Salary Sacrifice Schemes: Helping Your People Get More from Their Pay
Some of the benefits employees value most are also the ones that are hardest to pay for upfront. A bike for getting to work, an electric car, or essential home technology can make everyday life easier, but the cost of these everyday items can put them out of reach.
For one person it’s the commute that costs more every year. For another it’s a fridge that fails at the worst possible time. Payroll benefits exist for exactly these moments: real costs, made manageable.
Salary sacrifice helps by letting employees access selected benefits through payroll, with the cost spread over time.
Depending on the benefit and how the arrangement is taxed, salary sacrifice may reduce Income Tax and National Insurance contributions. Other schemes, such as Home and Electronics, use the same salary sacrifice mechanism primarily to let employees spread the cost over time.
My Group brings these schemes into the same employee benefits experience, so people can see what’s available, understand how each option works and make an informed choice before applying.
How does salary sacrifice work?
An employee agrees to give up part of their gross salary in exchange for a non-cash benefit provided by their employer. Because the sacrifice happens before tax and National Insurance are calculated, the tax and National Insurance position may change depending on the benefit and scheme structure.
The employer uses the sacrificed amount to fund the benefit, whether that’s a bike or a car lease, and the employee pays nothing upfront. The cost comes out of their pay each month, so the benefit can feel more manageable than paying the full cost at once.
Employer National Insurance savings can support the benefits budget
Where a scheme reduces earnings subject to employer National Insurance, it may lower the employer’s overall NI cost. The level of saving depends on the benefit and its tax treatment, and employers may choose to reinvest any saving into their wider benefits package.
Different schemes create value in different ways
Cycle to Work and electric vehicle schemes can deliver tax and National Insurance savings for employees, while also reducing employer National Insurance costs. Home and Electronics uses the same salary sacrifice mechanism, but does not normally create Income Tax or National Insurance savings. Taken together, these schemes can help employees manage larger costs, while giving employers a more rounded benefits offer.
Which salary sacrifice schemes are available through My Group?
My Group can bring together a range of salary sacrifice schemes that help employees access useful, high-value benefits through payroll, making bigger purchases feel more manageable. Some create tax and National Insurance savings, while others use the same mechanism mainly to help employees spread the cost over time.
Cycle to Work
Employees choose a bike and eligible safety equipment, which is made available through the scheme. The cost is reflected through a reduction in gross salary over the agreed period, making cycling more affordable while supporting active, lower-carbon commuting.
Cycle to Work benefits from a specific HMRC exemption when the scheme is set up correctly and the conditions are met.
Electric Vehicle Salary Sacrifice
Employees lease an electric vehicle through a deduction from their gross salary, before tax and National Insurance are calculated where the scheme allows. Electric vehicles have a low Benefit-in-Kind rate compared with many petrol or diesel company cars.
Some providers can also support salary sacrifice on other car types, but electric vehicles usually offer the strongest tax position and sustainability benefits for employers and employees.
Employer protections may be available depending on the scheme selected, including cover for some life events.
For organisations with sustainability goals, an electric vehicle scheme can also support lower-emission commuting choices.
Home and Electronics
Employees can spread the cost of home appliances, technology and electronics by sacrificing part of their future salary over an agreed period. This can include items such as white goods, televisions, laptops, tablets and smartphones from major retailers.
Unlike Cycle to Work and car salary sacrifice, Home and Electronics does not normally create Income Tax or National Insurance savings. Its value is practical: employees can spread the cost through payroll rather than paying the full amount upfront.
What do employers need to consider?
Salary sacrifice schemes are straightforward to run once they’re set up, but there are a few things worth understanding before you launch one.
Talk to us about salary sacrifice
Salary sacrifice schemes can give employees access to valuable benefits in a more manageable way, helping them spread costs and make bigger purchases feel more affordable. If you want to offer more practical support to your people, get in touch and we’ll help you get things moving.
Frequently Asked Questions
A salary sacrifice scheme is an arrangement where an employee agrees to give up part of their gross salary in exchange for a non-cash benefit provided by their employer. Because the sacrifice happens before tax and National Insurance are calculated, both the employee and employer typically pay less NI. In some cases the employee also pays less income tax, depending on the benefit.
It depends on the scheme and the employee’s circumstances. Some salary sacrifice arrangements can reduce tax and National Insurance contributions because the deduction is taken from gross pay before those calculations are made. The saving is not the same for every employee, and some schemes work differently.
Yes, in some cases. Where a scheme reduces earnings subject to employer National Insurance, it may lower the employer’s overall NI cost. The level of saving depends on the benefit and its tax treatment.
Yes, where the arrangement reduces the employee’s contractual entitlement to future salary in return for the benefit. Home and Electronics does not normally create Income Tax or National Insurance savings, because of the way the benefit is taxed. Its value is practical: employees can spread the cost through payroll rather than paying the full amount upfront.
Most employees can participate in salary sacrifice schemes, but there are some restrictions. The arrangement must not reduce an employee’s cash pay below the National Minimum Wage. For lower-paid employees this may affect eligibility or the amount that can be sacrificed. Some schemes also have their own eligibility criteria.
Yes. Salary sacrifice only ever happens with the employee’s agreement. When someone opts in, they sign a short agreement that formally updates their pay arrangement, confirming the amount sacrificed and the benefit they receive instead. This is what makes the tax treatment valid, and it protects the employee too: nothing changes without their consent, and the agreement sets out how the arrangement can be changed or ended. The scheme handles the documentation as part of joining, so there’s no separate legal process for the employer or employee to manage.
This depends on the scheme. For EV schemes, employer protections may cover some life events, depending on the terms selected. For other schemes, the terms of the arrangement set out how any outstanding balance is handled. The My Group team can explain the specific terms for each scheme.
Not exactly. Salary sacrifice is a specific mechanism where an employee exchanges part of their gross salary for a benefit, with potential tax and NI savings. Flexible benefits is a broader term for giving employees choice over the benefits they access. Some flexible benefits are delivered through salary sacrifice, but not all are. My Group offers both, and they work alongside each other through the same platform.
Yes. Salary sacrifice schemes sit within the My Group portal alongside discounts, health and wellbeing support, recognition tools, financial wellbeing services and more. Employees access everything through one login, which makes the overall benefits package easier to communicate.