The principle benefits which can operate under a salary sacrifice arrangement are:

Pension - Although more popular (and simple) with defined contribution it is also possible to turn a defined benefit scheme into a salary sacrifice scheme.

Childcare vouchers - Since 6th April 2006 the first £55 spent on the cost of providing the childcare vouchers to employees has been free from both income tax and national insurance provided the qualifying conditions below are met:

• That the childcare voucher scheme is generally available to all employees where the scheme operates;
• That employees can only use the childcare vouchers to pay for childcare that has been registered or approved.

Cycle to work scheme - Employees can save up to 50 per cent on the retail price of a bicycle through a combination on savings on income tax, VAT and National Insurance contributions.  The scheme is part of the Government's “Green Transport Plan” designed to encourage healthier travel and to reduce pollution and congestion. The cycles can also be used for leisure provided that they are mainly for traveling to and from work.

Note:

The March 2006 budget saw the announcement that tax exemptions for one of the most popular salary sacrifice benefits the home computer initiative (HCI) which was removed from 6th April 2006.