Ernest Grant

Salary Sacrifice/Exchange works by exchanging part of an employee’s remuneration from cash, on which PAYE tax and NICs are due, to non-cash benefits that are wholly or partially exempt from tax and NICs.

It is becoming increasingly common for employees to make pension contributions by way of salary sacrifice, with some employers deciding to use some or all of the savings made to increase employer contribution levels, as an added incentive.

The benefits of salary sacrifice can apply to:

• Childcare vouchers
• Cycle to work schemes
• Mobile phone contracts
• Buying and selling annual holiday entitlement
• Car leasing

It is also becoming commonplace for employees to make their pension contributions by way of a Salary Exchange, as this can increase the amount paid in, whilst reducing the cost to employers.

‘The Financial Conduct Authority does not regulate Employee Benefit Services.’