The firm surveyed 200 employers in a web briefing and found that the majority of companies were failing to take advantage of the significant cost savings salary sacrifice can generate.
But the research found that over 50 per cent of participants have plans to implement a salary sacrifice programme within the next 12 months.
The reduction of base salary means both the employer and employee pay less national insurance. Employers can also save on their tax bill.
For a pension scheme with 500 members, an average salary of £30,000 and an average contribution of 5 per cent, the company could save as much as £100,000 a year in national insurance.
Mercer’s employee benefits business senior associate Stephen Hempenstall says: “Companies are increasingly looking to their benefit programmes for cost savings and are realising that pension salary sacrifice can generate significant savings for both employers and employees.
“With future reduction in state second pension accrual and increases in national insurance contributions, pension salary sacrifice will become more attractive to both the employees and the employer.
“Salary sacrifice is no longer the reserve of larger organisations. Organisations with only 150 – 200 employees are still likely to achieve a return on investment within the first 12 months of implementation.”