What are the benefits of salary sacrifice? A guide to driving adoption

Simply put, salary sacrifice schemes are employee benefits where employees agree to sacrifice a small part of their monthly salary in return for an item or service. GOV.uk define salary sacrifice for employers as ‘an agreement to reduce an employee’s entitlement to cash-pay, usually in return for a non-cash benefit.’   

In doing this, an employee can lower their Income Tax and their National Insurance contributions, effectively making a saving on the item or service.

For example, with the Bike to Work Scheme, employees can save up to 42% on the cost of a new bike and accessories by utilising this salary sacrifice scheme, while also spreading the cost to help make the payment more manageable.

There are lots of salary sacrifice benefits for employers too. Research by Tusker (EV Driver Survey 2025) also shows that salary sacrifice schemes for a compelling part of a retention strategy: found that more than a quarter (27%) of those with an EV say having access to a salary sacrifice scheme makes them more likely to stay with their current employer.
 
The appeal is also applicable to jobseekers. Six in 10 (60%) say the availability of a salary sacrifice car scheme would influence their decision to join a company, highlighting its growing role as a recruitment differentiator.

There are lots of benefits of salary sacrifice schemes for employers and employees! Here’s a summary of those benefits.

National Insurance (NI) savings

A salary sacrifice pension contribution works like this: your employee gives up part of their gross salary in exchange for a pension contribution. Consequently, both the employee and the employer save National Insurance on that amount.

For an employee earning £40,000 who sacrifices £2,000 a year into their pension, the actual cost to them isn't £2,000. It's approximately £1,440, because they save income tax and National Insurance on that amount. That's a 28% benefit, just from the tax structure.

For the employer? You save 15% National Insurance on that same £2,000. That's £300 of savings per employee per year. Scale that across a workforce of 100 people, all participating, and you're looking at £30,000 in employer savings annually. Savings you can reinvest in the workforce or the business.
Cycle-to-work schemes deliver a similar tax-efficient benefit. An employee acquiring a £1,000 bike through salary sacrifice pays roughly £720 after tax relief, saving £280 outright.

In an environment where income tax is likely to rise, real money savings become even more valuable. Discover more real money savings from over 2,000 businesses using Access Engage to reduce employer NICs while driving engagement, recruitment and retention with our Engage NI Report.

Easy set-up

Salary sacrifice benefits for employers extend to being easy to set up and run.

The right provider can provide you with support and tools to run salary sacrifice schemes successfully.

A provider can help to put all of your salary sacrifice schemes into one place, making them easier to manage and administrate.

Hosting your salary sacrifice schemes through an employee benefits platform  gives you seamless integration with your HR and payroll software. It automates scheme management, reduces admin, and ensures employees can easily access and enrol in benefits — all from one centralised system.

As every company is different, different solutions will be needed for each. Looking for the right provider for your company can help make sure that you’re getting the right solutions for your employees.

For example, our Salary Extras platform is flexible to suit the needs of businesses of all shapes, sizes and industries, giving employers more options for how they want to run and promote their salary sacrifice schemes. 

Catherine Bennett, General Manager of Access Engage at The Access Group, reinforces the importance of integration in Episode 7: Invest in your greatest asset – your people of our Do the Best Work of Your Life series:

 “Integration is key. With modern technology the way it is, being able to integrate with existing HR systems is really a key one. That data piece is so important… having a single central data platform that holds all of your data and just feeds into your benefit solution really does take a large amount of administration away.”

This kind of seamless integration not only reduces admin but also improves employee experience and adoption rates.

Improved employee health and wellbeing

Supporting the health and wellbeing of your employees can be complex, but salary sacrifice schemes can help.

The Holiday Trading scheme we’ve mentioned is a great example, allowing employees to buy extra annual leave and have greater control over their work/life balance.

You will be aware of the term ‘burnout’. Burnout can cost your company as employees will likely need extended time to recover and may even leave the company if they’re struggling. Burnout in industries like finance is a persistent problem; our blog can help you discover strategies to address burnout in finance. 

Allowing staff to buy a specified amount of extra annual leave means they have more time to spend on their personal life. They can take more time to spend with loved ones, go on longer holidays away or deal with personal problems.

Introducing this particular scheme is a great way for you to allow employees to take more personal time and improve their health and wellbeing.

Improved employee financial wellbeing and support with the cost of living

Another aspect of looking after your employees will be centred around financial wellbeing.

You will have employees from all kinds of demographics and who will have different financial priorities. For example, an employee that is in their 20s may be looking into buying their first home. Whilst an employee in their late 50s is probably looking at how they can securely retire. Read our blog for a breakdown of the best employee benefits for each generation. 

The financial benefits of salary sacrifice schemes include providing alternative ways to save on things like a new bike or car maintenance to help reduce their monthly outgoings to support with the increasing cost of living.

This paired with resources like a financial wellbeing library, full of information and knowledge on how to help improve financial wellbeing, can make a real difference.

Money stresses can significantly affect a person’s mental wellbeing, which in turn affects a number of other areas including their productivity.

Giving your employees access to salary sacrifice schemes, alongside other financial wellbeing schemes, can help to show new employees that you care about their financial wellbeing

Current employees knowing that you care about their health and wellbeing, including financial wellbeing, will likely improve your overall employee satisfaction and employee retention levels.

Range of options

One of the key benefits of salary sacrifice schemes is the range of options available.

Each employee will have different needs and having a range of salary sacrifice schemes can help support their individual needs.

Salary sacrifice schemes can help support them financially, physically and emotionally, all whilst keeping the business running smoothly.

For example, the MotorSave scheme can help employees save up to 10% and spread the cost of vehicle maintenance, helping soften the blow of unexpected car repair costs and manage an important expense more carefully.

Holiday Trading, another popular salary sacrifice scheme, helps employees manage their annual leave, and thus their work/life balance, more effectively by allowing them to buy and even sell annual leave from and to their employer.

The range of options also means that you can benefit from a great uptake of the schemes because of the amount of employees that can take advantage of them and the many ways in which salary sacrifice schemes can help them.

Improved employee engagement

The benefits of salary sacrifice for employers extend even further beyond improving employee financial and physical wellbeing.

Through improving employee wellbeing and the relationship between the employer and the employee, employee engagement typically improves. When benefits are easy to access and tailored to employee needs. Our employee engagement software helps HR teams deliver personalised benefits experiences, track engagement metrics, and communicate value effectively 

Happier, healthier employees are typically more engaged, and salary sacrifice schemes go a long way in helping employees bring their best selves to work. Our best practice guide to improving employee engagement details actionable strategies that can help engage your employees with more than just their benefits package, which can lead to increased morale and a boost to productivity.

Improved employee value proposition

By providing a more appropriate and supportive range of employee benefits your business is much more likely to see an improvement in both attracting and retaining a talented workforce.

Salary sacrifice schemes can also be included in your flexible benefits, meaning employees can adjust their contributions to certain schemes to suit their financial goals, for example through adjustable pension contributions.

Providing salary sacrifice schemes like these overall helps employees get more value from their employment with you, improving their relationship with the business ultimately helping reduce employee turnover.

Watch below to see how TFG London implemented Access employee engagement software and reaped a wide range of benefits, including:

• 4,000+ employees now have seamless access to personalised benefits
• Immediate engagement with instant discounts popular from launch 
• Customised eligibility mapping ensuring employees only see relevant benefits
• Enhanced employee satisfaction through improved visibility and accessibility 
• Significant cost savings during peak periods like Christmas

The benefits of salary sacrifice are fantastic when implemented, communicated, and adopted. However, many organisations will find that uptake is shockingly low when they perform a benefits audit.

Employees often don’t use the benefits on offer because understanding salary sacrifice schemes requires a bit of financial literacy. Many employees are unfamiliar with how salary sacrifice schemes operate. The term itself can cause confusion, often leading to concerns about pension contributions or tax implications. They're also unsure about the process. Consequently, they don't engage.

Equally, everyday benefits like employee discount programmes, wellbeing platforms, and recognition schemes, are often overlooked in internal communications, as their value may not be immediately apparent to employees. 

The result? Employees may be missing out on financial support that’s already available to them through existing benefits.

1. Make It Simple

Complex benefit structures can discourage employee participation. Your communication about salary sacrifice needs to answer one question in the clearest possible way: "How much better off will I be?"

Don't lead with the mechanism. Lead with the outcome. "Join our salary sacrifice pension scheme and reduce your tax bill by over £500 a year. That's £40+ a month in your pocket, just from the way you pay for your pension."

Provide a simple online calculator that can show an employee at their salary band what they'd save.

2. Make It Personal

Different people value different benefits. The employee juggling childcare in half term cares about being able to flex up their holiday through Holiday Trading. The cyclist cares about the cycle scheme. The person worried about healthcare cares about private medical cover.

When you're driving adoption, segment your messaging. Tell parents specifically about childcare vouchers and quantify the saving. Tell the people interested in wellbeing about mental health support and gym discounts. 

Generic communications about benefits often fail to engage employees. Tailored messaging that reflects individual needs is more effective.

3. Make It Visible

Everyday benefits need presence. Integrate them into your regular communications. Share a "benefit of the week" in team briefings. Highlight the employee discount partners people use. Create a benefits hub that's genuinely easy to navigate and has targeted messaging; you can learn how to do so in our guide to employee benefits communication. When employees see their peers using benefits, they’re more likely to explore them too.

Leverage features like Total Reward Statements that provide a concise overview to employees of the total value they get from the total benefits and compensation package. 
 
Be sure to work closely with your employee benefits and engagement software provider too to drive engagement, just like Esther at Wilmington PLC who worked directly with her dedicated Customer Success Manager Steve to deliver employee-facing webinars promoting the benefits and rewards you provide.
 
"The webinars were invaluable! Steve guided our team through the new platform and set up (preferred by some to have a demo even though it is as intuitive as internet shopping), highlighting all the key benefits and features and was a great salesperson with the added benefits and instant discounts!"
Esther Osborn FCIPD, Head of People Operations & Services at Wilmington PLC

4. Make It Easy to Action

If someone decides to join your salary sacrifice scheme, the process shouldn't require three forms and a phone call. It should take 5 minutes online. If you want them to use your employee discount platform, sign-up should be frictionless. If you're asking them to engage with wellbeing benefits, the onboarding should be intuitive.

Reducing administrative steps can significantly improve participation rates. 

“Actually being able to go from your HR system straight into your employee benefits really helps with communication and driving that end user adoption piece, which is so important when you've got somebody like Dianne that has to put a business case forward. You need to really maximise the end user adoption piece.”
 Catherine Bennett, General Manager, Access Engage

5. Make It Regular

Encouraging employees to use benefits requires consistent communication throughout the year. Run quarterly benefits review sessions. Hold drop-in surgeries where people can ask questions about salary sacrifice. Refresh your communications with new benefit partners. Highlight new discounts regularly.

Annual open enrolment windows help, but regular touchpoints throughout the year keep benefits top-of-mind.

Building an organisational culture that promotes engagement can have significant benefits and you can learn how to build and maintain company culture in large organisations in our guide. 

With income tax increases expected in the near future, salary sacrifice and other tax-efficient benefits are becoming more relevant for employees looking to manage their take-home pay. In her pre-Budget speech, Chancellor Rachel Reeves stated that “we will all have to contribute” to economic recovery, signalling the possibility of higher income tax rates and an extended freeze on tax thresholds.

For many workers, particularly those on middle incomes, this could mean a greater portion of earnings is lost to fiscal drag or direct taxation, even if headline rates remain unchanged. In this context, benefits such as salary sacrifice arrangements, enhanced pension contributions, and other non-cash incentives can help reduce taxable income and support financial wellbeing.

Employers who take early steps to explain the financial value of these benefits and encourage uptake may be better placed to retain staff in the months following the Budget. Clear communication and practical guidance can make a significant difference, especially as employees seek out workplaces that offer meaningful support during the ongoing cost-of-living pressures.

From an employer perspective, driving salary sacrifice adoption delivers three things:

1. Better retention. When your people genuinely use and value their benefits package, they're less likely to leave. Benefits are part of what makes your total offer competitive. But they only work if people use them.
2. Employer savings. Salary sacrifice schemes generate genuine cashable savings. Those savings let you invest more in technology, training, or infrastructure. They can also protect your margin in a tighter labour market.
3. Engagement and culture. Organisations with strong benefits adoption report better employee engagement. Your people feel supported. They see a tangible benefit from working with you. That builds loyalty and culture.

Building an organisational culture that promotes engagement can have significant benefits and you can learn how to build and maintain company culture in large organisations in our guide. 

How can you measure the success of your benefits strategy?

Track these metrics as you drive adoption:

• Salary sacrifice pension scheme participation rates (benchmark: strong organisations see 60-75% participation)
• Employee discount platform usage (benchmark: active usage among 40-50% of eligible employees)
• Net Promoter Score on your benefits offering (track year-on-year improvement)
• Voluntary staff turnover (organisations with high benefits adoption typically see lower attrition)

Employee benefits, particularly in the current economic climate, represent a practical tool for HR teams to support staff and manage organisational costs. Well-designed benefits can help employees navigate financial challenges, contribute to stronger recruitment and retention outcomes, and generate measurable savings for employers through schemes like salary sacrifice.

But only if people use them.

The organisations that win over the next 12 months will be those that invest in driving adoption by making benefits simple, visible, personal, and easy to action. This approach can help transform a standard benefits offering into a meaningful factor in employee retention and recruitment.

Your HR platform needs to support this. You need visibility into who's using what. You need the ability to model benefits value. You need communications tools that let you reach people with relevant, targeted messages. And you need the data infrastructure to track adoption and adjust your approach.

This approach ensures benefits are actively used and contribute to employee wellbeing and organisational performance.

Ready to audit and improve your employee benefits adoption? Our PeopleXD Evo suite gives you the visibility and tools to drive genuine engagement with your benefits offering.