Imagine being able to halve your income tax bill without getting into trouble with the taxman. It may sound like a pitch from a crooked accountant but hundreds of thousands of employees are doing exactly that through workplace “salary sacrifice” schemes.

Salary sacrificing allows employees to give up some of their pretax earnings in exchange for various benefits from their employers, such as pension contributions and childcare vouchers. By paying for such benefits out of pretax salary you can reduce the amount of income tax that you need to pay.

The range of benefits offered by companies under salary sacrifice schemes is widening and now includes staff meals, cycle-to-work schemes, bus travel and even charitable donations and carbon offsetting.

Experts have long agreed that making pension contributions through “salary sacrifice” is a good idea because it saves you from paying national insurance as well as tax. If you contribute to a private pension you will save tax but not national insurance.

Childcare vouchers are another popular benefit offered by an increasing number of employers. By participating in a salary sacrifice scheme, a couple can buy up to £110 a week, or £55 per parent, of childcare vouchers out of pretax income to pay for care for children up to the age of 16. This includes after-school care. Children must attend a registered childcare minder who already has an arrangement with the employer who is offering the scheme.

Of the newer “flexible benefit” initiatives, cycle-to-work schemes, introduced by the Government last year, offer tax and national insurance-free bicycle loans to employees, while bus travel through salary sacrifice involves taking a lower salary in return for free bus travel. Some workplaces give employees the opportunity to donate to charities out of pretax income or even sacrifice some of their salary in exchange for a committment from the employer to devote the funds to carbon offsetting.

Gary Hull, of PriceWaterhouseCoopers, the consultancy, says that employers are hoping to encourage staff to sign up to as many benefits as possible. “More and more companies are presenting themselves as a ‘life-style partner’ to their employees,” he says. “That is, they are not only providing job, salary and pension, but are also giving employees the opportunity to procure life essentials through salary sacrifice schemes, including cars, bicycles, lunch, transport and even accommodation.”

Employers believe that packages incorporating innovative “flexible benefits” will help to attract staff and help to retain workers who are locked in to schemes. Mr Hull says: “This is a growing area which fundamentally changes the relationship between employer and employee.”

However, experts, while pointing to the tax savings and convenience of salary sacrifice, caution that it may not be wise to limit your choices to those offered by your employer. Stephen Herring, of BDO Stoy Hayward, the independent financial adviser, says: “Employers may wish to lock in employees through as many aspects of their life as possible, but this may not always be in the best interests of the employee.

“Although it allows you to buy benefits at a lower price than you might otherwise pay, it is putting a fetter on your freedom of movement.

Sometimes it has the hallmarks of going back to the turn of last century, when employers paid people with vouchers redeemed at the company shop.”

For example, under the cycle-to-work scheme, you have to buy your bicycle from an approved supplier. This could prove more expensive than buying from a nonapproved dealer.

Mr Herring adds that those considering joining salary sacrifice schemes should also be aware that state benefits, such as sick pay and maternity pay, could be affected if you reduce your salary below the legal threshold. However, it is possible to calculate the effect of salary sacrifice on such benefits and it is best to talk to your employer and/or adviser about the potential consequences. Mr Herring adds: “Receiving certain benefits under salary sacrifice schemes can impact on other areas, such as tax credits. Your employer should take the time to explain the implications if you are thinking about signing up.”

Would-be homeowners looking to obtain a mortgage may also find that the benefits are not included in their overall income. Lenders differ as to whether they will include such benefits when assessing a customer’s income and borrowers are advised to check.

Mr Herring says: “Signing up to salary sacrifice benefits is an annual decision. Once employees sign up to a particular salary sacrifice benefit, they should generally be committed to it for at least a year, unless they have a fundamental change in life-style during the period.

“Be sure that you really do need that benefit, then look at the cost and the impact on your long-term remuneration. If all those are a tick, ask whether you are happy to be locked in for 12 months.”

CASE STUDY: Voucher scheme is child's pay

Jon and Alison Stickings, of Edinburgh, sacrifice some of their salary each month in return for childcare vouchers.

The couple work for Royal Bank of Scotland and both participate in the bank’s flexible benefits scheme, which also gives employees the opportunity to pay for bus tickets and bicycles and make pension contributions out of their pretax earnings.

Mr and Mrs Stickings receive £243 a month in childcare vouchers, which they put towards the £264-a-month cost of sending their three-year-old son, Finlay, to nursery.

Finlay attends nursery two days a week. They also previously paid for their daughter, Freya, 5, to attend nursery for three days a week until she started school this year.

Mrs Stickings, pictured with Finlay and Freya, says: “It is a good money-saving exercise for us and because the cost of the vouchers comes straight off our salaries, we do not have to set up a direct debit, which is very convenient.”

She adds: “We started the scheme when our daughter was already in childcare. Fortunately, her nursery was registered for the scheme.”