Salary sacrifice (or salary exchange) allows employees to give up part of gross salary in exchange for employer-provided benefits — typically pension contributions, electric vehicles, cycle-to-work schemes, or childcare. Because the sacrifice reduces gross salary, both income tax and social security contributions are lower, making the benefit cheaper than purchasing from net pay.

Example: a UK employee sacrificing £5,000/year for pension contributions saves £1,000 in income tax (20%) plus £400 in national insurance (8%) — a 28% discount versus buying privately. Tax efficiency varies by country, benefit type, and income level.