Salary sacrifice is when an employee, by a change in their employment contract agrees to a REDUCTION in their salary.  In return for this an employee receives an equivalent amount in childcare vouchers.  The first £55 week (£243 per month) of the value of the childcare vouchers is exempt from tax and National Insurance, and employers Class 1 National Insurance contributions.

A signed agreement between the employer and employee stating the reduction in salary the employee has agreed to, the length of time of the agreement and the amount to be received as vouchers, is sufficient to support the original contract of employment.

Employees can salary sacrifice the whole cost of their childcare and receive it as childcare vouchers, but only the first £55 week (£243 per month)is free of tax and National Insurance.

An employees salary must not, after salary sacrifice, fall below the National Minimum Wage.

Unfortunately self employed people are not eligible to participate in salary sacrifice schemes.