The £100k Tax Trap: How It’s Shaping Senior Hiring and Reward Strategies

Recently, I ran a LinkedIn poll asking:

"Should salary sacrifice exemptions be removed for those earning over £100k?"

The response was clear — 75% said no. Only 10% supported the idea, and 12% felt it depends on the circumstances. This says a lot about how professionals at the top end of the pay scale view their benefits.

But why does this matter? Well, once employees pass the £100,000 salary threshold, they face what’s often called the £100k tax trap — where the effective marginal tax rate can spike up to 60%. Not exactly a reward for hard work and progression.

That’s where salary sacrifice schemes come in. These schemes help reduce taxable income and boost net benefit, particularly for high earners. The most popular ones include:

• Pension contributions – tax-free and future-proof.
• Workplace nursery fees – a brilliant perk for working parents.
• Cycle-to-work schemes – healthier employees and tax savings.
• Payroll giving – tax-efficient philanthropy.

So what if these were taken away for those earning over £100k?

It could have real consequences for how businesses attract and retain top-tier talent. We already know that Directors and senior leaders don’t just weigh up salary — they look at the full package. Removing access to smart financial tools would narrow the reward envelope at a time when organisations are competing fiercely for talent.

What does this mean for hiring managers?

If you’re recruiting for roles with six-figure packages, think beyond base pay. Consider:

Flexible salary sacrifice options — make sure your schemes are accessible and wellcommunicated.

Performance-related incentives — bonuses or LTIPs that are aligned with clear milestones.

Non-cash benefits — such as enhanced annual leave, private healthcare, wellness allowances, or development budgets.

Pension top-ups or employer-only contributions — especially for those hitting the tapered annual allowance options — make sure your schemes are accessible and well-communicated.

Keep an eye out for our benefits survey in the Autumn.