Salary sacrifice refers to an employee agreeing to give up the right to receive a portion of their salary. This is used to provide a benefit, which is typically free of tax and National Insurance (NI) for employees. Employers can also save up to 12.8% on NI.
Such arrangements on benefits are commonly seen in voluntary benefit packages today, and some popular schemes include childcare vouchers, bike loans, mobile phones and car parking.
However the list of salary sacrifice benefits extends to health screening, work-related training, travel to work, and meals or food vouchers.
If structured correctly, contributions to a defined contribution pension scheme can also be offered through salary sacrifice arrangements within a voluntary benefits scheme in order to gain tax and NI advantages.