Here's the full revised article, with the two schemes kept clearly separate throughout:
Salary sacrifice commuting schemes: WorkRide and Extraordinary
Salary sacrifice commuting schemes let employees pay for their commute from pre-tax income by temporarily reducing their gross salary or wages. The two schemes in common use in New Zealand are:
WorkRide: for a commuting vehicle, being a bike, e-bike, or scooter.
Extraordinary: for public transport, being bus, train, and ferry fares, loaded onto an Extraordinary card to top up Snapper, AT HOP, Bee Card and similar.
In both cases the reduction is formalised through a Salary Sacrifice Agreement, which is a variation to the employee's employment agreement. It is a genuine reduction of gross pay, not an ordinary deduction taken from take-home pay for tax purposes. However, it is the view of MBIE that these are deductions, and need to be treated as such for the purposes of managing holiday pay/leave entitlements.
Each scheme operates under its own Inland Revenue ruling:
WorkRide operates under IRD's binding ruling on the WorkRide programme. IRD describes the arrangement as one where the employer and employee agree to reduce the employee's annualised gross salary or wages for a period of time.
Extraordinary operates under a specific IRD product ruling (BR Prd 25/03) for the provision of a public transport payment card.
How salary sacrifice affects pay
The tax effect is the same for both schemes. Because the gross is genuinely reduced, all calculations that flow from gross are based on the lower figure. That includes PAYE, KiwiSaver employee contributions, employer KiwiSaver contributions, and ACC earner levies.
This is the correct treatment, and it is consistent with how both schemes are marketed to employers. The employer's KiwiSaver and ACC savings on the reduced gross are a deliberate feature of the benefit.
Where the two schemes differ is in how the arrangement is set up in PaySauce.
WorkRide is a one-off benefit recovered through a reduction to the employee's pay.
Extraordinary funds an employee's transport card each pay cycle, so it is set up as a recurring pre-tax deduction per employee. The two methods are covered separately below.
Before you make any change
A salary sacrifice must be supported by a valid written agreement between you and the employee. This is a condition of IRD's ruling and a requirement under the Employment Relations Act. WorkRide provides a template Salary Sacrifice Agreement. Do not make any payroll change until this agreement is signed.
The agreement should specify:
The amount being sacrificed, both the total and the amount per pay period.
The start and end date of the sacrifice period.
That the employee's gross salary or wages is being reduced, not that a deduction is being taken from take-home pay.
Setting up WorkRide
For WorkRide, reduce the employee's base salary or hourly rate for the duration of the salary sacrifice period, to reflect the reduced gross agreed in the Salary Sacrifice Agreement.
For salaried employees:
Open the employee's payments.
Update their annual salary to the reduced amount, being the original salary minus the annual sacrifice amount.
At the end of the sacrifice period, restore the original salary.
For waged employees, work out the equivalent per hour reduction and apply it to the employee's hourly rate for the duration of the arrangement.
If you would prefer the reduction to show as a separate line, you can instead add a fixed amount payment line to the employee's record and enter a negative value, which reduces the gross. Read more about how to do this here: Creating and managing employee payments.
Setting up Extraordinary
For Extraordinary, set up a banked deduction for each employee, following our deductions guide here:
You will only be able to save this as a post-tax deduction. Once you have saved it, contact PaySauce support and let us know you need the deduction changed to pre-tax for an Extraordinary salary sacrifice. We will update the setting for you so the deduction correctly reduces the employee's gross. Please note the deduction will be set up as a post tax deduction by you, and remains so until you have received confirmation from PaySauce Support that we have changed it to a pre-tax option.
Please allow 2-3 business days for us to do this for you, due to variations in inbound support volume.
What this means for the employee
When the salary sacrifice is correctly applied as a reduction to gross:
PAYE is calculated on the lower gross, so the employee pays less income tax.
KiwiSaver employee deductions are calculated on the lower gross.
KiwiSaver employer contributions are calculated on the lower gross.
Reported taxable earnings reflect the reduced gross for the period. This is correct and expected, as the employee's gross earnings for the sacrifice period are genuinely lower.
The employee should be aware of the effects of this arrangement, including reduced KiwiSaver contributions, and reduced reported earnings.
Holiday and leave pay: Labour Inspectorate position statement
In September 2026 the Labour Inspectorate published a position statement on the WorkRide Benefit Scheme. Its view is that, for employment law purposes, the periodic sacrifice amounts are deductions from wages. Holiday and leave payments must be calculated on the employee’s salary or wages before the sacrifice is applied. This applies under the Holidays Act 2003 now, and under the Employment Leave Act 2026 when it starts in August 2028.
The statement doesn’t cover tax law. The tax treatment described in this article, under Inland Revenue’s ruling, hasn’t changed.
The setup steps in this article reduce the employee’s gross pay for tax purposes. If you have employees on WorkRide, you’re responsible for making sure their holiday and leave payments, and the gross earnings those payments are based on, reflect their pre-sacrifice pay for the length of the arrangement. You’ll need to review and manage this yourself for each affected employee, including any leave already taken while a sacrifice was in place.