the bonus amount.

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different thing then as you are capped on that whereas the ER amount isnt.

I just need to be sure that the extra EE contribution stays within my age-related contribution limits. Which it always does anyway.