With costs continuing to rise, many employers and employees are looking for practical ways to reduce outgoings without removing valuable benefits. Salary sacrifice can be an effective way to achieve this, yet it is still overlooked by many businesses.

In simple terms, salary sacrifice allows an employee to give up part of their gross salary in exchange for a benefit such as a pension contribution, an electric car or a bicycle. Because the exchange takes place before tax and National Insurance (NI), both the employer and employee can benefit from savings, while employees receive a more attractive overall package.

A proposed cap on National Insurance relief for pension contributions received significant attention following the Autumn Budget 2025 announcement. However, the cap will not take effect until 6 April 2029. Until that date, the advantages available under the current rules remain in place.

For employers, salary sacrifice can be a practical way to strengthen employee benefits, support recruitment and retention, and reduce certain tax costs. For employees, it can make valuable benefits more affordable at a time when managing cash flow is increasingly important.

If you would like to understand how the numbers could work for your business, we would be happy to help you review the potential tax and NI position and demonstrate how salary sacrifice could operate in practice for you and your team.