Reference/notional salary: a simple change that puts your employees at ease

Notional Salary - A notional or reference salary is the employee’s salary before salary sacrifice. You retain this for employees for the calculation of other benefits.

"Salary sacrifice? Does that mean you are paying me less?!"

Salary exchange when done correctly is a win-win for employers and their employees. The biggest challenge often found is that employees see the term salary sacrifice and think they will lose money (it's why we use salary exchange) and often wonder whether this will impact other areas of their life such as maternity pay or their mortgage. 

Reference/notional salary

A notional or reference salary is the employee’s salary before salary sacrifice. You retain this for employees for the calculation of other benefits such as life cover & pay rises etc. The ‘reference salary’ is also quoted for mortgage calculations, however, many mortgage providers now base their lending criteria on affordability; therefore a higher net (take home) pay may actually be even more advantageous.

Mintago's standard email communication (and therefore contract addendum) assume that employers use reference salary for all pay-related and state benefits. This is so that employees do not lose out from this change. It is assumed that notional salary is equal to your pre-exchange pay and will be used for all reference purposes such as sick pay rates, discretionary and other pay changes, and the reference point for any other salary related benefits.