Salary sacrifice saves employers National Insurance and gives employees tax-free benefits. That much is settled. But not all schemes deliver the same value, and picking the wrong one (or the right one at the wrong time) wastes budget and goodwill.
This post compares the five most common salary sacrifice schemes head to head: what they cost, what they save, and which ones to prioritise based on your company size. If you need a primer on how salary sacrifice works before diving in, read our salary sacrifice explained post first.
Quick refresher: how salary sacrifice works
In a salary sacrifice arrangement, the employee agrees to give up part of their gross salary in exchange for a non-cash benefit. Because the benefit is paid before tax and National Insurance, both sides save. The employer pays less employer NI on the reduced salary, and the employee receives the benefit without paying income tax or employee NI on that amount.
The key legal requirement is that the employee's cash pay must not fall below the National Minimum Wage after the sacrifice. Beyond that, most schemes are straightforward to set up with the right provider.
The five main salary sacrifice schemes
1. Cycle to Work
How it works
The employer leases bicycles and cycling equipment through an approved provider, then offers them to employees via salary sacrifice. The employee pays for the bike in monthly instalments deducted from gross pay, typically over 12 months. At the end of the hire period, the employee can usually buy the bike for a small residual payment.
Employer cost: Zero. The scheme is funded entirely through salary sacrifice. Most providers charge no setup fee and handle all administration.
Employee saving: 25% to 39% compared with buying at retail, depending on tax band. Higher-rate taxpayers save the most.
Typical uptake: 5% to 15% of eligible employees, though this varies widely by location and workforce demographics. Urban employers with younger staff tend to see higher take-up.
Best for: Any employer, regardless of size. Setup is simple, there is no financial risk, and it signals commitment to employee wellbeing. It is the easiest salary sacrifice scheme to launch and a sensible starting point.
2. Electric Vehicle (EV) scheme
How it works
The employer leases an electric vehicle through a salary sacrifice provider. The employee chooses a car, and monthly lease payments (including insurance, maintenance, and breakdown cover) are deducted from gross salary. The lease typically runs for two to four years.
Employer NI saving: Up to 15.05% of the sacrificed amount. For a car costing the employee 500 per month gross, the employer saves roughly 75 per month, or 900 per year, per participant.
Employee saving: 30% to 60% compared with arranging a personal lease, thanks to the combination of income tax relief, NI relief, and the ultra-low benefit-in-kind (BIK) rate for electric vehicles.
BIK rate: 2% for fully electric vehicles in 2024/25, rising to 3% in 2025/26 and 4% in 2026/27. Even at 4%, this remains dramatically lower than the BIK rate on petrol or diesel cars, which can exceed 37%.
Typical uptake: 3% to 8% of eligible employees. Uptake is highest among employees earning above 30,000, where the savings are large enough to make a meaningful difference to monthly outgoings.
Best for: Employers with 50 or more staff and a proportion of higher earners. The administrative overhead is slightly higher than cycle to work, and providers typically require a minimum number of employees. The NI savings for the employer can be substantial if uptake is reasonable.
3. Technology scheme (laptops, phones, tablets)
How it works
Similar to cycle to work, but for technology. The employer purchases or leases equipment and offers it to employees via salary sacrifice, usually over 12 to 36 months. At the end of the agreement, the employee can often keep the device for a nominal fee.
Employee saving: 12% to 32% depending on tax band and the specific arrangement. Basic-rate taxpayers save around 12% from NI alone, plus the income tax saving. Higher-rate taxpayers save more.
Employer NI saving: The standard employer NI saving applies on the sacrificed amount, identical to other salary sacrifice arrangements.
Typical uptake: 8% to 20%, particularly in organisations with remote or hybrid working. Employees who need a personal laptop or upgraded home office equipment find this genuinely useful.
Best for: Remote and hybrid workforces where employees are already spending their own money on technology. It also works well as a retention tool for tech-savvy teams.
4. Pension salary sacrifice (also called smart pensions or salary exchange)
How it works
Instead of the employee making pension contributions from net pay, both the employer and employee contributions are routed through salary sacrifice. The employee's gross salary is reduced by the amount of their pension contribution, and the employer pays that amount directly into the pension scheme. The employee's take-home pay stays the same (or increases slightly), while both sides save NI.
Employer NI saving: 13.8% (rising to 15.05% from April 2025) on every pound sacrificed. For an employer with 100 employees each sacrificing 200 per month, that is roughly 33,000 per year in NI savings.
Employee saving: The employee saves their rate of NI (currently 8% for most) on the sacrificed amount. Unlike standard pension contributions, where higher-rate tax relief must be claimed back, salary sacrifice delivers the full saving automatically.
Typical uptake: This is different from other schemes because it can be applied as a default for all employees (with an opt-out). Uptake rates of 90% or higher are common.
Best for: Every employer. Pension salary sacrifice is the single most impactful scheme you can introduce, because it covers your entire workforce and the NI savings are automatic. If you only do one salary sacrifice scheme, do this one. Use our free pension salary sacrifice calculator to see the exact savings for your team.
5. Workplace nursery and childcare
How it works
The employer either operates a workplace nursery, partners with a nursery near the workplace, or offers childcare vouchers (though the voucher scheme closed to new entrants in October 2018, existing members can continue). Through salary sacrifice, the employee pays nursery fees from gross salary.
Employee saving: Up to 33% for basic-rate taxpayers and 47% for higher-rate taxpayers on the sacrificed amount. Given that nursery fees in the UK average 14,000 to 18,000 per year for a full-time place, the savings are significant.
Employer NI saving: Standard NI saving on the sacrificed amount applies.
Typical uptake: Highly variable. Where a nearby nursery partnership exists, uptake among parents with young children can reach 40% to 60%. Without convenient nursery access, uptake is negligible.
Best for: Employers located near nursery facilities or large enough to establish a workplace nursery. This is a powerful benefit for working parents, but it only works where the logistics make sense.
Comparison table
| Scheme | Employer cost | Employee saving | Setup complexity | Typical uptake |
|---|---|---|---|---|
| Cycle to Work | Zero (salary sacrifice funded) | 25-39% vs retail | Low | 5-15% |
| Electric Vehicle | Zero (NI saving is net positive) | 30-60% vs personal lease | Medium | 3-8% |
| Technology | Zero to low | 12-32% | Low to medium | 8-20% |
| Pension sacrifice | Zero (NI saving is net positive) | 8%+ NI saving | Low | 90%+ (if default) |
| Workplace nursery | Zero to moderate (depends on model) | 33-47% | High | 40-60% (among parents) |
Which schemes to prioritise by company size
Under 50 employees
Start with pension salary sacrifice and cycle to work. Both have zero setup cost, minimal admin, and no minimum employee thresholds. Pension sacrifice alone can save a 30-person company 10,000 or more per year in employer NI.
50 to 150 employees
Add an EV scheme. At this size, providers will typically onboard you, and you will have enough higher earners to generate meaningful uptake. The employer NI savings from the EV scheme can offset the time spent setting it up within the first year.
150+ employees
Layer in a technology scheme and explore nursery partnerships. Larger employers have the scale to negotiate better terms with tech scheme providers and are more likely to have clusters of employees near specific nursery facilities. At this size, the cumulative NI savings across multiple schemes become a material line item on the P&L.
NI savings calculator: how to estimate your saving
You do not need a complex spreadsheet to get a rough figure. Here is the formula:
Annual employer NI saving = Number of participating employees x Average monthly sacrifice x 13.8% x 12
For example, if 20 employees each sacrifice 300 per month through a cycle to work scheme:
20 x 300 x 0.138 x 12 = 9,936 per year
For pension sacrifice, multiply your total workforce by the average pension contribution amount. Because uptake is near-universal, this is usually your largest saving.
For a more precise figure, use our Salary Sacrifice Calculator which uses the latest 2026/27 tax rates and lets you model how employer NI savings could fund new benefits.
Common mistakes
Not communicating it properly
This is the single biggest reason salary sacrifice schemes underperform. Many employers launch a scheme, send one email, and wonder why uptake is 2%. The fix is simple: explain the savings in pounds and pence, run examples for different salary bands, and repeat the message quarterly. Schemes with ongoing communication see two to three times the uptake of those announced once and forgotten.
Dropping below National Minimum Wage
If an employee's post-sacrifice pay falls below the National Minimum Wage, the arrangement is void and HMRC can assess both employer and employee for the tax and NI that should have been paid. This is most relevant for lower-paid employees combining multiple sacrifice schemes. Always run a minimum wage check before approving a new sacrifice arrangement.
Complex sign-up processes
If the sign-up process takes more than 10 minutes or requires printing and scanning forms, you will lose a significant portion of potential participants. Choose providers with digital onboarding. The fewer clicks between "I want this" and "I have this," the higher your uptake.
Finding the right scheme providers
Choosing a salary sacrifice provider is easier when you can compare them side by side. PerkIQ's Benefits Hub lets you browse and compare scheme providers across all five categories, and the Provider Marketplace includes detailed profiles, pricing transparency, and reviews from other UK employers. If you are not sure where to start, the platform can help you shortlist providers matched to your company size and sector.
Sources
- HMRC, Salary sacrifice for employers (GOV.UK, updated 2024)
- HMRC, Company car and car fuel benefit-in-kind rates (GOV.UK, 2024/25)
- The Pensions Regulator, Salary exchange and automatic enrolment (2023)
- Cyclescheme, Employer guide to Cycle to Work (2024)
- Tusker, EV salary sacrifice employer savings report (2024)
- ONS, Childcare and early years survey of parents (2023)
- CIPD, Employee benefits trends survey (2024)