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SALARY SACRIFICE – A RECAP A salary sacrifice agreement allows an employee to waive a portion of their pay in exchange for another type of benefit. If the benefit given has a tax-free status instead of a salary decrease, the employee may experience a reduction in their overall tax responsibility. The salary reduction will result in less tax and national insurance that must be paid The main examples of salary sacrifice are reducing salary in exchange for: Employer pension contributions. Childcare vouchers. Provision of a low emission car. Provision of a bicycle. There are some practical issues to consider, such as: - [ ] The employee needs to be aware that their income has decreased because this could have an influence on them if they want to borrow money, for instance, to buy a house. For the purpose of determining statutory payment, such as maternity and sick pay, the employee's income may also be lower - [ ] The employer needs to verify that they are not in violation of any national minimum wage laws. - [ ] Additionally, if the employer gives the employee the option to select a work automobile, the employer can still be responsible for paying for the car (on a lease, HP, etc.) after the employee leaves When an employee has the choice of a car allowance or the provision of a non-low emission corporate car, care must be taken. Despite not having a company car, the employee may still have to pay taxes on the amount of the car allowance.