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What is Salary Sacrifice?
A Smarter Way to Pay for Employee Benefits
Ever wished your paycheck could stretch a little further? Salary sacrifice makes it happen. It’s a simple, tax-efficient way to fund benefits—helping employees save money while giving businesses a smarter way to reward their teams.
From pensions and healthcare to commuting and even household expenses for remote workers, salary sacrifice lets employees swap a portion of their pre-tax salary for valuable perks. The result? Lower tax, bigger savings, and a benefits package that actually makes a difference.
How Salary Sacrifice Works?
It’s exactly what it sounds like—employees exchange part of their salary before tax is applied to pay for benefits. Because it’s deducted before tax and National Insurance, employees end up paying less tax overall while still receiving the full benefit value.
For businesses, it’s just as rewarding. Offering salary sacrifice benefits reduces employer National Insurance contributions, lowers payroll costs, and helps attract and retain top talent.
Example:
Imagine an employee wants to contribute £100 per month toward a benefit. Through salary sacrifice, that amount is taken before tax, so instead of costing them £100 in take-home pay, it might only reduce their net salary by £70. They still receive the full £100 benefit while paying less tax.
Which Benefits Can Be Paid via Salary Sacrifice?
Not every benefit qualifies, but many of the most essential and high-value perks can be funded this way. Here’s what employees can take advantage of:
Why Salary Sacrifice Works for Businesses?
It’s not just employees who benefit—companies save, too. Here’s why salary sacrifice is a smart move for businesses:
– Lower payroll costs – Reduced employer National Insurance contributions
– Stronger retention & engagement – Employees value perks that save them money
– More attractive job offers – Competitive benefits make hiring easier
– Tax-efficient solutions – Maximizes savings for both employers and employees
It’s not just employees who benefit—companies save, too. Here’s why salary sacrifice is a smart move for businesses:
The Bottom Line: A Win-Win for Everyone
Salary sacrifice is one of the simplest ways to make benefits work harder. Employees save money on tax, businesses optimize payroll costs, and everyone gets access to more valuable perks.
From pension savings to household support, this approach helps companies offer better benefits without increasing salary budgets.
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