6 Types of Salary Sacrifice Benefits for Your Workplace

Salary sacrifice schemes are a popular benefit, and for good reason. But there are more types of salary sacrifice benefits than you might think. Let's walk through what salary sacrifice is, how it works, and explore some key examples that could transform your workplace.

Benefits 101

Jun 11, 2024 ⋅ 5 min read

Salary sacrifice schemes are an increasingly popular benefit, and with good reason: they allow employees to make tax-efficient purchases and spread the cost out over multiple pay cycles. But the benefits don’t stop at just employees – and there are more types of salary sacrifice benefits you can offer than you might think!

Let's walk through what salary sacrifice is, how it works, and explore some key examples that could transform your workplace.

What is salary sacrifice?

Salary sacrifice is a type of benefit where an employee agrees to give up a portion of their salary toward something that will benefit them, like a bicycle or tech gear. These benefits are often provided at a reduced cost due to tax efficiencies, making it a win-win situation for both employees and employers.

How do salary sacrifice schemes work?

Salary sacrifice schemes are designed to be straightforward. The process begins with an agreement between the employer and the employee. You'll need to partner with a specialist in the salary sacrifice scheme you choose. Both parties must agree on the specific amount of salary the employee will forego in exchange for the chosen benefits.

Next, the agreed amount is deducted from the employee's monthly gross salary before tax and national insurance contributions are calculated. This deduction is beneficial because the sacrificed portion of the salary is not taxable, allowing both the employer and the employee to save money on these payments.

Once all agreements are finalised, the employee can start enjoying the benefits. These benefits could include a car, purchasing a bike, or saving for future retirement. But it’s important to be aware of certain restrictions and conditions. Some benefits, such as cars and pensions, come with extra rules and may not be available to all employees. 

Additionally, the deductions cannot reduce the employee's salary below the national minimum wage, and participating in a salary sacrifice scheme might impact the employee's entitlement to certain benefits, such as statutory sick pay or redundancy pay.

Types of salary sacrifice benefits

1. Nursery schemes

Nursery schemes, also known as childcare vouchers or workplace nurseries, are designed to help working parents manage childcare costs. Employees can exchange a portion of their salary for childcare vouchers or directly access nursery services provided by the employer. This not only reduces the financial burden of childcare but also helps ease the emotional stress of finding reliable childcare. Furthermore, parents can feel more confident and focused at work, knowing their children are well cared for.

2. Cycle to work schemes

Cycle to work schemes encourage employees to adopt healthier, more sustainable commuting options. Under this scheme, employees can purchase bicycles and cycling equipment through salary sacrifice. The scheme promotes physical fitness and helps companies meet their Environmental, Social, and Governance (ESG) goals through reduced environmental impact. By cycling to work, employees can also save on commuting costs and reduce their carbon footprint, contributing to a healthier planet.

3. Electric vehicle (EV) schemes

Electric vehicle schemes allow employees to lease electric cars at a more affordable rate. With growing awareness of environmental issues, many employees are keen to switch to greener modes of transport. This scheme not only aligns with corporate sustainability goals but also offers significant savings on fuel and maintenance costs for employees. Additionally, driving an electric vehicle can provide employees with a sense of pride and responsibility, knowing they are making a positive impact on the environment.

4. Grocery saving schemes

This is one you might not have thought of yet: what if your employees could save on their weekly grocery shop? Grocery schemes, like the one offered through Gogeta Grocery, offer employees a 10% savings on this expense by allowing them to purchase a pre-paid voucher from their gross salary, before tax and National Insurance deductions. These vouchers can be used at all major supermarket chains. This scheme can provide significant relief for employees, especially in times of rising living costs, helping them manage their household budgets more effectively.

5. Tech schemes

Tech schemes allow employees to purchase the latest technology products through salary sacrifice. Whether it's a new laptop, tablet, or smartphone, employees can spread the cost over several months, making high-end tech more accessible. This can be particularly beneficial for remote or hybrid workers who need reliable technology to perform their jobs efficiently. Employers benefit too, as providing access to up-to-date technology can enhance productivity and engagement.

6. Pensions

Employees can make pension contributions as a type of salary sacrifice scheme – the most common type of salary sacrifice in the UK.

As of 2023, the standard pension contribution in the UK is 8% of an employee's earnings. This is typically a minimum of 3% from the employer and 5% from the employee. ‍However, many companies today offer more generous pension contributions than the mandated 3%, with 10-15% being known as a generous offering.

Benefits of salary sacrifice

Salary sacrifice is advantageous to employees, but it doesn’t end there. There are plenty of ways salary sacrifice benefits employers, as well. Let’s take a look at how everyone gains with salary sacrifice:

Advantages for employees

  • Tax savings: Reduced taxable income can lower overall tax and National Insurance contributions.
  • Cost-effective benefits: Access to products and services at lower prices than retail.
  • Enhanced wellbeing: Benefits like nursery schemes and cycle to work schemes support work-life balance and physical health.
  • Environmental impact: Options like EV schemes promote greener living.

Advantages for employers

  • Employee retention: Attractive benefits can improve job satisfaction and reduce turnover.
  • Cost savings: Employers can save on National Insurance contributions.
  • Sustainability goals: EV and cycle to work schemes support corporate environmental strategies.
  • Workplace productivity: Healthier, happier employees are often more productive and engaged.

Final thoughts

Incorporating salary sacrifice is a great way to boost your company’s benefits. From childcare vouchers and cycle-to-work programs to the latest tech gear, the options are endless. Employers benefit too, enjoying improved employee retention, cost savings, and boosted productivity.

Want to learn more about how Ben can help you make the most of your salary sacrifice benefits?

Get benefits that get your people

Chat with one of our Benefits & Rewards Specialists to learn more.

Get started
No items found.
Copy link