Guide
What is salary sacrifice?
A plain-English guide to how salary sacrifice works in the UK and why take-home pay usually falls by less than the amount sacrificed.
The simple definition
Salary sacrifice is an agreement to reduce contractual salary in exchange for a non-cash benefit. In PayPath UK's MVP, the main use case is pension salary exchange.
Why people use it
When salary is sacrificed into pension, the sacrificed amount is usually not subject to employee income tax or employee National Insurance. That means your take-home pay normally drops by less than the gross amount redirected.
Why the exact result varies
The real impact depends on your tax band, student loan deductions, and whether your employer shares any National Insurance saving with you.
When to be careful
Check minimum wage implications, parental pay effects, and any scheme-specific employer rules before making a decision.