Salary sacrifice
A salary sacrifice happens when an employee gives up the right to receive part of the cash pay due under his or her contract of employment. It is a tax efficient way of receiving staff benefits.
The employer provides a non cash benefit or service e.g. childcare, in return for the employee giving up some of their gross salary. The 'sacrifice' is achieved by varying the employee's terms and conditions of employment relating to pay.
As the employee sacrifices gross salary it means the tax, and National Insurance contribution they usually pay is reduced as all these change depend on the amount the employee earns.