HMRC has declared that the Covid-19 pandemic counts as a life event for salary sacrifice scheme purposes given that an employee’s financial circumstances might have significantly altered. This means an employee can change previously agreed salary sacrifice arrangements.

Although it sounds simple enough, it is best to obtain professional advice before making any decision. There are several factors to consider, especially if salary sacrifice involves pension contributions and/or the employee has been furloughed under the government’s Coronavirus Job Retention Scheme (CJRS).

Impact on furlough pay

In calculating the amount payable under the CJRS, salary sacrifice scheme reductions from an employee’s pay are not included. Making a change to the salary sacrifice arrangements will not alter the amount payable because this is based on the amount of wages from the last pay period before 19 March 2020 (or an average of previous wages in some cases).


For employees, opting out of salary sacrifice arrangements might mean receiving additional salary, an attractive proposition if they are currently struggling cash wise. However, the employee will of course lose the tax advantages enjoyed with salary sacrifice.


For employers, the suspension of salary sacrifice arrangements might remove some or all of the cost of providing the benefits for which salary has been sacrificed.

The entire amount of furloughed pay must be paid to an employee, leaving the employer with the cost of providing salary sacrificed benefits. Many employers may not have the resources to continue to fund this cost, so they can seek an employee’s written agreement to temporarily suspend the provision during furlough. This is especially the case for benefits for which employees may have little immediate use, such as childcare vouchers.

Where pension contributions have been subject to salary sacrifice, any change to the arrangements cannot reduce contributions below the statutory minimum. The Pensions Regulator has published detailed guidance on pension contributions and salary sacrifice, including several worked examples, here