What's covered in this guide?:
Salary Sacrifice
Salary sacrifice is when an employee agrees to reduce their gross salary in return for a benefit, like:
Extra pension contributions
Cycle-to-work scheme
Other approved deductions
There are two supported types of salary sacrifice:
Standard Salary Sacrifice – e.g. cycle-to-work, childcare, or other approved deductions
Pension Salary Sacrifice – where the sacrificed amount is treated as an employer pension contribution rather than a personal deduction
Set Up Salary Sacrifice
For Salary Sacrifice:
Navigate to: Payroll > Payroll Settings > Deduction Types
Click ‘+ New’ to create a new deduction type.
Set the Journal Account to Deductions (or the relevant account you use).
Tick both:
Pre-tax deduction
Salary sacrifice
Click Update to save.
For Pension Salary Sacrifice:
Navigate to: Payroll > Payroll Settings > Deduction Types
Click ‘+ New’ to create a new deduction type.
Set the Journal Account to Deductions (or the relevant account you use).
Tick:
Pension Salary Sacrifice
Click Update to save.
How Salary Sacrifice Appears on Payslips
You can apply a salary sacrifice deduction in two ways:
1. Automatically (via employee profile)
Go to the employee’s profile: Payroll > Payroll Details
Under the Deductions section, add a Salary Sacrifice or Pension Salary Sacrifice item
This deduction will be automatically included in all future payslips for that employee
2. Manually (during a pay run)
Open a Draft payslip in a pay run
Add a Salary Sacrifice deduction line
Choose the correct deduction type
Enter a fixed amount (e.g., £100)
What You’ll See on the Payslip
When a salary sacrifice deduction is applied:
Gross Pay is reduced by the salary sacrifice amount
- The new amount is displayed as Adjusted Gross PayHelp text appears on the payslip to explain the adjusted gross pay
The deduction is clearly listed in the Deductions section, showing:
The name of the deduction
Its category (e.g., “Pension” or “Other”)
