Salary Sacrifice Schemes: What Are They, and Why Should You Care?

But here's the twist: salary sacrifice schemes are actually a win-win for both employers and employees, and I'm here to explain why you should take them seriously – before your competitors do.
 

First, let's demystify the jargon. Salary sacrifice is not some modern-day Robin Hood operation where employees hand over part of their salary in exchange for... well, nothing. No, this is about trading a portion of pre-tax earnings for valuable benefits – and when I say valuable, I mean actually useful things like childcare vouchers, pensions, cycle-to-work schemes, and increasingly, electric vehicle (EV) leasing.

For employers, it's a nifty way to offer benefits while reducing your National Insurance bill. For employees, it's an opportunity to save on tax and National Insurance contributions while accessing things they might actually want. It's not sacrificing your salary; it's maximising its potential.

Salary sacrifice schemes come in a variety of shapes and sizes. The beauty is that you can pick the ones that resonate most with your workforce. Here are some of our biggest hitters:

1. Technology: Who doesn't want the latest gadgets without the hefty price tag? Through salary sacrifice, employees can spread the cost of laptops, phones, and other tech over several months, all while saving on National Insurance. It's a smart way to help your team stay connected and productive, whether in the office or working from home.
2. Car Schemes: If your employees are eyeing a new set of wheels, salary sacrifice for cars – particularly electric vehicles (EVs) – is a game-changer. They'll save money on leasing a brand-new vehicle, and you'll position your company as a sustainability champion. Bonus points if you've installed EV charging points at the office!
3. Cycle to Work: With rising transport costs and a growing focus on health and wellbeing, the cycle-to-work scheme is an evergreen favourite. Employees can grab a shiny new bike and the gear to go with it, while employers bask in the glow of reduced NI costs and fewer sick days. Who said commuting couldn't be a workout?
4. Holiday Trading: Ever heard an employee say, "I wish I had more holiday"? Enter holiday trading. This scheme allows employees to buy or sell extra holiday days through salary sacrifice, giving them more control over their work-life balance. Need more time for a big trip or just a few extra duvet days? Sorted.

Now, let's talk strategy. If you're in HR, you're in the business of keeping employees happy, productive, and still working for you in 12 months' time. Salary sacrifice schemes are an easy way to tick all those boxes. They're cost-effective, they show you're committed to employee wellbeing, and – crucially – they make your benefits package stand out in a crowded job market.

Take EV leasing, for example. With the government pushing for net-zero and more people waking up to the climate crisis, salary sacrifice for EVs is having its moment. Employees get a shiny new car at a fraction of the cost, and employers show they care about sustainability.

Here at Personal Group, we're all about benefits that actually benefit. Salary sacrifice is one of the tools in our arsenal, but let's be clear: it's not a one-size-fits-all solution. The trick is to offer the right mix of options so employees feel like they're in control of their choices.

Think about it: one employee might be thrilled with a cycle-to-work scheme, while another is all about salary sacrifice for PMI (Private Medical Insurance). Tailoring benefits to the needs of your workforce is the secret sauce of employee engagement.

Now, let's tackle the elephant in the room: "Is salary sacrifice worth it for everyone?" Short answer – no. Long answer – it depends on the employee's circumstances. Lower earners, for example, might find their salary dips below the National Minimum Wage, which is a big HR no-no. And for those nearing retirement, reducing their salary might mean lower pension contributions.

But this is why communication is key. If you're going to introduce salary sacrifice schemes, make sure employees understand how it works and what's in it for them. Because, trust me, the moment someone hears "reduced salary," they'll assume HR is plotting to save money at their expense.

And while these salary sacrifice options have been big hitters over the last few years. What will employees want in the future?

Digital Wellness – Giving employees access to fitness, meditation, therapy apps and subscriptions to digital healthcare services such as online GPs.

AI-Driven Health Tools – From health monitoring platforms to AI-powered fitness and recovery tools, these benefits cater to those who want their devices to nag them.

Hybrid Benefits Models – Gone are the days of one-size-fits-all perks. Now, it's all about mixing and matching like a Spotify playlist no one else understands. License-based offerings (e-learning platforms and software tools) combined with traditional benefits such as pensions and childcare vouchers, will make your organisation truly stand out from the competition.

Professional Development – Subscriptions to e-learning platforms and licenses for professional software and tools to aid training and development.

Entertainment and Lifestyle – Yes, salary sacrifice has moved on and employers are offering best-deal subscriptions for broadband, mobile tariffs, and streaming services, alongside platforms that support healthier lifestyles.

Group Insurance Plans – With the rise in NHS waiting lists, group insurance plans have stepped into the breach offering cost-effective, accessible benefits with family cover options and added extras like online GPs and wellness platforms for employees.

The future of salary sacrifice is flexible, personal, and relentlessly digital. Employers who embrace these trends will not only attract and retain top talent but also cement their status as progressive, forward-thinking workplaces. From digital wellness and AI-driven tools to hybrid benefits and lifestyle perks, salary sacrifice schemes are no longer just about saving on your pension contributions—they're about keeping pace with the times, one perk at a time.

If all this sounds like a lot to juggle, don't worry – that's where we come in. At Personal Group, we specialise in making employee benefits simple, accessible, and effective. Whether it's helping you roll out salary sacrifice schemes or providing the education your employees need to make informed decisions, we're here to help.

Because let's be real: in a world where financial stress is skyrocketing, offering benefits that *actually make a difference* is no longer optional. Salary sacrifice isn't just about ticking a box – it's about showing your workforce that you're invested in their wellbeing, both now and in the future.

So, if you're ready to boost employee engagement, save on costs, and maybe even save the planet (EVs, anyone?), get in touch. Your employees will thank you – and so will your payroll department.

Want one of our friendly experts to talk you through the options? Drop us a line and we'll show you the options and how this could work for your business.