Twenty-three per cent of employers say they plan to reduce the generosity of employer pension contributions in response to changes to salary sacrifice, which, from April 2029, will see National Insurance applied to pension contributions made via salary sacrifice above £2,000 per year per employee as the current plan stands.
This new research from GRiD, the industry body for the group risk sector [1], also found that 22% of employers expect to reduce the generosity of other employee benefits, while 15% say it is too early to determine how they will respond.
Salary sacrifice, a tax-saving arrangement in which an employee agrees to reduce their gross salary in exchange for a non-cash benefit such as increased pension contributions, group risk benefits, an electric vehicle or a cycle-to-work scheme, has proven popular with employees. However, changes to its tax treatment risk weakening an arrangement that many workers and employers use to strengthen their overall reward package.
As a result of the changes, GRiD’s research shows that many employers are likely to review the affordability and structure of their offerings, balancing the need to manage additional costs with the importance of maintaining a competitive and supportive benefits package. It will be crucial to consider not only what benefits are offered, but how effectively they support the wider business. In practical terms, this means looking for clear evidence of impact, whether through fast access to clinical support, preventative services that reduce the incidence of absence, financial protection when employees are unable to work, or structured support that enables a timely and sustainable return to work. Benefits that can demonstrate tangible outcomes are more likely to withstand increased financial scrutiny.
Katharine Moxham, spokesperson for GRiD, said: “This change to salary sacrifice is coming, and with three years to go, employers have time to prepare. They will want to be clear about what their benefits are delivering, which ones matter most to their people, and how they can continue to offer meaningful support. As such, they are likely to lean heavily on their employee benefits advisers to help with a close examination of costs and value.”
[1] Employer research was undertaken by Opinium from 5-19 January 2026 amongst 500 HR Decision makers
