For employers, salary sacrifice is one of the few things that helps staff and the business at the same time. Your people get pensions, electric cars, bikes or childcare more cheaply, and you save employer National Insurance on every pound sacrificed. The reason more employers do not offer it is the admin and the compliance, because a sacrifice has to be documented, checked against the minimum wage and processed correctly every pay run. That is exactly what a payroll bureau is for. This page sets out the case for offering salary sacrifice and how we run it for you.
This is the employer view. For how each scheme works in detail, see the salary sacrifice overview and the pages on pensions, electric cars and cycle to work.
Why employers offer it
Salary sacrifice lets you offer benefits your staff genuinely want, more cheaply than they could buy them from taxed pay, while saving the business money at the same time. It helps you compete for people without simply raising salaries, it improves retirement outcomes for your team, and it signals that you look after your staff. For many small and medium employers it is the most cost-effective benefit they can add, once someone else is running it properly.
The employer saving
Every pound an employee sacrifices is a pound you no longer pay employer National Insurance on. Across a workforce that adds up, and it is a real, recurring saving rather than a one-off. Many employers choose to put that saving to work, most often by paying it into staff pensions, which makes the scheme noticeably more generous at little or no extra cost to the business.
Our salary sacrifice calculator shows the employer National Insurance saved on a given sacrifice, so you can see the effect before you offer a scheme.
Schemes you can offer
The schemes worth offering are the ones that keep their full tax and National Insurance advantage:
- Pensions. The most popular, and the simplest to run.
- Electric cars. Highly tax-efficient thanks to the low benefit-in-kind rate on EVs.
- Cycle to work. A low-cost, well-liked benefit that is easy to add.
- Workplace nursery. A childcare scheme that still carries its full advantage.
The admin, and who carries it
This is the honest reason more employers do not offer salary sacrifice. Each arrangement needs a proper contract variation, the reduced salary and the benefit have to be processed correctly every pay run, the minimum wage floor has to be checked as pay changes, and some schemes create a benefit-in-kind reporting duty. Done by hand, across a growing team, it is fiddly and easy to get wrong. Handed to a bureau, it simply runs. We carry the admin and the compliance so you get the upside without the burden.
How to set it up
Setting up salary sacrifice comes down to three things, and we handle all of them. First, choose the benefit and, for cars and bikes, a scheme provider. Second, put a valid contractual variation in place for each employee, agreed before the sacrifice begins, because a sacrifice is a change to contractual pay and not just a deduction. Third, process it correctly in payroll. We scope what suits your team, make sure the paperwork is right, and build it into your payroll from the next run.
Getting it right
The pitfalls are well known and all avoidable. A sacrifice cannot take anyone's cash pay below the National Minimum Wage or National Living Wage, so it will not suit every member of staff. It reduces gross pay, which can affect statutory maternity, paternity and sick pay, so timing matters for some employees. And without a proper prior contract variation, the tax treatment can be challenged. We watch all of these on your behalf, every run.
How we help
We set your schemes up correctly, make sure each sacrifice is properly documented, apply the right National Insurance treatment, check the minimum wage floor every run, and handle any benefit-in-kind reporting. As your team changes, we add new sacrifices and unwind them for leavers. We are a South Wales payroll bureau with more than 60 years of combined experience, CIPP members and Chartered Accountants (ICAEW), ICO registered and Cyber Essentials certified. To offer salary sacrifice without taking on the admin,talk to us about your payroll or see our pricing.