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: Low. Over the hire period the cost is met by the employee through salary sacrifice, and most providers charge no setup fee and handle the administration. The bike is paid for upfront, though, by the employer or the provider, and recovered over roughly twelve months, so there is a cashflow cost and a risk of being left out of pocket if an employee leaves before the cost is recovered.
Employee saving: Around 28% for basic-rate and 42% for higher-rate taxpayers, because the cost comes out of gross pay and bikes are exempt from benefit-in-kind tax. The small payment to keep the bike at the end of the hire period trims the net figure slightly. Our cycle to work calculator shows the net cost of a bike at any salary.
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 and it signals commitment to employee wellbeing. The main thing to manage is the upfront funding of the bike, which is recovered through salary sacrifice over the hire period, so an early leaver can leave the business with an unrecovered cost. Even so, it is one of the easiest salary sacrifice schemes 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: 15% 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: Roughly a third to a half compared with arranging a personal lease, depending on tax band, thanks to paying from gross salary plus the very low benefit-in-kind (BIK) rate for electric vehicles. Our electric car salary sacrifice calculator shows the net monthly cost and the saving against a personal lease.
BIK rate: Just 4% for fully electric vehicles in 2026/27, rising slowly to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Even at those levels it stays far below the BIK rate on petrol and 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. If an employee leaves mid-lease the employer can be liable for the remaining payments, so check whether the provider offers early-termination protection, which usually applies after a minimum hire period. The NI savings for the employer can be substantial if uptake is reasonable. Compare the main EV salary sacrifice providers in the PerkIQ electric car scheme directory, including Octopus EV vs Tusker.
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: National Insurance only. Because the equipment is a taxable benefit-in-kind, the employee saves NI on the amount sacrificed (around 8% for most earners, or 2% on earnings above the upper earnings limit) but pays income tax on the benefit, so there is no income tax saving. Basic-rate employees therefore save more than higher earners on a technology scheme.
Employer saving: Usually little or none. In a typical arrangement the employer NI saved on the reduced salary is largely offset by the Class 1A National Insurance due on the benefit-in-kind, so a technology scheme usually does not deliver the employer NI saving that other schemes do, though the exact position depends on how the scheme is structured. The employer also funds the equipment upfront and recovers it through salary sacrifice, so, as with cycle to work, there is a cashflow cost and a risk if an employee leaves early.
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: 15% on every pound sacrificed (increased from 13.8% on 6 April 2025). For an employer with 100 employees each sacrificing £200 per month, that is roughly £36,000 per year in NI savings.
Employee saving: The employee saves National Insurance on the amount sacrificed, 8% for most earners or 2% on earnings above the upper earnings limit. They receive income tax relief on pension contributions either way, so the extra benefit of salary sacrifice is this NI saving, delivered automatically rather than claimed back through a tax return. Some employers also add part of their own NI saving to the pension, which increases the benefit further.
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: Around 28% for basic-rate taxpayers and 42% for higher-rate taxpayers, because the fees come out of gross salary and so save both income tax and National Insurance. 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 saving: There can be a small employer NI saving on the amount sacrificed, but depending on the provider this is often retained as their operating fee, similar to many EV schemes, so the net saving to the employer may be little or nothing.
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 | Low (funded upfront, recovered via sacrifice) | 28-42% vs retail | Low | 5-15% |
| Electric Vehicle | Zero (NI saving is net positive) | 30-50% vs personal lease | Medium | 3-8% |
| Technology | Low (funded upfront, limited NI saving) | NI only (8% / 2%) | Low to medium | 8-20% |
| Pension sacrifice | Zero (NI saving is net positive) | NI saving (8% / 2%) | Low | 90%+ (if default) |
| Workplace nursery | Zero to moderate (depends on model) | 28-42% | High | 40-60% (among parents) |
These percentages are typical figures, not fixed rules. The actual saving on any scheme depends on the employee's tax band, the National Insurance treatment, and how the scheme is structured, so treat them as a guide and confirm the numbers for your own arrangement.
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 15% x 12
For example, if 20 employees each sacrifice £300 per month through a cycle to work scheme:
20 x £300 x 0.15 x 12 = £10,800 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 provider directory lets you browse and compare scheme providers across all five categories, with 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, 2026/27)
- 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)
