A salary sacrifice occurs when an employee agrees to give up part of their pre-tax salary in exchange for a benefit from their employer, in this case the hire of a cycle. Such an arrangement reduces the employees taxable income (it´s like the employee never earned the amounts deducted) and generates significant tax savings, dependent on their tax rate.

The diagram below illustrates how a purchase of a cycle with and without salary sacrifice affects employees final ‘cash in hand’ levels.