SALARY EXCHANGE FOR PENSION CONTRIBUTIONS (SXP)
AGENCY WORKER QUESTIONS AND ANSWERS (Q&A)
This Q&A is applicable to all businesses, offices and operations within the gap personnel group, including:
• gap personnel Holdings Limited – Company Reg – 3589208
• gap personnel Holdings Limited t/a Hawk 3 Talent Solutions – Company Reg – 3589208
• gap technical Limited – Company Reg – 5646432
• gap personnel (TELFORD) LTD – company Reg – 13377649
• Quattro Recruitment Limited – Company Reg – 7131120
• Quattro Healthcare Ltd – Company Reg - 9389534
The Company pension provider is The People’s Pension Save where you are engaged by Quattro Group Holdings Limited / Quattro Recruitment Limited / Quattro Healthcare Ltd the Pension Provider is Nest
This document contains common “Questions & Answers” that you may have regarding Salary Exchange for Pension Contributions (SXP). If your question is not covered by the information below, please contact your Agency.
WHAT IS SXP?
SXP is a modern, cost effective and common way of making pension contributions. It is designed to save National Insurance costs for both workers and employers. Under SXP you exchange some entitlement to gross pay for increased agency/employer pension contributions. For these purposes, whilst we are not your employer, we are required to make employer pension contributions for your benefit. The changes under SXP provide National Insurance savings for you and your agency. The level of contributions to the pension scheme remains the same in total, and there is no change in the pension scheme provider. SXP just allows you to benefit from the reduction in your National Insurance deductions and improvement in net pay.
IS SXP COMPLIANT, I.E. DOES SXP CONFORM TO HMRC PRACTICE?
Yes, most “employers” in the UK use SXP. We sought professional advice and expertise from Dains Accountants on implementation of SXP. HM Revenue and Customs (HMRC) is familiar and comfortable with SXP as long as it is implemented correctly.
DOES SXP IMPACT MY TERMS AND CONDITIONS?
Yes, SXP requires a slight change in your contract for services so that your entitlement to pay is reduced but your entitlement to agency (“employer”) pension contributions is increased by a corresponding amount. The overall effect of this change reduces the National Insurance you pay and increases your net take home pay.
HOW MUCH NATIONAL INSURANCE DO I SAVE WITH SXP?
The amount you save depends on your level of pay, level of pension contributions and the percentage at which you pay National Insurance. Most workers pay National Insurance at 8% (correct for 2024/25) and their saving is the amount they exchange under SXP multiplied by this percentage. Those who do not pay National Insurance, perhaps because their earnings are insufficient or because they are over state pension age, will not make any saving. Your saving is also determined by the amount you earn above the National Minimum Wage. This is because we can only exchange pay you have above the National Minimum Wage for additional agency pension contributions.
HOW DOES MY PAYSLIP DIFFER WITH SXP?
When SXP is operating, we still show the value of pay before the change to terms and conditions on the payslip. We call this your “Reference Pay”. Including it helps you to check that we have calculated your pay correctly from the hours that you’ve worked. But the amounts will no longer be your contractual entitlement. From these amounts, you will see a pay reduction shown on your payslip as “Salary Exchange – Pension”, which is the amount you agree, and are legally able, to exchange for additional agency pension contributions, but you will also see higher take home pay on your payslip. Please see the end of this document for illustrations showing the “before” and “after” effects of SXP on your payslip.
WILL SXP IMPACT PROPERTY RENTALS OR MORTGAGE APPLICATIONS?
Where financial references are required by our agency workers, for example for the purposes of renting a property or obtaining a mortgage, we will ensure that the rate of “Reference Pay” is communicated and SXP explained to illustrate the improvement in net pay. You will find that most people understand SXP and have a good appreciation of the benefits.
IS ANYONE INELIGIBLE TO PARTICIPATE IN SXP?
Most workers are eligible to participate in SXP to some extent, but we do exclude some workers automatically where the law requires us to or where we believe they will not enjoy a benefit. Workers that are in receipt of statutory payments; e.g. SSP, SMP, SPP, SAP, will be excluded from SXP during the period of statutory pay. Without SXP, worker pension contributions required by auto-enrolment will be deducted from pay. Once normal pay continues, workers will automatically be reinstated into SXP. Any worker that has already opted out of the Pension will also be ineligible.
HOW DOES SXP AFFECT THE PAYMENT OF NATIONAL MINIMUM WAGE (NMW)?
The law requires us to ensure that all workers earn at a rate of no less than NMW. As agency pension contributions are not treated as pay for the purposes of NMW, it is important that your adjusted pay, i.e. after the reduction for SXP, does not fall below the NMW. We carefully check the amount of your pay above NMW and ensure that only pay above NMW is exchanged for pension contributions. If this isn’t at your full pension contribution level, the balance of your pension contribution will be deducted in the ‘pre SXP’ way so that the total amount paid to your pension is exactly the same.
CAN SXP IMPACT MY ENTITLEMENT TO STATE BENEFITS?
Contribution-based Benefits
Your entitlement to contribution-based benefits is related to the amount of National Insurance contributions you have paid or are deemed to have paid. The biggest impact would occur if SXP reduced pay to an amount below the National Insurance Lower Earnings Limit (LEL), £123 in 2024/25, so that you are no longer paying (or deemed to be paying) National Insurance. We will assess the pay of each worker to ensure that this does not happen, and you will be treated as ineligible for SXP if this is the case. However, even if your earnings remain above the LEL, because you are paying (or deemed to be paying) less National Insurance, this may reduce your entitlement to contributions-based benefits, so please take your own advice in relation to your specific circumstances and obtain an Optout Request Form if you need to.
State Pension
SXP does not affect your basic state pension as we ensure that earnings are greater than the LEL, or otherwise treat you as ineligible, so that your qualifying years for basic state pension are unaffected. The Department for Work and Pensions offers a free pension forecast. More information about this free service can be found on The Pension Service website at www.thepensionservice.gov.uk
Earnings-related State Benefits
Your entitlement to earnings-related benefits is usually based on the amount of your earnings after the SXP reduction. The amount of these benefits is likely to be affected by a reduction in pay. It could be that entitlement increases; however, you must take the necessary advice and ensure that the correct details are included on any claim forms.
State Work-related Benefits (SMP, SPP & SAP)
State work-related benefits are paid by us to eligible workers and are based on average weekly earnings over a fixed period before you begin to receive them. Work-related benefits can include Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP). The entitlement to SMP, SPP and SAP is based on average earnings which will be lower when participating in SXP. Given this, we treat these work-related benefits as a “Key Lifestyle Change” which entitles the worker to apply to opt-out of SXP without delay. We may automatically instigate that opt-out for you if it becomes applicable.
With regard to SMP, if a worker opts-out of SXP at or around the 15th week of pregnancy, the earnings period impacting maternity pay calculations will include a higher rate of gross pay entitlement. We may automatically instigate that opt-out for you if it becomes applicable.
WILL SXP AFFECT CHILD MAINTENANCE ENFORCEMENT COMMISSION (CMEC) PAYMENTS OR PAYMENTS UNDER COURT ORDERS?
Such payments can be based on either gross pay (after the SXP Adjustment) or net take-home pay and therefore the impact from SXP could be to decrease or increase the amount you are due to pay. Please check your own circumstances carefully.
WILL SXP AFFECT STUDENT LOAN REPAYMENTS?
Repayments of student loan (taken out with the Student Loans Company) may be reduced slightly as a result of participating in SXP. This is because your repayments are calculated on gross pay which will be reduced following SXP.
DO I NEED TO DO ANYTHING TO PARTICIPATE IN SXP?
No. Directly engaged agency workers, with the exception of those we know are ineligible, automatically participate in SXP based on their contract or after being provided with a Notification of the change in their terms and conditions or on returning to normal pay after a period of exclusion while receiving state workrelated benefits.
HOW CAN I OPT OUT OF SXP?
Those that do not wish to participate are able to opt-out of SXP and can continue to be a member of the Pension making contributions after the calculation of National Insurance and therefore not benefiting from any potential National Insurance savings. Applications to opt-out must be made using the SXP Opt-Out Request Form available from pensionsxp@gap-personnel.com. There are strict deadlines and timescales for dealing with your request to opt-out of SXP as explained below.
On implementation of SXP, on starting work and in any other instance where we provide a notification of SXP, we will allow you at least 7 days to submit an optout request using the relevant form. If you are enrolled in SXP in the meantime, we will not reverse the arrangements, but we will cease to operate SXP as soon as we have your completed SXP Opt-Out Request Form.
Where you experience a “Key Lifestyle Event” we will consider your application to opt-out of SXP. We will not always agree your application, but we will be reasonable in considering your request given a change of circumstances arising from any of the following:
∞ Pregnancy
∞ Birth/adoption/fostering of a child
∞ Divorce/separation
∞ Marriage
∞ Reaching state retirement age
∞ Death or redundancy of spouse/partner
∞ Promotion
∞ House move
∞ Changes in working hours (e.g. from fulltime to part-time)
∞ Commencement of or return from long-term absence (including sickness, unpaid leave and career break)
The Annual Renewal Date for SXP is 1 April. You have an opportunity to opt-out or opt-in to SXP by notifying us before we process payments for working on or after that date each year. If we receive an SXP Opt-Out Request Form from you in circumstances which do not involve a Key Lifestyle Event, we will not withdraw SXP before the following Annual Renewal Date.
IF I OPT-OUT OF SXP, WILL I BE ABLE TO OPT BACK IN AGAIN
In some circumstances, if you opt-out of SXP, we may reinstate you if your circumstances change; for example, if you return after having a child or following a period of sickness. In most circumstances however, if you opt-out you will only be able to opt back into SXP at the Annual Renewal Date.