How salary sacrifice schemes could boost your income

Salary sacrifice schemes can be a handy way for employees to make their money go further, but many people may not know whether their firm offers one, or how it could benefit them.

Such schemes are an agreement between you and your employer to reduce your entitlement to cash pay.

While this doesn’t sound great, in return for this, you’ll tend to receive a non-cash benefit.

He explains: “One way to save money is by paying for things through your company payroll using your pre-tax salary, so you pay less income tax and National Insurance.

“This is known as salary sacrifice and can offer employees significant savings.”

Watts-Lay continues: “Many people pay their pension contributions in this way, but it can also be used to pay for transport, such as company cars, bikes and bus passes, and even mobile phones, gym passes and health and dental care.”

There could be some potential drawbacks to consider, though.

While employers may be able to negotiate certain corporate discounts, Watts-Lay says: “It could mean that you have less choice, as they may only be available through selected providers.

“It will also mean that you will have less salary coming in each month, so make sure that you will still have enough.”

Another potential downside to using a salary sacrifice scheme could be that if you’re considering borrowing money, such as taking out a mortgage, for example, having a lower salary may affect the amount that you are able to borrow.

Your employer should be able to let you know whether it offers a salary sacrifice scheme and what this involves, so you can work out whether it’s right for you.