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Salary Sacrifice Health and Dental Insurance
Salary sacrifice health insurance and dental insurance salary sacrifice schemes allow employees to access private health and dental cover by exchanging a portion of their pre-tax salary.
This tax-efficient arrangement reduces National Insurance contributions while providing affordable, comprehensive healthcare benefits for employees and their families.

What is salary sacrifice health insurance?
Salary sacrifice health insurance is a tax-efficient scheme where employees exchange a portion of their gross salary in return for private health insurance. This arrangement reduces the employee’s taxable income, leading to savings on National Insurance contributions while providing access to comprehensive healthcare.
For employers, offering salary sacrifice health insurance enhances their benefits package, helping to attract and retain talent. Employees benefit from faster access to medical treatment, reducing time away from work due to illness. The scheme is voluntary, and both parties must agree to the salary adjustment through a formal agreement.
This type of benefit can improve employee wellbeing, reduce absenteeism, and show a commitment to staff health. It is crucial that the scheme complies with HMRC regulations, ensuring employees’ salaries do not fall below the National Minimum Wage.
What is dental insurance salary sacrifice?
Dental insurance salary sacrifice allows employees to access private dental care by sacrificing a portion of their gross salary before tax and National Insurance deductions. This makes dental coverage more affordable while reducing overall taxable income.
Employees can use the scheme to cover a range of dental treatments, from routine check-ups to more extensive dental work. For employers, offering dental insurance salary sacrifice demonstrates a commitment to employee wellbeing and enhances the company’s benefits package.
The scheme is flexible and can be tailored to meet the needs of different employees. Both employers and employees benefit from cost savings, and the process is simple to implement with the right support. As with other salary sacrifice schemes, it must comply with legal requirements and be carefully managed to avoid reducing wages below the National Minimum Wage.
How does salary sacrifice health and dental insurance work?
Salary sacrifice health insurance and dental insurance salary sacrifice work by allowing employees to exchange part of their gross salary for access to private healthcare benefits. The amount sacrificed is deducted before tax and National Insurance contributions, reducing the employee’s overall taxable income.
Here’s how the process typically works:
- Employer Setup: The employer establishes a formal salary sacrifice scheme, ensuring compliance with HMRC regulations.
- Employee Enrolment: Eligible employees voluntarily agree to sacrifice a portion of their salary in exchange for health or dental insurance.
- Salary Adjustment: The agreed amount is deducted from the employee’s gross salary before tax and National Insurance are calculated.
- Policy Activation: The employer arranges and pays for the insurance policy, providing employees with health or dental coverage.
- Ongoing Management: Both parties monitor the scheme to ensure compliance and adjust as necessary if circumstances change.
Employees benefit from lower costs for essential healthcare services, while employers save on National Insurance contributions and provide an attractive staff benefit.
Benefits salary sacrifice health insurance
For Employers:
- Reduced National Insurance Costs: Lower employer National Insurance contributions through pre-tax salary deductions.
- Improved Employee Wellbeing: Encourage a healthier workforce by providing quicker access to medical treatment.
- Enhanced Recruitment and Retention: Attract and retain top talent with a comprehensive health benefits package.
- Reduced Absenteeism: Faster medical treatment leads to shorter recovery times and fewer days off work.
- Positive Employer Branding: Demonstrate commitment to employee health and wellbeing.
For Employees:
- Tax and NI Savings: Pay for private health insurance through pre-tax salary, reducing personal tax liabilities.
- Access to Private Healthcare: Gain quicker access to consultations, treatments, and specialist care.
- Affordable Health Coverage: Spread the cost of health insurance over time through salary deductions.
- Reduced Waiting Times: Avoid NHS waiting lists for quicker diagnosis and treatment.
- Family Coverage Options: Extend healthcare benefits to cover family members at a lower cost.
Benefits dental insurance salary sacrifice
For Employers:
- Lower Employer Costs: Save on National Insurance contributions by offering pre-tax dental cover.
- Improved Staff Wellbeing: Encourage regular dental care, reducing long-term health risks.
- Competitive Benefits Package: Stand out as an employer who cares about holistic employee wellbeing.
- Increased Productivity: Reduce unplanned absences caused by dental issues.
- Flexible and Scalable: Adapt the scheme to accommodate different employee needs and preferences.
For Employees:
- Cost Savings: Reduce the cost of dental care by paying from gross salary, lowering tax and NI contributions.
- Comprehensive Coverage: Access routine dental care, emergency treatment, and specialist services.
- Easier Budgeting: Spread the cost of dental insurance through regular salary deductions.
- Better Oral Health: Encourage regular check-ups and preventive care, reducing future dental problems.
- Family Inclusion: Many schemes allow employees to extend dental coverage to family members.
How to get started with the salary sacrifice health insurance and dental insurance salary sacrifice scheme
Starting a salary sacrifice health insurance and dental insurance salary sacrifice scheme involves careful planning and compliance with HMRC guidelines. Here’s a step-by-step guide:
- Assess Feasibility: Determine if the scheme is suitable for your business and confirm that deductions will not reduce employee salaries below the National Minimum Wage.
- Select a Provider: Partner with a reputable health and dental insurance provider to offer comprehensive coverage.
- Set Up Formal Agreements: Draft written agreements detailing the salary sacrifice terms, including the amount sacrificed and the benefits provided.
- Communicate with Employees: Clearly explain how the scheme works, its benefits, and how it will affect their pay.
- Implement Payroll Adjustments: Ensure your payroll system can accommodate salary deductions and accurately calculate tax and National Insurance.
- Monitor and Review: Regularly review the scheme to ensure compliance and maintain employee engagement.
Working with an accountant or benefits specialist can streamline the process, ensure compliance, and provide valuable insights into structuring the scheme effectively.
Risks and implications that can occur when starting up
While salary sacrifice health insurance and dental insurance salary sacrifice schemes offer numerous benefits, improper setup can lead to legal and financial risks. Common issues include:
- Non-Compliance with HMRC Rules: Misalignment with HMRC regulations could result in the scheme being disqualified, leading to backdated tax liabilities.
- Minimum Wage Breaches: Salary reductions cannot bring employee earnings below the National Minimum Wage, risking legal penalties if not monitored.
- Administrative Errors: Inaccurate payroll adjustments can lead to incorrect tax calculations and employee disputes.
- Impact on Other Benefits: Salary sacrifice may affect statutory benefits (e.g., maternity pay, pensions), reducing employee entitlements.
- Employee Misunderstanding: Lack of clear communication may result in employees misunderstanding their pay and benefits.
To mitigate these risks, employers should consult with an accountant or benefits expert who can:
- Ensure the scheme is compliant with tax laws.
- Provide accurate payroll guidance.
- Advise on employee communication and documentation.
- Monitor ongoing compliance and adjust the scheme as regulations change.
By securing expert support, businesses can implement salary sacrifice health insurance and dental insurance salary sacrifice confidently, ensuring legal compliance and maximising the benefits for all parties.
Professional salary sacrifice implementation
At Pulse Accountants, we provide a comprehensive service to help businesses implement and manage salary sacrifice schemes efficiently and compliantly.
What We Offer:
- Expert Consultation – We assess your business needs and help design a salary sacrifice scheme tailored to your workforce.
- Scheme Implementation – We manage the setup process, ensuring compliance with HMRC regulations.
- Employee Communication – We provide clear, professional communication to employees, ensuring they understand how salary sacrifice works and the benefits it offers.
- Ongoing Support – Our team is available to answer queries and provide ongoing administrative support.
Pricing
- Cost: Varies on a case-by-case basis. Based on company size and employees. Contact us to get a quote.
- Transparent Communication: We communicate the scheme benefits directly to employees and provide full support for any questions.
- Flexible Payment Options: Our fee is spread over several months, so your business benefits from cost savings immediately.
Why choose Pulse?
With extensive experience in sacrifice scheme and insurance management, we provide businesses with a seamless and fully compliant salary sacrifice solution. Our team ensures that both employers and employees understand the benefits and make the most of their opportunities.
Key Reasons to Work With Us:
✔ Industry Expertise – We have a deep understanding of salary sacrifice regulations.
✔ Tailored Solutions – We design bespoke schemes that align with your business and workforce needs.
✔ Compliance Assurance – We ensure full adherence to HMRC guidelines and workplace rules.
✔ Dedicated Support – Our team is available to provide ongoing assistance and ensure smooth implementation.


Types of Salary Sacrifice schemes
While Salary Sacrifice can be used for an array of different benefits, below are the 12 most popular options for salary sacrifice in the United Kingdom:

Car benefit schemes
Employees sacrifice salary to lease a car, covering insurance, maintenance, and tax-efficient payments, reducing taxable income and employer costs.
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Pension contributions
Employees exchange salary for pension payments through salary sacrifice, increasing retirement savings while lowering National Insurance liabilities, benefiting long-term financial security.
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Cycle to work scheme
Employees lease bikes and accessories tax-efficiently, spreading costs while promoting healthier commuting and reducing carbon footprint with employer support.
Find Out More
Home office equipment
Employees acquire ergonomic desks, chairs, and accessories through salary sacrifice, reducing tax costs while improving productivity in remote work environments.
Find Out More
Childcare vouchers
Pre-tax salary funds childcare, reducing tax and National Insurance, helping working parents save on nursery, preschool, and after-school care expenses.
Find Out More
Electric vehicle (EV) scheme
Employees lease EVs through salary sacrifice, enjoying tax savings and reduced running costs, supporting green energy and sustainable transport solutions.
Find Out More
Workplace parking
Employees use pre-tax salary to pay for parking near work, reducing tax costs while securing convenient commuting solutions for daily travel needs.
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Health & dental insurance
Employees sacrifice salary for private healthcare, gaining faster medical access while reducing tax liabilities and supporting overall wellbeing cost-effectively.

Technology schemes
Employees acquire laptops, phones, and gadgets via salary sacrifice, spreading costs with tax efficiency while keeping up with essential technology needs.
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Gym memberships
Employees sacrifice salary to access gyms, benefiting from reduced tax costs while supporting physical health, fitness, and overall workplace wellbeing programs.
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Bus & rail season tickets
Employees fund public transport passes through salary sacrifice, spreading payments while saving on tax and making commuting more affordable.
Find Out More
Holiday purchase scheme
Employees buy extra leave through salary sacrifice, balancing work-life flexibility while reducing tax liabilities with employer-supported additional holiday options.
Find Out More
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