Salary sacrifice grocery schemes and the cost of living

With bills rising and employees feeling the squeeze, it’s no surprise that some organisations are looking for creative ways to support staff. 

One idea that’s been getting attention is salary sacrifice grocery schemes. 

They promise cheaper groceries and potential National Insurance savings, but as HR directors, it’s worth asking whether they really deliver and what the risks are.

The concept is simple. 

Employees give up part of their salary in exchange for supermarket vouchers or prepaid cards. 

Some providers claim basic-rate taxpayers could save around 8% on National Insurance, which sounds appealing on paper.

These schemes are currently being offered by some employers and third-party providers. 

Employees get vouchers or cards, and a portion of their salary goes towards them.

But here’s the confusing bit. 

HM Revenue & Customs (HMRC) hasn’t approved grocery salary sacrifice schemes, and most of the ones marketed don’t qualify for tax or National Insurance savings.

For HR and payroll teams, that matters because:

• Employees might expect savings that don’t actually exist, which can lead to disappointment
• The salary given up could still be treated as taxable earnings, with full National Insurance applied
• Employers are responsible for compliance, so mistakes could mean unexpected tax bills or payroll corrections

In other words, these schemes exist, but the 'savings' are often overstated, so it’s important to do your research before rolling anything out.

If a scheme isn’t approved by HMRC:

• Employees could feel let down if the savings don’t materialise
• Payroll needs to make sure deductions don’t push salaries below the National Minimum Wage
• Contracts and internal communications need to be clear to avoid confusion or compliance issues

We recommend that HR teams take a careful, informed approach and get specialist advice before offering these schemes.

Evidence suggests they rarely deliver the advertised savings. 

They’re usually taxable, so the “win-win” for employees and employers isn’t always there.

If the goal is to help employees stretch their pay, there are alternatives that actually deliver value without the compliance headaches of grocery salary sacrifice schemes, such as:

Cashback or reward platforms

These platforms let employees earn real cash back or points on everyday spending. 

Unlike grocery salary sacrifice schemes, these rewards don’t affect PAYE, so employees keep more of their take-home pay. 

They’re simple to use and can cover a wide range of purchases, from groceries to household essentials, making them an easy way to give staff a tangible benefit.

Discount schemes at major retailers

Many large retailers offer employee discount programmes through partnerships with HR platforms. 

These schemes can include everything from groceries and clothing to tech and homeware. 

They give employees a real, upfront saving on purchases without affecting payroll or triggering complex tax rules, making them a low-risk way to support staff financially.

HMRC-approved salary sacrifice benefits

Certain salary sacrifice benefits are recognised by HMRC and genuinely save both employees and employers money. 

Classic examples include:

• Pensions, where contributions reduce taxable income and National Insurance
• Cycle-to-work schemes, which help employees get bikes and equipment at a lower cost
• Childcare vouchers (for legacy schemes still in operation)

These benefits are fully compliant, so there’s no risk of unexpected tax bills or payroll corrections. 

They also give employees real value while supporting wellbeing and long-term financial goals.

By offering these alternatives, HR teams can provide meaningful support for employees’ finances without the uncertainty or complexity of grocery salary sacrifice schemes.

When employees are under financial pressure, it’s easy to see why schemes promising cheaper groceries can sound appealing. 

But in many cases, the real issue isn’t a lack of benefits. It’s a lack of confidence and clarity around money.

That’s why we focus on helping employees understand and manage their finances day to day. 

When people know where their money is going, feel more in control of their pay, and can plan ahead, they’re far less likely to need short-term fixes like grocery salary sacrifice schemes.

For HR teams, that means fewer complicated benefits to manage, less risk around compliance, and a more sustainable approach to financial wellbeing that supports employees properly, not just at the checkout.