An agreement between an employer and an employee within Benefits Administration, where an employee agrees to give up a certain portion of salary in return for a benefit in kind.
In general, salary sacrifice in benefits administration refers to a benefit where an employee is able to give up certain part of his salary in return for a non-cash benefit provided by the employer through this benefit plan.
The most common form of salary sacrifice plans are pension plans, in which employees opt to sacrifice a portion of salary. In return, the employer agrees to pay an equivalent percentage or fixed amount into the employees' pension plans on their behalf.
Within Flexible Benefits for Great Britain (GB FlexBens), salary sacrifice is relevant only for pension plans, where is applied to existing pension plan options.
ExampleWhen a pension benefits plan option is assigned as a salary sacrifice option, an employee enrolling in this pension plan option chooses to sacrifice a portion of salary. In return, the employer pays an equivalent percentage or fixed amount into the employee's pension plan on his behalf.
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