Salary Sacrifice Benefits: A Guide for Employers
Imagine offering your employees a way to get the things they need, save money, and feel valued—all without costing your company a penny. Sounds too good to be true? Welcome to the world of salary sacrifice benefits.
In today’s challenging economic climate, financial pressures are taking a toll on everyone. As an employer, you have the power to make a real difference in your team's lives by providing benefits that ease these pressures and boost morale. In fact, research shows that offering comprehensive benefits plays a crucial role in enhancing employee engagement and loyalty, with many employees considering these benefits as important as their salaries.
Salary sacrifice schemes are the perfect solution: they save money for both your staff and your business while offering perks that employees truly appreciate.
In this complete employers guide to salary sacrifice benefits, you'll discover:
What is a salary sacrifice benefit?
A salary sacrifice benefit, also known as a salary exchange, is a flexible way for employees to access desirable perks while helping employers enhance their benefits package without extra cost. Technically, it's an agreement (known as a salary sacrifice agreement) where an employee chooses to reduce their pre-tax salary in exchange for a non-cash benefit. This arrangement can cover various benefits, such as a new bike, the latest home and tech gadgets, or even a green car.
Salary sacrifice schemes are incredibly attractive for employers because they cost nothing to implement. The initial cost of the benefit is offset by the reduction in salary, and because employers also save on National Insurance Contributions (NICs), it can even lead to financial savings. Essentially, you’re boosting your employee benefits package without dipping into company funds.
Ultimately, salary sacrifice benefits are a brilliant strategic tool for businesses aiming to offer competitive and appealing benefits without bearing additional costs. They enhance employee satisfaction, give staff an improved wellbeing, promote loyalty, and can even contribute to your company’s financial health.
Ready to boost your benefits package?
Click here to join BHN Extras for free or click here to contact us if you have any questions or queries.
Why should I offer salary exchanges to my employees?
Salary sacrifice schemes offer a powerful solution for small and growing businesses to support their staff in these tough times, without breaking the bank.
According to our research, two-thirds of workers say that benefits are crucial for managing cost-of-living challenges, yet only 5% feel their employers are doing enough. In fact, 50% of workers surveyed said they would actually sacrifice more of their basic salary in exchange for a personalised benefits package.
You should offer salary exchanges as part of your benefits package because they help employees to save money while reducing their taxable income and they also help reduce your company's payroll costs and boost employee morale!
What are the salary sacrifice scheme benefits to employees?
The biggest employee advantage of salary sacrifices is that they help them save money and spread the cost when buying expensive items. Since the salary sacrifice deduction payments are taken from their wages before tax and NICs are calculated, the benefits are actually cheaper than if they were purchased outright.
As well as the tax benefits, further advantages of salary sacrifice schemes include:
- - Cyclescheme: promotes an active lifestyle, reducing stress and improving physical and mental wellbeing. It also reduces their carbon footprint!
- - Home & Tech Scheme: makes high-priced items including the latest gadgets and technology, white goods and furnishings more affordable.
- - Green car benefit: saves employees money on commuting costs and set them up for a secure and stable future that's good for them and the environment.
- - MyGymDiscounts: gets your staff moving, which helps keeps them fit and healthy, improving their overall physical and mental wellbeing.
What are the advantages for employers of salary sacrifices?
Salary sacrifice benefits aren't just great for employees—they offer fantastic benefits for employers too. Here’s some of our favourite advantages of salary sacrifice schemes and why you should consider adding them to your benefits package:
- - Cost-effective: Salary sacrifice benefits are free to set up with no additional outgoings. You pay an initial cost for the benefit, but the employee repays you, neutralising the cost. Plus, as these benefits reduce employees' National Insurance (NI), companies can end up saving money. On average, these schemes can generate up to 13.8% in savings per employee.
- - Attracting Top Talent: An attractive benefits package can strongly influence 85% of employees when they're looking for a new job. Salary sacrifice options make your company more appealing to top talent.
- - Employee Retention: Competitive packages, including salary sacrifice benefits, help reduce employee turnover. Employees are more likely to stay with a company that values their financial well-being.
- - Employee Engagement: Valuable benefits, such as salary sacrifices, enhance staff engagement. When staff feel valued and supported, they’re happier employees that are more motivated and productive.
Ready to boost your benefits package?
Click here to join BHN Extras for free or click here to contact us if you have any questions or queries.
What are the most popular examples of salary sacrifice benefits?
Nearly three-quarters of employees want benefits that meet their individual needs. With financial pressure mounting as the cost-of-living remains high, salary sacrifice benefits are an effective way of supporting your team.
Here are three hugely popular money-saving salary sacrifice arrangements that will make a real difference and your employees will love:
Cyclescheme
Our cycle-to-work scheme, Cyclescheme, can save your staff up to 42% on the cost of their choice of a new bike or accessories (such as replacement tyres or frames and road safety equipment) at over 2,000 retailers in the UK.
As well as promoting an active workforce, which can help to manage stress and anxiety, cycling to work is 50% faster than driving during rush hour.
Cyclescheme is free for you and your employees to join with minimum approval and payroll admin tasks. Plus, you can save up to 13.8% in employer NICs on all spend through the scheme too!
Offering a benefit like Cyclescheme can also help to reduce your company's carbon footprint by encouraging more of your employees to cycle to work and you can also apply to be recognised as a 'Cycle Friendly Employer'.
Click here to offer Cyclescheme.
Home & Tech Scheme
When we asked employees what benefits they'd like to have access to, a salary sacrifice scheme that helped them spread the cost of the latest tech was in their top three choices.
That's where Home & Tech Scheme comes in. Home & Tech Scheme is hugely popular because it helps your staff save up to 8% on the latest technology and homeware at IKEA and Currys.
There are 1000s of home and tech items to choose from in-store and online, ranging from mobile phones and laptops, fridges and washing machines to sofas and a comfy new bed.
Home & Tech scheme is free to join and cost-neutral to implement, plus there's minimal approval and payroll admin and no end-of-hire process.
Our research found that Techscheme made employees feel positive about their employer and less likely to leave the company.
Want to know the best bit? Employees can use this scheme to buy tech for the whole family. So, it's good news all round!
Click here to offer Home & Tech.
Green Car Benefit
With the price of petrol and diesel rising, it's no surprise that 81% of Britons are open to trying an alternative mode of transport.
Green Car Benefit gives your employees a cost-saving solution for switching to a hybrid or electric vehicle for an affordable monthly amount.
As well as the freedom to choose a low-emission vehicle from the likes of Tesla, Nissan, Audi, Hyundai, and Citroen, the free-to-implement package includes insurance, road tax, MOT, servicing, and more. It’s all administered by market-leading specialists, Tuskers, making the process seamless.
Offering a green car scheme not only supports your organisation's sustainability goals but also shows your commitment to innovative and environmentally friendly solutions.
Click here to offer Green Car Benefit.
Gym Discounts
Staying active is more important than ever, but financial pressures have led many to give up their gym memberships.
The salary sacrifice scheme, MyGymDiscounts, can help by offering employees up to 25% off a gym membership at a huge range of gyms, health clubs, fitness studios, leisure centres, and BootCamp classes across the UK.
With leading fitness brands such as Fitness First, PureGym, David Lloyd, and Virgin Active in the scheme, there's something for everyone.
This wellness benefit actively supports employee physical and mental health, which can help to boost feel-good hormones, make anxiety more manageable, and decrease sick days.
Your entire workforce can access this benefit for one low-cost fee and, once they're signed up, they can self-serve their benefit.
Click here to offer MyGymDiscounts.
Other Benefits To Consider - Cashback and discounts
The research makes it clear to see that employees want benefits that help them cut the cost of everyday purchases. So, as well as salary sacrifice schemes, here are three other, easy-to-implement and affordable financial wellbeing benefits that can help save money on expenses, including groceries and eating out.
- - bYond: This prepaid shopping card gives employees up to 15% cash back at more than 70 UK stores. Our research found that 56% of employees felt more valued at work because of their bYond card
- - Extras Discounts: Save 15% on physical and digital gift cards from over 100 big brands. As there is no admin, approvals, invoicing, or cost to your business, this is an easy and effortless employee benefit
- - Syd: syd™ is an AI-powered super-app that provides individuals with science-backed and personalised recommendations to improve life quality, from emotional health to financial well-being, and discover a life they love.
Click here to join BHN Extras for free or click here to contact us if you have any questions or queries.
How to easily add salary sacrifice schemes to your employee benefits package
Adding salary sacrifice options to your employee benefits package is simpler than you might think. All you need to do is join our employees benefits platform, Extras, for free and you'll get access to a wide range of market-leading salary sacrifice schemes that provide your team with the most support and choice.
Extras is totally free with no setup fees or per-person charges—just an easy and affordable way to enhance your benefits package.
Ready to unlock the benefits of salary sacrifices?
Ready to transform your workplace with benefits that make your employees feel valued, save them money, and boost morale—all without adding extra costs to your business?
To discover how salary sacrifices can enhance your benefits package and support your team, get in touch today on 0208 159 9430, via our contact page, or by emailing enquiries@workplaceextras.com.
Frequently Asked Questions About Salary Sacrifice Schemes
Are salary sacrifice benefits costly for employers? +
Salary sacrifice arrangements are what is known as a zero-cost employee benefit. This is because, although you pay an initial upfront cost for the benefit, the employee pays you back at the end of the agreement, which neutralises the cost to the employer.
There's more good news. As salary sacrifice benefits reduce employees' National Insurance contributions, companies can even end up making money. That's why they're an attractive option to add to your employee benefits package.
How much salary can employees sacrifice? +
The amount of salary employees can sacrifice is largely up to them. However, to ensure that agreeing to the salary sacrifice doesn't get them into financial trouble, the employee contribution must not take their earnings below the national minimum wage or national living wage.
Regardless of their income or tax bracket, every employee can take advantage of the tax savings a salary sacrifice brings.
Is it easy for employees to opt out of salary sacrifice benefits? +
In a word: yes. As salary sacrifices are voluntary, employees must sign an agreement that confirms how much they will pay in return for the benefit. Their employment contract should be updated to reflect the range of benefits they have agreed to.
If they wish to opt out of a salary sacrifice arrangement at any period of time, they can do so. The benefit must be removed from their contract and, if they still owe money, they will be required to make any outstanding payments.
How does a Salary Sacrifice Scheme affect my Contributions to the pension scheme? +
Salary sacrifice can affect pension contributions since these are typically calculated based on an employee's gross salary after the sacrifice. This means the contributions from both employer and employee could be lower and can affect the total amount going in to your employees pension pot. However, employers can choose to maintain their pension contributions at pre-sacrifice levels to ensure employees' pension pots are not negatively impacted.
Are there any tax implications when using Salary Sacrifice schemes? +
Yes, there are tax implications - good ones! Salary sacrifice schemes reduce an employee's taxable income, which means they pay less income tax and National Insurance. Employers also pay less National Insurance on the reduced salary. However, it's essential to ensure that the arrangements comply with HMRC regulations to avoid any tax issues.
Is there a minimum contribution from my company on any salary sacrifice schemes? +
No, there is no minimum contribution required from the company for salary sacrifice schemes. These schemes are designed to be cost-neutral for employers, meaning you can offer valuable benefits to your employees without additional financial outlay.
What happens if an employee leaves the company? +
If an employee leaves the company, the terms of the salary sacrifice agreement will outline how any outstanding payments are handled. Typically, the remaining balance for the benefit must be paid off, either by deducting from the final salary or through an alternative arrangement.
Can all employees participate in salary sacrifice schemes? +
Most employees can participate in salary sacrifice schemes, but there are exceptions. For instance, employees earning close to the National Minimum Wage cannot reduce their salary below this threshold. Additionally, some benefits may have specific eligibility criteria.
How often can employees change their salary sacrifice arrangements? +
Employees can usually change their salary sacrifice arrangements during specific times of the year, such as annual enrolment periods or after a qualifying life event (e.g., marriage, birth of a child). However, the exact terms should be outlined in the salary sacrifice agreement.
