As an employee, you may have heard the term “salary sacrifice agreement” tossed around in conversations about benefits and compensation. But what exactly is a salary sacrifice agreement, and what does it entail?

In essence, a salary sacrifice agreement is an arrangement between an employer and employee in which the employee agrees to receive a lower salary in exchange for certain benefits or perks. These benefits may include items such as childcare vouchers, pension contributions, or cycle-to-work schemes.

One important note is that the salary sacrificed must be done before taxes are applied, meaning that both the employee and employer save on National Insurance contributions.

As an employee, if you are considering entering into a salary sacrifice agreement, it is important that you fully understand the terms and benefits of the arrangement. The document should outline the benefits you will receive, the amount of salary you will be sacrificing, and the duration of the agreement. It is also important that both you and your employer sign the agreement and that you retain a copy for your records.

To give you an idea of what a salary sacrifice agreement might look like, below is a sample template:

[EMPLOYER NAME]

[SALARY SACRIFICE AGREEMENT]

This agreement (“Agreement”) is entered into between [EMPLOYER NAME] (“Employer”) and [EMPLOYEE NAME] (“Employee”) on [DATE].

WHEREAS, the parties agree that Employee will sacrifice a portion of their salary in exchange for certain benefits offered by the Employer.

NOW, THEREFORE, in consideration of the above, the parties agree as follows:

1. Salary Sacrifice: Employee agrees to sacrifice [AMOUNT] of their salary on a [MONTHLY/WEEKLY] basis, to be paid before taxes and National Insurance contributions are applied.

2. Benefits: The Employee will receive the following benefits in exchange for the salary sacrifice outlined in section 1:

[LIST BENEFITS HERE]

3. Duration: This agreement shall remain in effect for [LENGTH OF TIME] unless otherwise terminated by either party.

4. Termination: This Agreement may be terminated by either party upon [LENGTH OF TIME] written notice to the other.

5. Signature: This Agreement shall not be binding unless and until signed by both parties.

[EMPLOYER NAME]

[EMPLOYER SIGNATURE]

[DATE]

[EMPLOYEE NAME]

[EMPLOYEE SIGNATURE]

[DATE]

By entering into a salary sacrifice agreement, employees have the opportunity to enhance their benefits and save on National Insurance contributions, while employers are able to offer attractive benefits to their workforce without incurring additional costs. Be sure to consult with your employer and seek professional advice to determine if a salary sacrifice agreement is right for you.