Salary sacrifice grocery schemes! Do they work?

Promotion of salary sacrifice grocery schemes

With the recent cost of living challenges and measures to improve employee retention, a number of questionable arrangements are being promoted by a small number of providers with statements such as ‘no brainer’!

One such scheme being actively pushed are grocery salary sacrifice schemes.

One of the promoters misleadingly states that ‘HMRC introduced rules allowing grocery salary sacrifice back in 2007’- this will be news to HMRC who have never promoted or launched such a scheme.

They also claim that ‘a grocery salary sacrifice scheme means the money for food shopping is taken out of the employee’s pay before tax or National Insurance is calculated’.

They go on to claim: ‘That means employees don’t pay National Insurance on any groceries bought through the scheme’. They go on to claim that basic rate tax payers would therefore save 8% and higher rate 2% in reduced NIC contribution – but is that correct?

HMRC rebuff

In a response seen by PAYadvice.UK, HM Revenue and Customs have provided the following response on the legitimacy of these types of ‘questionable’ schemes.

They state:

Under the OPRA arrangements introduced from April 2017, the tax and NICs advantages were largely withdrawn, see EIM44130. 

Exemptions on BIKs do not generally apply to salary sacrifice schemes, apart from the likes of childcare vouchers and cycle to work schemes and others covered in NIM02416. 

Therefore, if the supply of a non-cash voucher doesn’t meet with the listed exemptions from NICs from Part 8 of Schedule 3 SSCR 2001, a Class 1 liability for NICs will apply.

This also applies to credit tokens.

Do they work and is there a saving!

So do salary sacrifice grocery schemes work as described by the promoters of these arrangements? Or is it a case of buyer beware, it’s a trick?

These schemes often operate through the provision of vouchers or credit tokens and pre-payment cards etc. The employer has not actually provided any groceries directly to the employee, but provision of vouchers or a credit token, the individual goes to their shop to choose and purchase goods with a voucher or credit token based on an amount of earnings foregone through the sacrifice arrangement.

On the basis of vouchers or credit tokens, these schemes do not meet the exemption requirements and therefore are highly questionable arrangements.

The resulting amount sacrificed does not then meet the Optional Remuneration Arrangements (OpRA) exemptions and is subject to tax as a benefit on the full amount of the sacrifice, no reduction for discounted vouchers or credit tokens, and the amount is subject to both primary and secondary Class 1 National Insurance.

There is no savings in National Insurance and the claim that there is or that HMRC ever launched an approved grocery salary sacrifice facility is misleading. The amount is not subject to Class 1A employer only NICs but Class 1 on both the employee and employer. There is likely to be no legitimate 8% or 2% NIC saving and the employer will have under-collected and underpaid.

Update

The HMRC have issued information as part of the December 2025 Employer Bulletin comfirming that they have not given permission for claims that these schemes are approved or cleared and confirming that provision of benefits provided in this way by salary sacrifice are subject to Schedule 3 and liable to Class 1 National Insurance on both the employee and the employer. There is no NI savings.

PAYadvice.UK 12/2/2025 updated 11/12/2025