Check the remaining cash pay, not the headline
Headline cash pay − proposed sacrifice
Cash pay after sacrifice
≥
Applicable minimum-wage floor
The rule
Employers must not use salary sacrifice in a way that reduces cash earnings below the National Minimum Wage or National Living Wage for the worker's age or apprentice band. This is an employer payroll compliance rule, not a pension tax relief limit.
Visual explainer
The cash-pay floor comes first
UK · 2026/27 · From April 2026 · Age 21+ reference: £12.71/hour · Other age and apprentice bands differ.
Only the headroom can be considered
Cash pay above the floor may be available for sacrifice, subject to payroll rules and any employer buffer.
Protected floor · keep as cash pay
Applicable hourly rate × relevant hours
For the 21+ reference: £12.71 × 37.5 hours × 52 ≈ £24,785/year.
Check scheme limits and payroll calculation.
Reduce or reject the proposed sacrifice.
Why employers cap sacrifice
Salary sacrifice changes your contractual cash pay. If the sacrifice would push that cash pay below the legal minimum for your hours and age band, payroll should reject or reduce the sacrifice. Many employers build a buffer into their systems.
Salary sacrifice versus normal pension contributions
With salary sacrifice, your employer pays less cash salary and more pension contribution. With a normal personal pension contribution, you are paid first and then contribute from your own money. Both can affect adjusted net income, but they work differently for PAYE, National Insurance, payslip salary and minimum-wage checks.
The timing of the contribution changes the route
SALARY SACRIFICE
Contractual cash pay reduced
Pension receives contribution
Remaining cash through payroll
PERSONAL PENSION
Cash pay through payroll
Pension receives net payment
Gross pension contribution
Salary sacrifice changes the employer’s cash-pay obligation; a personal contribution is paid from your own money.
What to watch
- Use post-sacrifice cash pay, not headline salary, for the minimum-wage comparison.
- Use actual paid hours, including regular overtime where relevant.
- Check the correct age or apprentice band.
- Ask payroll how often they test compliance and whether they keep a buffer.
- Remember salary sacrifice can affect payslip salary, mortgage affordability, statutory pay and some benefits.
Sources and last reviewed
Last reviewed 2026-05-08. Sources: GOV.UK: National Minimum Wage rates from April 2026, GOV.UK: The National Minimum Wage in 2026.