What Is Salary Sacrifice? | HR Glossary | BambooHR
An arrangement where an employee gives up part of their salary for a non-cash benefit.
Salary sacrifice is an arrangement in which an employee agrees to give up part of their gross salary in exchange for a non-cash benefit, such as additional pension contributions, a bike-to-work scheme or certain travel benefits. Because the exchange happens before tax, it can be tax-efficient for both parties.
The tax and social insurance treatment depends on the benefit and the jurisdiction. Ireland permits salary sacrifice only for specific approved benefits — such as the Cycle to Work and TaxSaver commuter schemes — with strict rules, whereas the UK operates a broader but also regulated regime.
Employers must set arrangements up correctly, since a poorly structured scheme can create unexpected tax liabilities and affect pay-related entitlements. Because the rules change, it is wise to confirm current treatment before offering or amending a scheme.
