Salary sacrifice schemes are a cornerstone of modern, tax-efficient employee benefits. They offer tangible National Insurance savings for both your business and your employees, making benefits like pension contributions and workplace nursery fees significantly more affordable.
When your trusted accountant offers to “handle the process” for a lower fee than a specialist financial wellbeing provider, it feels like the easy, cost-effective choice. We get it – it’s natural to want to implement these schemes as cost-effectively as possible.
While it is a possible option, it doesn’t come without risks to your business.
In this article, we’ll cover the six legal obligations required to be met by employers and how you can ensure compliance and full value at every stage.
Table of contents
Who is responsible for salary sacrifice compliance?
The ultimate responsibility for compliance always rests with the employer. Implementing a salary sacrifice scheme is not just a payroll function; it is a legally binding contract variation that is rigorously policed by the HMRC.
Accountants are undoubtedly excellent at reporting the deduction, but they are often not equipped to handle the complex HR, legal, and compliance steps that must happen before the deduction is made.
What are the risks?
Compliance: While you may save money on lower implementation fees, you expose your business to backdated tax liability, fines, and National Minimum Wage (NMW) penalties if your initial implementation is not set up properly.
Reduction in NI savings: There are different ways to introduce salary sacrifice schemes. If your employees don’t fully understand or trust the scheme you’re introducing, you will likely be at risk for low engagement. This means money is left on the table – both for your employees, and for you – because the fewer people that utilise salary exchange schemes, the less you save from them.
Increased HR burden: The introduction of salary sacrifice is fundamentally a benefit and HR task for a company. The benefits need to be positioned in the right way with employees, staff need to feel confident in the reasons and motivations of the senior team, and someone needs to be available to answer all technical and personal queries. If you don’t have the appropriate support for this, it can become stressful and turn into a negative experience.
Maintenance: Salary sacrifice is not a one off event. Schemes need to be managed on an ongoing basis. This includes NMW compliance, contract variation and record storage. If you don’t have a system in place to manage this it can lead to long term burden, inefficiency and risk.
Employer obligations for salary sacrifice
Regardless of who you choose to implement your salary sacrifice scheme, as the employer you are responsible to manage six critical areas which impact compliance, legality and engagement.
The table below shows the key obligations to you as an employer and how you can best ensure compliance:
Employer obligation | What this means | Accountants territory? | What support you will need | How a specialist like Maji can help |
|---|---|---|---|---|
Assess + maintain eligibility | Establish systems to check that an employee’s cash earnings never fall below the National Minimum Wage (NMW) after the salary sacrifice is applied. | No. This is an HR and payroll obligation.
| Checks to ensure NMW checks are actioned and only eligible employees are enrolled. This needs to be maintained over time as employees shift their pension contributions and/or salary sacrifice participation across multiple benefits. | Automate NMW checks across multiple salary sacrifice products and update compliance system in line with periodic government changes to policy. |
Educate employees | Provide clear and accessible information to ensure your employees understand the schemes available and the potential impact on things such as statutory pay (e.g., maternity/paternity), state benefits, and other earnings-related benefits (like mortgage applications). | No. This is an HR obligation. | Access to educational information, webinars and personalised calculations that help employees work through questions and concerns. You’ll need someone ready to handle all questions and ideally a confidential space where employees can talk through how salary sacrifice might affect their personal circumstances. | Personalised education, calculations, and modelling tools can help employees understand their options and make confident financial decisions. Live workshops explain salary sacrifice and the different schemes available, while expert live chat support allows staff to ask questions privately. 1-1 financial coaching provides employees with a dedicated expert to guide them on how to make the most of these schemes in their personal circumstances. Employer campaigns and resources can further empower HR teams to drive engagement and awareness across the business. |
Gather records of consent | Obtain employee agreement and consent to vary the terms of the employment contract, ensuring the sacrifice is effective and voluntary before any pay is earned. | No. This is an HR obligation. | Guidance on the correct documentation and tools to be able to accurately capture this information. The way this is handled can lead to great variation in the amount of work involved. Default opt out schemes are by far the best approach for pension engagement. | Automate the end-to-end electronic consent capture process, ensuring a clear audit trail and compliance, significantly reducing the administrative burden on your HR team. |
Amend employment contracts | Draft and implement a legally effective, permanent contractual variation for every employee who joins or leaves the scheme. | No. This is an HR obligation. | Guidance on the proven, compliant contractual templates and best-practice guidance required to ensure the variation is effective. | Offer up-to-date, legally vetted contractual variation templates and best-practice implementation guidance, developed in partnership with employment law experts, to ensure all changes are effective and compliant. |
Keep records | Maintain accurate, auditable records of the contractual variations, consent forms, and NMW checks for all participants. | No. This is an HR obligation. | A low admin system to keep records for immediate retrieval in the event of an HMRC audit. | A digital platform that serves as a secure, centralised repository for all auditable documentation, enabling instant retrieval for HMRC audit preparation and ensuring long-term compliance. |
Update pension/payroll portals | Correctly apply the pre-tax deduction, calculating NI savings, and fulfilling end-of-year tax reporting where applicable (P11D/PAYE). | Yes. This is the accountant’s core function and where their expertise is best placed.
| Pension and payroll support as well as dedicated live chat support to support employers directly. | Offer dedicated, direct support and guidance to your payroll/finance team for accurate monthly processing and essential year-end P11D/PAYE reporting. |
Key takeaway:
The one area an accountant excels in is the last one (Update pension/payroll portals). All other areas are traditionally the responsibility of your HR, payroll and Legal team, which is why partnering with a specialist is in your best interest.
The use of technology and expert support to take that critical compliance and administrative burden off your HR department is where you’ll get the most value of your salary sacrifice implementation.
The pros and cons of each salary sacrifice implementation approach
When weighing up the provider who will implement your salary sacrifice scheme, it’s important to recognise the pros and cons of each approach.
Going it alone or using an accountant:
- Pro:
- You might find lower upfront costs
- Cons:
- High compliance risks and liability
- Administrative burden on HR
- Lack of employee engagement
- Lower NI savings
- No system to maintain the schemes
Using an expert provider:
- Pros:
- Guaranteed compliance and risk mitigation
- Lifts the admin burden on HR by 60%
- Ongoing expert support for your HR team
- Happy and grateful staff
- 10 – 50% higher NI savings for your organisation
- Automated scheme management and record keeping
- Con:
- May charge higher upfront costs
The long-term missed opportunities
While salary sacrifice schemes bring savings and value to both your business and your people, the financial wellbeing of your workforce depends on more than just tax savings.
An implementation that is purely transactional (payroll only) and lacks a holistic support framework creates three significant risks:
- Cynical employees who don’t engage
A salary sacrifice scheme is a benefit, but if employees don’t clearly understand its impact on their take home pay, NI savings, and statutory pay, they won’t trust it. The risk here is a low uptake, where the benefit fails to deliver its cost-saving potential, and your investment in employee benefits is perceived as complex and confusing.
- Excluding the rest of your workforce
Salary sacrifice, by definition, won’t apply to every employee (e.g., those near the NMW threshold). If the scheme is the only financial benefit you offer, you risk creating a two-tier system where those who need financial support the most feel excluded. A financial wellbeing provider ensures inclusivity by offering a holistic platform with deals and discounts, financial education tools, and money and spending insights that provide tangible, immediate value to everyone, regardless of their earnings.
- HR and finance overload
Without a dedicated support system, where do employees go with technical questions about tax, personal questions about debt, or specific questions about their pension strategy? They go to HR and Finance. The biggest non-compliance risk is forcing your internal staff to become untrained financial coaches, diverting their time and potentially providing incorrect advice. An expert provider will include live chat support and up to date personalised financial education to handle complex, personal, or technical employee questions directly.
- Poor return on ROI (the financial coaching gap)
Low engagement with benefits often comes down to a lack of understanding. Personalised financial coaching bridges that gap, helping employees see the real value of the benefits available to them and how to make the most of these opportunities. When people understand how their benefits fit into their financial goals, they’re far more likely to engage and take action. Coaching turns passive awareness into active participation, driving both financial confidence and higher uptake across your benefits offering.
The big trade-off: cost vs long term benefit
We have no doubt your accountant is excellent at what they do. However, salary sacrifice is a strategic employee benefit that requires legal understanding, deep employee support, and a comprehensive engagement strategy.
The choice isn’t between an expensive option and a cheap option; it’s between a low-cost, high-risk, low-engagement transactional service vs a compliant, strategic, and engagement-driving platform.
Ready to launch a compliant, engaging, and risk-free salary sacrifice scheme?
Contact Maji for a bespoke estimation of savings available.
