An employee is to be made redundant at the end of the month. They have been provided with a summary of their redundancy package, which includes three months' pay In lieu of notice (PILON). They have requested that we use salary sacrifice to pay the PILON straight into their pension (redundancy sacrifice), to avoid an immediate high tax charge and National Insurance contributions (NICs). There appears to be some confusion over whether this is possible, as a colleague has stated that 'under the tax regulations all notice pay is required to be taxed. We’re unable to process tax payments on a gross basis anymore.' However, some websites infer that any parts of the redundancy package that is subject to tax and NICs can be 'sacrificed'. 

Arthur Weller replies:  

If you look at HMRC’s Employment Income manual at EIM42780 and EIM42785, you can see that even though the advantages of salary sacrifice were withdrawn from April 2017, nevertheless employer contributions into a registered pension scheme are an exception. Consequently, such pension contributions are not taxable on the employee. The example at EIM42785 talks about an employee receiving a bonus to which he is contractually entitled.