Can an employer increase salary instead of making pension contributions - where the employee requests that they do so?

The risk that is run in this situation is whether a salary increase as a result of withdrawal from a pension scheme would be considered inducement under section 54 of the Pensions (No. 2) Act (Northern Ireland) 2008. This states that an employer cannot act with the sole purpose of influencing an employee to give up membership of a pension scheme.

It is the employer’s motivation that is relevant in determining a breach of section 54, for example, if an employee came with the request with no prior communication from their employer, there would be difficulty showing that they were “induced” to opt-out of the scheme. However, if an employer is actively advertising the option for an  increase in salary by omitting pension contributions, then there is more risk of this being considered inducement.

There would need to be careful consideration of the specific facts and the broader implications of agreeing to an employee’s request. There is potential for this to lead to multiple employees asking for the same treatment which would become more and more difficult to refuse with every request that is granted. Specific legal advice should be sought on this issue.