can an employer pay a lump sum in to an employees pension?

[JohnJay]

An employer owes an employee 1500/2000 for overtime/bonus. They currently dont contribute to the employees pension. Can the employer pay this as a lump sum in to the employees pension and what tax benefits are there for this?

 

[Gordon Gekko]

They could, but that's "salary sacrifice", which is taxable. The tax benefits disappear basically.

 

[JohnJay]

but an employer can pay a % of salary in to a pension with tax benefits. What's the difference in them paying a lump sum?

 

[Joe_90]

An employer can make a contribution to a pension on behalf of an employee.

The employer can't put the employees overtime into a pension only the employee can! The difference is that it's the employee contributing so the contribution will qualify for Income Tax relief, but not PRSI or USC relief.

 

[Gordon Gekko]

but an employer can pay a % of salary in to a pension with tax benefits. What's the difference in them paying a lump sum?

Pretty simple really. If an employee says "You know that money you owe me? Will you stick it into my pension instead?", that's "salary sacrifice" and it's taxable.

 

[Steven Barrett]

From the Revenue website on salary sacrifice

Any other benefits arising as a result of any salary sacrifice arrangement, and not specifically approved by Revenue as being exempt, are deemed to be payment of emoluments by an employer and chargeable to tax.

It does also say

Where income is not paid during the year e.g. a bonus, commission or other income which only arises after the end of the year, such income cannot be taken into account for the purposes of salary sacrifice

Steven
www.bluewaterfp.ie