A salary sacrifice scheme allows employees to exchange part of their gross salary for a non-cash benefit, with the payments taken directly through payroll. Because reductions are made before tax and National Insurance contributions are applied, salary sacrifice benefits can help employees access valuable products and services in a more affordable way.

Many employers use salary sacrifice schemes to strengthen their employee benefits package while supporting employee financial wellbeing. Common examples include Cycle to Work schemes, salary sacrifice car schemes, and technology salary schemes.

Salary sacrifice benefits are often used to improve recruitment, retention and employee engagement by offering practical, everyday support employees genuinely value.

Salary sacrifice works through an agreement between the employer and employee to temporarily reduce part of the employee’s gross salary in exchange for a benefit.

The employee repays the cost through payroll reductions over an agreed period, rather than paying large upfront costs. Depending on the scheme and the employee’s circumstances, this can create tax and National Insurance efficiencies.

For employers, salary sacrifice schemes provide a cost-effective way to improve employee benefits while simplifying access to high-value perks such as Cycle to Work schemes, Car benefit schemes and technology salary sacrifice schemes.

Salary sacrifice benefits can support both employers and employees.

For employees, salary sacrifice schemes can help spread the cost of larger purchases such as bikes, cars, laptops and home electronics through manageable payroll reductions. This can improve affordability while supporting financial wellbeing.

For employers, salary sacrifice benefits can strengthen employee value propositions, improve recruitment and retention, and provide employees with benefits they actively use and appreciate. In some cases, salary sacrifice schemes may also reduce Employer National Insurance costs.

Businesses increasingly use salary sacrifice benefits to create more competitive employee benefits packages without relying solely on salary increases.

Employers can offer a wide range of salary sacrifice benefits depending on the needs of their workforce.

Popular salary sacrifice schemes include Cycle to Work schemes, salary sacrifice car schemes, Home and Electronics schemes, pension salary sacrifice arrangements and wellbeing-related benefits.

Many businesses focus on benefits that provide practical, everyday value for employees, particularly during periods of increased living costs. Salary sacrifice benefits can help employees access transport, technology and home essentials in a more affordable and manageable way.

Perkbox brings multiple salary sacrifice schemes together into one platform, helping businesses simplify administration while improving the employee experience.

A Cycle to Work scheme is a salary sacrifice benefit that helps employees access bikes and cycling equipment through payroll reductions.

Employees choose a bike and eligible accessories, then repay the cost through manageable monthly instalments rather than paying upfront. Depending on their circumstances, employees may benefit from tax and National Insurance efficiencies.

Cycle to Work schemes are popular because they support employee wellbeing, healthier commuting habits and sustainability goals while providing a practical everyday benefit employees regularly use.

A salary sacrifice car scheme allows employees to access a vehicle through payroll reductions over an agreed period.

Many salary sacrifice car schemes include insurance, servicing, maintenance, MOT and breakdown cover within the monthly cost, helping employees manage vehicle expenses more predictably.

Salary sacrifice car schemes have become increasingly popular as businesses look for ways to support employee financial wellbeing while strengthening their employee benefits offering.

Electric and hybrid salary sacrifice car schemes are particularly attractive for businesses looking to support sustainability initiatives and lower-emission commuting.

Yes. Technology salary sacrifice schemes allow employees to spread the cost of laptops, tablets, phones and home electronics through payroll reductions.

Home and Electronics salary sacrifice schemes help employees access products they need for everyday life without large upfront costs. For employers, they provide a practical employee benefit that supports financial wellbeing and improves overall employee experience.

Technology salary sacrifice schemes have grown in popularity as employees increasingly expect benefits that support both work and home life.

In some circumstances, salary sacrifice schemes may help employers reduce Employer National Insurance contributions because employees exchange part of their gross salary for a benefit.

Alongside National Insurance savings, salary sacrifice benefits can also reduce hidden business costs associated with employee turnover, recruitment and disengagement.

Many employers use salary sacrifice benefits to strengthen recruitment and retention strategies by offering practical employee benefits that employees actively value and use.

The Autumn Budget 2025 introduced changes to the National Insurance treatment of pension salary sacrifice arrangements, with new limits due to take effect from April 2029.

The announced reforms relate specifically to pension contributions made through salary sacrifice. Other employee salary sacrifice benefits, including Cycle to Work schemes, electric vehicle schemes and Home and Electronics schemes, were not included in the proposed changes.

As employers continue reviewing employee benefits strategies, salary sacrifice schemes remain an effective way to support affordability, employee wellbeing and retention, while helping businesses provide valuable benefits in a cost-efficient way.

We continue to monitor regulatory developments and keep clients informed about any changes that may affect their schemes.

Yes. Salary sacrifice schemes can work effectively for businesses of different sizes, including SMEs.

Many smaller businesses use salary sacrifice benefits to create a more competitive employee benefits package without significantly increasing fixed salary costs. Offering salary sacrifice schemes can help smaller employers improve recruitment, retention and employee satisfaction while supporting financial wellbeing.

Modern salary sacrifice platforms also make administration significantly easier than in the past, helping SMEs manage employee benefits more efficiently.

Salary sacrifice schemes may affect certain salary-related calculations depending on employee circumstances.

For example, reducing gross salary could affect borrowing applications, pension calculations or statutory payments in some cases. Employers should ensure employees understand how salary sacrifice works before joining a scheme.

Despite these considerations, salary sacrifice benefits remain one of the most popular ways for employers to provide practical, affordable employee benefits that employees regularly use.

Salary sacrifice can affect pension contributions depending on how pension arrangements are structured.

Some pension salary sacrifice schemes are designed specifically to create tax and National Insurance efficiencies, while other salary sacrifice benefits operate separately from pension arrangements.

Following the Autumn Budget changes announced in November 2025, many employers have been reviewing pension salary sacrifice arrangements more closely. Employee benefit salary sacrifice schemes such as Cycle to Work and Car benefit schemes remain separate from those pension-related changes.

Salary sacrifice schemes can be particularly attractive for higher-rate taxpayers because reductions are made before tax and National Insurance contributions are applied.

Depending on the employee’s circumstances and the scheme selected, higher-rate taxpayers may see greater overall savings compared with paying for the same products or services outside payroll.

This is one reason salary sacrifice car schemes, Cycle to Work schemes and technology salary sacrifice benefits continue to grow in popularity across professional and corporate workforces.

The best salary sacrifice scheme for employee retention is usually the one employees genuinely use and value in everyday life.

Benefits such as salary sacrifice car schemes, Cycle to Work schemes and Home and Electronics schemes often perform strongly because they provide practical financial support employees can immediately feel the benefit of.

Businesses increasingly use salary sacrifice benefits as part of wider employee retention and recruitment strategies, helping strengthen employee value propositions while improving employee financial wellbeing.