Salary Sacrifice and Pensions on a UK Visa: What You Need to Know

What Is Salary Sacrifice?

Salary sacrifice (also called salary exchange) is an arrangement where you agree to receive a lower gross salary in exchange for your employer providing a non-cash benefit, most commonly increased pension contributions. It is tax-efficient because the sacrificed amount is not subject to income tax or National Insurance.

For most UK workers, salary sacrifice is beneficial. But for Skilled Worker visa holders, the question is how it interacts with the salary calculation for immigration purposes.

What the Sponsor Guidance Says

The Skilled Worker visa requires your salary to meet the minimum threshold and the going rate for your occupation. The salary that counts is the gross figure your sponsor records on your Certificate of Sponsorship, before tax and without allowances.

The Home Office subtracts from that figure any payments you are required to make to your sponsor, or a related organisation, for business costs, immigration costs or investment in the business. It then says that money will not be subtracted where the payment is "an additional benefit offer which the worker has a genuine choice whether to take up, such as a salary sacrifice arrangement". The one limit it states is that the arrangement must not take your pay below the National Minimum Wage.

The Home Office does not count employer pension contributions (whether from salary sacrifice or otherwise) towards the salary threshold. Only the gross salary paid to you counts.

Where the Uncertainty Lies

The guidance settles how the Home Office calculates your salary. It does not say how a sponsor should record a salary sacrifice on the Certificate of Sponsorship or in payroll, and the Home Office checks what you are actually paid through HMRC records and compliance visits. Two facts matter here:

• Your sponsor must tell the Home Office if your salary is reduced for a reason not related to absence, and the salary paid in each pay period must equal or exceed the going rate for the hours worked in that period.
• A sacrifice that takes your pay below the National Minimum Wage is not allowed at all.

For example, if the minimum threshold for your role is 41,700 pounds and your gross salary is 50,000 pounds, a salary sacrifice of 5,000 pounds leaves 45,000 pounds in your payslips, which is still above the threshold whichever figure is looked at.

Where to Check Carefully

The points that need checking are:

• Your salary after sacrifice would be close to, or below, the threshold or going rate.
• Your employer auto-enrols you into a salary sacrifice pension at a high contribution rate.
• You are considering multiple salary sacrifice benefits (pension plus cycle-to-work plus electric car, etc.).

If you are unsure, work out your post-sacrifice salary and compare it with your visa requirements, and ask your sponsor to confirm the salary it has recorded for you. The GOV.UK workplace pensions guide explains the other ways of paying into a pension, where your gross salary is not changed.

Alternatives to Salary Sacrifice

If you would rather keep your contractual salary unchanged, there are other ways to pay into a pension:

• Net pay arrangement: Your employer takes your pension contribution out of your pay before working out Income Tax. Your contractual gross salary is unchanged.
• Relief at source: You contribute from pay that has already been taxed, and the pension provider claims basic-rate tax relief and adds it to your pot. Again, your gross salary is unaffected.
• Opt out of salary sacrifice: Most employers allow you to opt out. You may still be auto-enrolled into a pension but through a non-sacrifice route.

What to Tell Your Employer

Speak to your HR department about your visa requirements. Ask how the arrangement will be recorded against the salary on your Certificate of Sponsorship, and whether a non-sacrifice pension option is available if you prefer to keep your contractual salary unchanged. Some large employers already have policies for sponsored workers.

Your employer's sponsor duties include ensuring your salary meets the threshold. A responsible sponsor will want to avoid compliance issues.

Impact on ILR and Extensions

When you apply to extend your Skilled Worker visa or for ILR, the Home Office checks that your sponsor still needs you and that you are paid, and will be paid, at least the salary threshold that applies. It also checks what you were actually paid against the salary on your Certificate of Sponsorship, so your payslips and your sponsor's records need to tell the same story.

Keep your payslips, and keep a written record of how the salary sacrifice was agreed and how your sponsor recorded it.

Next Steps

Check your current salary sacrifice arrangements. The GOV.UK salary requirements page explains what counts as salary. Work out your post-sacrifice salary, compare it with the threshold, and ask your sponsor how the arrangement is recorded. If you want to keep your gross salary unchanged, the pension arrangements above do that.

Related guides:

• Salary Calculation for Skilled Workers
• Skilled Worker Salary Threshold
• Skilled Worker Extension Guide
• Employer Sponsor Duties

Questions and answers