diff --git a/.gitattributes b/.gitattributes
new file mode 100644
index 000000000..807d5983d
--- /dev/null
+++ b/.gitattributes
@@ -0,0 +1,3 @@
+
+# Use bd merge for beads JSONL files
+.beads/issues.jsonl merge=beads
diff --git a/policyengine_uk/parameters/gov/contrib/behavioral_responses/salary_sacrifice_broad_base_haircut_rate.yaml b/policyengine_uk/parameters/gov/contrib/behavioral_responses/salary_sacrifice_broad_base_haircut_rate.yaml
new file mode 100644
index 000000000..41b6d9d69
--- /dev/null
+++ b/policyengine_uk/parameters/gov/contrib/behavioral_responses/salary_sacrifice_broad_base_haircut_rate.yaml
@@ -0,0 +1,22 @@
+# The rate at which ALL workers' employment income is reduced due to the salary sacrifice cap.
+# When the salary sacrifice cap is active, employers face increased NI costs on excess contributions.
+# They spread these costs across ALL employees (not just affected workers), reducing everyone's pay.
+#
+# Calculation from blog (https://policyengine.org/uk/research/uk-salary-sacrifice-cap):
+# - Total excess above £2,000 cap: £13.8 billion
+# - Employer NI on excess (at 15%): £2.1 billion
+# - Total UK employment income: ~£1.3 trillion
+# - Broad-base haircut rate: £2.1bn / £1.3tn ≈ 0.0016 (0.16%)
+#
+# This is applied to ALL workers' employment income, not just salary sacrificers.
+# The economic logic: employers cannot target only affected workers (who would negotiate
+# to recoup the loss), so they spread the cost across all employees.
+description: Rate at which all workers' employment income is reduced when salary sacrifice cap is active.
+values:
+  2010-01-01: 0.0016
+metadata:
+  unit: /1
+  label: Salary sacrifice broad-base haircut rate
+  reference:
+    - title: PolicyEngine UK Salary Sacrifice Cap Analysis
+      href: https://policyengine.org/uk/research/uk-salary-sacrifice-cap
diff --git a/policyengine_uk/simulation.py b/policyengine_uk/simulation.py
index 236d58af2..301219595 100644
--- a/policyengine_uk/simulation.py
+++ b/policyengine_uk/simulation.py
@@ -123,6 +123,10 @@ def __init__(
 
         self.move_values("capital_gains", "capital_gains_before_response")
         self.move_values("employment_income", "employment_income_before_lsr")
+        self.move_values(
+            "employee_pension_contributions",
+            "employee_pension_contributions_reported",
+        )
 
         self.input_variables = self.get_known_variables()
 
diff --git a/policyengine_uk/tests/microsimulation/reforms_config.yaml b/policyengine_uk/tests/microsimulation/reforms_config.yaml
index 246e0e271..a93c8f056 100644
--- a/policyengine_uk/tests/microsimulation/reforms_config.yaml
+++ b/policyengine_uk/tests/microsimulation/reforms_config.yaml
@@ -16,7 +16,7 @@ reforms:
   parameters:
     gov.hmrc.child_benefit.amount.additional: 25
 - name: Reduce Universal Credit taper rate to 20%
-  expected_impact: -29.3
+  expected_impact: -29.4
   parameters:
     gov.dwp.universal_credit.means_test.reduction_rate: 0.2
 - name: Raise Class 1 main employee NICs rate to 10%
@@ -24,7 +24,7 @@ reforms:
   parameters:
     gov.hmrc.national_insurance.class_1.rates.employee.main: 0.1
 - name: Raise VAT standard rate by 2pp
-  expected_impact: 20.7
+  expected_impact: 20.9
   parameters:
     gov.hmrc.vat.standard_rate: 0.22
 - name: Raise additional rate by 3pp
diff --git a/policyengine_uk/tests/microsimulation/test_salary_sacrifice_cap_reform.py b/policyengine_uk/tests/microsimulation/test_salary_sacrifice_cap_reform.py
new file mode 100644
index 000000000..80d517dfc
--- /dev/null
+++ b/policyengine_uk/tests/microsimulation/test_salary_sacrifice_cap_reform.py
@@ -0,0 +1,401 @@
+"""
+Test suite for salary sacrifice pension cap reform fiscal impacts.
+
+This tests the £2,000 salary sacrifice cap policy announced in Autumn Budget 2025,
+which takes effect from April 2029.
+
+Methodology (matching blog at https://policyengine.org/uk/research/uk-salary-sacrifice-cap):
+- Employees redirect excess above £2,000 to regular pension contributions
+- Regular pension contributions get income tax relief but NOT NI relief
+- Broad-base haircut: employers spread NI costs across ALL workers (~0.16% of employment income)
+- Revenue comes from NI on the redirected excess
+
+Expected revenue: ~£3.3 billion in 2029-30
+
+Reference: https://policyengine.org/uk/research/uk-salary-sacrifice-cap
+"""
+
+import pytest
+import numpy as np
+import pandas as pd
+from policyengine_uk import Microsimulation
+
+
+# Policy year when the salary sacrifice cap takes effect
+POLICY_YEAR = 2030  # Use 2030 to ensure cap is active (cap starts 2029-04-06)
+
+# Expected revenue impact in billions (from blog)
+# PolicyEngine baseline estimate: £3.3 billion
+# OBR static estimate: £4.9 billion
+# OBR post-behavioural: £4.7 billion
+EXPECTED_REVENUE_BILLION = 3.3
+TOLERANCE_BILLION = (
+    1.5  # Allow reasonable tolerance for year/methodology differences
+)
+
+
+def _create_no_cap_baseline():
+    """Create baseline simulation without the salary sacrifice cap."""
+    return {
+        "gov.hmrc.national_insurance.salary_sacrifice_pension_cap": {
+            "2029": float("inf"),
+            "2030": float("inf"),
+        }
+    }
+
+
+@pytest.fixture(scope="module")
+def baseline_simulation():
+    """Create baseline simulation without the salary sacrifice cap."""
+    return Microsimulation(reform=_create_no_cap_baseline())
+
+
+@pytest.fixture(scope="module")
+def reform_simulation():
+    """Create reform simulation with the £2,000 salary sacrifice cap.
+
+    Current law already has the cap from 2029-04-06, so we use
+    a plain Microsimulation without additional reform parameters.
+    """
+    return Microsimulation()
+
+
+def test_salary_sacrifice_cap_revenue_impact(
+    baseline_simulation, reform_simulation
+):
+    """
+    Test that the £2,000 salary sacrifice cap raises ~£3.3 billion.
+
+    This matches the PolicyEngine blog methodology:
+    - Employees redirect excess to regular pension contributions
+    - Full excess subject to NI (broad-base haircut reduces all workers' income)
+    - Income tax relief preserved via regular pension contributions
+    """
+    baseline_gov_balance = baseline_simulation.calculate(
+        "gov_balance", POLICY_YEAR
+    ).sum()
+    reform_gov_balance = reform_simulation.calculate(
+        "gov_balance", POLICY_YEAR
+    ).sum()
+
+    revenue_impact_billion = (reform_gov_balance - baseline_gov_balance) / 1e9
+
+    print(f"\nBaseline gov_balance: £{baseline_gov_balance/1e9:.3f} billion")
+    print(f"Reform gov_balance: £{reform_gov_balance/1e9:.3f} billion")
+    print(f"Revenue impact: £{revenue_impact_billion:.3f} billion")
+
+    # The reform should raise revenue (positive impact)
+    assert revenue_impact_billion > 0, (
+        f"Salary sacrifice cap should raise revenue, "
+        f"but impact is {revenue_impact_billion:.2f} billion"
+    )
+
+    # Revenue should be approximately £3.3 billion
+    assert (
+        abs(revenue_impact_billion - EXPECTED_REVENUE_BILLION)
+        < TOLERANCE_BILLION
+    ), (
+        f"Salary sacrifice cap revenue is {revenue_impact_billion:.2f} billion, "
+        f"expected ~{EXPECTED_REVENUE_BILLION:.1f} billion "
+        f"(±{TOLERANCE_BILLION:.1f} billion tolerance)"
+    )
+
+
+def test_ni_increases_with_reform(baseline_simulation, reform_simulation):
+    """
+    Test that total NI increases when the cap is applied.
+
+    The reform adds excess salary sacrifice back to employment income,
+    which is then subject to NI through the normal Class 1 calculation.
+    """
+    baseline_ni = baseline_simulation.calculate(
+        "total_national_insurance", POLICY_YEAR
+    ).sum()
+    reform_ni = reform_simulation.calculate(
+        "total_national_insurance", POLICY_YEAR
+    ).sum()
+
+    ni_increase = reform_ni - baseline_ni
+
+    print(f"\nBaseline NI: £{baseline_ni/1e9:.3f}bn")
+    print(f"Reform NI: £{reform_ni/1e9:.3f}bn")
+    print(f"NI increase: £{ni_increase/1e9:.3f}bn")
+
+    # NI should increase with the reform
+    assert (
+        ni_increase > 0
+    ), f"NI should increase with cap, but change is £{ni_increase/1e9:.3f}bn"
+
+    # NI increase should be significant (at least £1bn)
+    assert (
+        ni_increase > 1e9
+    ), f"NI increase should be >£1bn, got £{ni_increase/1e9:.3f}bn"
+
+
+def test_income_tax_impact(baseline_simulation, reform_simulation):
+    """
+    Test the income tax impact of the reform.
+
+    The excess is added to employment income and to employee pension
+    contributions for relief. Due to pension relief caps, some people
+    don't get full relief, resulting in a small positive income tax impact.
+    """
+    baseline_tax = baseline_simulation.calculate(
+        "income_tax", POLICY_YEAR
+    ).sum()
+    reform_tax = reform_simulation.calculate("income_tax", POLICY_YEAR).sum()
+
+    tax_change = reform_tax - baseline_tax
+
+    print(f"\nBaseline income tax: £{baseline_tax/1e9:.3f}bn")
+    print(f"Reform income tax: £{reform_tax/1e9:.3f}bn")
+    print(f"Income tax change: £{tax_change/1e9:.3f}bn")
+
+    # Income tax should increase slightly (due to pension relief caps)
+    # Expected to be around £1-2bn
+    assert (
+        tax_change > 0
+    ), f"Income tax should increase, got £{tax_change/1e9:.3f}bn"
+    assert (
+        tax_change < 3e9
+    ), f"Income tax increase should be <£3bn, got £{tax_change/1e9:.3f}bn"
+
+
+def test_excess_redirected_to_pension(reform_simulation):
+    """
+    Test that full excess is redirected to employee pension contributions.
+
+    The blog assumes employees maintain their total pension contributions
+    by redirecting the full excess to regular pension contributions.
+    """
+    redirected = reform_simulation.calculate(
+        "salary_sacrifice_returned_to_income", POLICY_YEAR
+    ).sum()
+
+    # Should be significant (blog says £13.8bn excess - full amount redirected)
+    assert (
+        redirected > 12e9
+    ), f"Redirected amount should be >£12bn, got £{redirected/1e9:.2f}bn"
+
+
+def test_salary_sacrifice_data_exists(reform_simulation):
+    """
+    Test that salary sacrifice data exists in the simulation.
+
+    Blog: 4.9 million workers with SS contributions, £22.7 billion total.
+    """
+    ss_contributions = reform_simulation.calculate(
+        "pension_contributions_via_salary_sacrifice", POLICY_YEAR
+    )
+
+    total_ss = ss_contributions.sum()
+    num_contributors = (ss_contributions > 0).sum()
+
+    # Should have significant SS contributions
+    assert (
+        total_ss > 20e9
+    ), f"Total SS contributions should be >£20bn, got £{total_ss/1e9:.2f}bn"
+    assert (
+        num_contributors > 4e6
+    ), f"Should have >4 million contributors, got {num_contributors/1e6:.1f}m"
+
+
+def test_affected_population(reform_simulation):
+    """
+    Test that a reasonable number of people are affected by the cap.
+
+    Blog: 3.3 million workers exceed the £2,000 cap (68% of contributors).
+    """
+    ss_contributions = reform_simulation.calculate(
+        "pension_contributions_via_salary_sacrifice", POLICY_YEAR
+    )
+
+    cap = 2000
+    affected_count = (ss_contributions > cap).sum()
+
+    # Should be around 3.3 million
+    assert (
+        affected_count > 2.5e6
+    ), f"Expected >2.5 million affected, got {affected_count/1e6:.1f}m"
+    assert (
+        affected_count < 5e6
+    ), f"Expected <5 million affected, got {affected_count/1e6:.1f}m"
+
+
+def test_full_excess_redirected(reform_simulation):
+    """
+    Test that the full excess is redirected (no targeted haircut).
+
+    The broad-base haircut reduces ALL workers' employment income,
+    but the full excess above cap is redirected to regular pension contributions.
+    """
+    # Get weighted totals using map_to for proper aggregation
+    ss_contributions = reform_simulation.calculate(
+        "pension_contributions_via_salary_sacrifice",
+        POLICY_YEAR,
+        map_to="person",
+    )
+    weights = reform_simulation.calculate("person_weight", POLICY_YEAR)
+    redirected = reform_simulation.calculate(
+        "salary_sacrifice_returned_to_income", POLICY_YEAR, map_to="person"
+    )
+
+    cap = 2000
+    raw_excess = (np.maximum(ss_contributions - cap, 0) * weights).sum()
+    redirected_total = (redirected * weights).sum()
+
+    # Redirected should be 100% of raw excess (no targeted haircut)
+    ratio = redirected_total / raw_excess if raw_excess > 0 else 0
+
+    assert 0.95 < ratio < 1.05, (
+        f"Full excess should be redirected (ratio ~1.0). "
+        f"Raw excess: £{raw_excess/1e9:.2f}bn, "
+        f"Redirected: £{redirected_total/1e9:.2f}bn, "
+        f"Ratio: {ratio:.2f}"
+    )
+
+
+def test_broad_base_haircut_affects_all_workers(reform_simulation):
+    """
+    Test that the broad-base haircut reduces employment income for all workers.
+
+    The broad-base haircut (default 0.16%) applies to ALL workers,
+    not just those with salary sacrifice.
+    """
+    haircut = reform_simulation.calculate(
+        "salary_sacrifice_broad_base_haircut", POLICY_YEAR
+    )
+    weights = reform_simulation.calculate("person_weight", POLICY_YEAR)
+    employment_income = reform_simulation.calculate(
+        "employment_income_before_lsr", POLICY_YEAR
+    )
+
+    # All workers with employment income should have a haircut
+    has_employment = employment_income > 0
+    has_haircut = haircut < 0  # Haircut is negative
+
+    # Count workers with employment income but no haircut
+    workers_with_employment = (has_employment * weights).sum()
+    workers_with_haircut = (has_haircut * weights).sum()
+
+    print(
+        f"\nWorkers with employment income: {workers_with_employment/1e6:.1f}m"
+    )
+    print(f"Workers with haircut: {workers_with_haircut/1e6:.1f}m")
+
+    # Most workers with employment income should have a haircut
+    haircut_coverage = workers_with_haircut / workers_with_employment
+    assert haircut_coverage > 0.9, (
+        f"Broad-base haircut should affect most workers, "
+        f"but only {haircut_coverage:.1%} are affected"
+    )
+
+
+def test_decile_impact_negative_for_higher_earners(
+    baseline_simulation, reform_simulation
+):
+    """
+    Test that higher income deciles experience negative income changes.
+
+    The salary sacrifice cap reduces household net income for affected workers
+    (those with SS contributions > £2,000) because they now pay NI on the excess.
+    Higher deciles should have larger negative impacts as they're more likely
+    to have high salary sacrifice contributions.
+
+    This validates the distributional impact methodology used in uk-budget-data.
+    """
+    # Calculate household net income for baseline and reform
+    baseline_income = baseline_simulation.calculate(
+        "household_net_income", period=POLICY_YEAR, map_to="household"
+    )
+    reform_income = reform_simulation.calculate(
+        "household_net_income", period=POLICY_YEAR, map_to="household"
+    )
+    household_decile = baseline_simulation.calculate(
+        "household_income_decile", period=POLICY_YEAR, map_to="household"
+    )
+    household_weight = baseline_simulation.calculate(
+        "household_weight", period=POLICY_YEAR, map_to="household"
+    )
+
+    # Build decile DataFrame
+    decile_df = pd.DataFrame(
+        {
+            "household_income_decile": household_decile.values,
+            "baseline_income": baseline_income.values,
+            "reform_income": reform_income.values,
+            "income_change": (reform_income - baseline_income).values,
+            "household_weight": household_weight.values,
+        }
+    )
+    decile_df = decile_df[decile_df["household_income_decile"] >= 1]
+
+    # Calculate weighted relative change by decile
+    decile_names = [
+        "1st",
+        "2nd",
+        "3rd",
+        "4th",
+        "5th",
+        "6th",
+        "7th",
+        "8th",
+        "9th",
+        "10th",
+    ]
+    results = []
+
+    for decile_num in range(1, 11):
+        decile_data = decile_df[
+            decile_df["household_income_decile"] == decile_num
+        ]
+        if len(decile_data) > 0:
+            weighted_change = (
+                decile_data["income_change"] * decile_data["household_weight"]
+            ).sum()
+            weighted_baseline = (
+                decile_data["baseline_income"]
+                * decile_data["household_weight"]
+            ).sum()
+            rel_change = (
+                (weighted_change / weighted_baseline) * 100
+                if weighted_baseline > 0
+                else 0
+            )
+            results.append(
+                {
+                    "decile": decile_names[decile_num - 1],
+                    "decile_num": decile_num,
+                    "rel_change_pct": rel_change,
+                    "abs_change": weighted_change,
+                }
+            )
+
+    print("\nDecile Impact (relative % change in household net income):")
+    for r in results:
+        print(f"  {r['decile']}: {r['rel_change_pct']:.3f}%")
+
+    # Higher deciles (8th, 9th, 10th) should have negative impacts
+    # These workers are more likely to have high salary sacrifice
+    high_decile_results = [r for r in results if r["decile_num"] >= 8]
+
+    for r in high_decile_results:
+        assert r["rel_change_pct"] < 0, (
+            f"Decile {r['decile']} should have negative impact "
+            f"(losers from reform), got {r['rel_change_pct']:.3f}%"
+        )
+
+    # The 10th decile should have the largest negative impact
+    decile_10 = next(r for r in results if r["decile_num"] == 10)
+    assert decile_10["rel_change_pct"] < -0.1, (
+        f"10th decile should have significant negative impact (<-0.1%), "
+        f"got {decile_10['rel_change_pct']:.3f}%"
+    )
+
+    # Overall impact should be negative (reform takes money from households)
+    total_change = sum(r["abs_change"] for r in results)
+    print(f"\nTotal household income change: £{total_change/1e9:.3f}bn")
+    assert total_change < 0, (
+        f"Total household income should decrease, "
+        f"got £{total_change/1e9:.3f}bn change"
+    )
diff --git a/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.yaml b/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.yaml
index 1b03d184f..39785efd9 100644
--- a/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.yaml
+++ b/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.yaml
@@ -5,7 +5,7 @@
     employment_income: 40_000
     pension_contributions_via_salary_sacrifice: 1_500
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
     salary_sacrifice_pension_ni_employee: 0
 
@@ -16,9 +16,10 @@
     employment_income: 45_000
     pension_contributions_via_salary_sacrifice: 2_250
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: (2_250 - 2_000) * 0.08  # £250 excess * 8%
+    # £250 excess * 8% = £20
+    salary_sacrifice_pension_ni_employee: (2_250 - 2_000) * 0.08
 
 - name: Employee NI charge at 8% main rate for earner just below UEL
   period: 2025
@@ -27,9 +28,10 @@
     employment_income: 50_000
     pension_contributions_via_salary_sacrifice: 10_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: (10_000 - 2_000) * 0.08  # £8,000 excess * 8%
+    # £8,000 excess * 8% = £640
+    salary_sacrifice_pension_ni_employee: (10_000 - 2_000) * 0.08
 
 - name: Employee NI charge at 2% additional rate for high earner above UEL
   period: 2025
@@ -38,9 +40,10 @@
     employment_income: 125_000
     pension_contributions_via_salary_sacrifice: 25_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: (25_000 - 2_000) * 0.02  # £23,000 excess * 2%
+    # £23,000 excess * 2% = £460
+    salary_sacrifice_pension_ni_employee: (25_000 - 2_000) * 0.02
 
 - name: Employee NI charge at 2% for earner well above UEL
   period: 2025
@@ -49,9 +52,10 @@
     employment_income: 80_000
     pension_contributions_via_salary_sacrifice: 5_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: (5_000 - 2_000) * 0.02  # £3,000 excess * 2%
+    # £3,000 excess * 2% = £60
+    salary_sacrifice_pension_ni_employee: (5_000 - 2_000) * 0.02
 
 - name: No employee NI charge when exactly at cap
   period: 2025
@@ -60,7 +64,7 @@
     employment_income: 60_000
     pension_contributions_via_salary_sacrifice: 2_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
     salary_sacrifice_pension_ni_employee: 0
 
@@ -71,19 +75,33 @@
     employment_income: 35_000
     pension_contributions_via_salary_sacrifice: 2_100
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: 100 * 0.08  # £100 excess * 8%
+    # £100 excess * 8% = £8
+    salary_sacrifice_pension_ni_employee: 100 * 0.08
 
-- name: Employee optimizes salary sacrifice to cap (100% behavioral response)
+- name: Employee NI on full redirected excess
   period: 2025
   absolute_error_margin: 0.01
   input:
     employment_income: 45_000
     pension_contributions_via_salary_sacrifice: 3_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 1.0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employee: 0
-    pension_contributions_via_salary_sacrifice_adjusted: 2_000
+    # £1,000 excess * 8% = £80
+    salary_sacrifice_pension_ni_employee: (3_000 - 2_000) * 0.08
+    # Full excess is redirected (no targeted haircut)
     salary_sacrifice_returned_to_income: 1_000
+
+- name: Broad-base haircut reduces all workers employment income
+  period: 2025
+  absolute_error_margin: 1
+  input:
+    employment_income_before_lsr: 50_000
+    pension_contributions_via_salary_sacrifice: 0
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0.0016
+  output:
+    # Worker with no salary sacrifice still has employment income reduced by 0.16%
+    salary_sacrifice_broad_base_haircut: -80  # -50_000 * 0.0016
diff --git a/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.yaml b/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.yaml
index f4b9bd74f..ac76d1cb4 100644
--- a/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.yaml
+++ b/policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.yaml
@@ -5,7 +5,7 @@
     employment_income: 40_000
     pension_contributions_via_salary_sacrifice: 1_500
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
     salary_sacrifice_pension_ni_employer: 0
 
@@ -16,9 +16,10 @@
     employment_income: 45_000
     pension_contributions_via_salary_sacrifice: 2_250
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: (2_250 - 2_000) * 0.15  # £250 excess * 15%
+    # £250 excess * 15% = £37.50
+    salary_sacrifice_pension_ni_employer: (2_250 - 2_000) * 0.15
 
 - name: Employer NI charge at 15% for high earner with large excess
   period: 2025
@@ -27,9 +28,10 @@
     employment_income: 125_000
     pension_contributions_via_salary_sacrifice: 25_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: (25_000 - 2_000) * 0.15  # £23,000 excess * 15%
+    # £23,000 excess * 15% = £3,450
+    salary_sacrifice_pension_ni_employer: (25_000 - 2_000) * 0.15
 
 - name: Employer NI charge for large salary sacrifice
   period: 2025
@@ -38,9 +40,10 @@
     employment_income: 80_000
     pension_contributions_via_salary_sacrifice: 15_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: (15_000 - 2_000) * 0.15  # £13,000 excess * 15%
+    # £13,000 excess * 15% = £1,950
+    salary_sacrifice_pension_ni_employer: (15_000 - 2_000) * 0.15
 
 - name: No employer NI charge when exactly at cap
   period: 2025
@@ -49,7 +52,7 @@
     employment_income: 60_000
     pension_contributions_via_salary_sacrifice: 2_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
     salary_sacrifice_pension_ni_employer: 0
 
@@ -60,9 +63,10 @@
     employment_income: 35_000
     pension_contributions_via_salary_sacrifice: 2_100
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: 100 * 0.15  # £100 excess * 15%
+    # £100 excess * 15% = £15
+    salary_sacrifice_pension_ni_employer: 100 * 0.15
 
 - name: Employer NI charge for low earner with high pension contribution
   period: 2025
@@ -71,18 +75,21 @@
     employment_income: 30_000
     pension_contributions_via_salary_sacrifice: 5_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: (5_000 - 2_000) * 0.15  # £3,000 excess * 15%
+    # £3,000 excess * 15% = £450
+    salary_sacrifice_pension_ni_employer: (5_000 - 2_000) * 0.15
 
-- name: No employer NI charge when employee optimizes (100% behavioral response)
+- name: Employer NI on full redirected excess
   period: 2025
   absolute_error_margin: 0.01
   input:
     employment_income: 45_000
     pension_contributions_via_salary_sacrifice: 3_000
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
-    gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate: 1.0
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    salary_sacrifice_pension_ni_employer: 0
-    pension_contributions_via_salary_sacrifice_adjusted: 2_000
+    # £1,000 excess * 15% = £150
+    salary_sacrifice_pension_ni_employer: (3_000 - 2_000) * 0.15
+    # Full excess is redirected (no targeted haircut)
+    salary_sacrifice_returned_to_income: 1_000
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/national_insurance.py b/policyengine_uk/variables/gov/hmrc/national_insurance/national_insurance.py
index d91df2967..429a27730 100644
--- a/policyengine_uk/variables/gov/hmrc/national_insurance/national_insurance.py
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/national_insurance.py
@@ -14,5 +14,4 @@ class national_insurance(Variable):
         "ni_class_2",
         "ni_class_3",
         "ni_class_4",
-        "salary_sacrifice_pension_ni_employee",
     ]
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_broad_base_haircut.py b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_broad_base_haircut.py
new file mode 100644
index 000000000..54ab7ea41
--- /dev/null
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_broad_base_haircut.py
@@ -0,0 +1,43 @@
+from policyengine_uk.model_api import *
+
+
+class salary_sacrifice_broad_base_haircut(Variable):
+    label = "Salary sacrifice broad-base employment income haircut"
+    documentation = (
+        "Reduction in employment income for ALL workers due to employers spreading "
+        "the increased NI costs from the salary sacrifice cap across all employees. "
+        "This is a negative value that reduces employment_income. "
+        "\n\n"
+        "When the salary sacrifice cap is active, employers face increased NI costs "
+        "on excess contributions. They spread these costs across ALL employees (not "
+        "just salary sacrificers), as they cannot target only affected workers without "
+        "those workers negotiating to recoup the loss. "
+        "\n\n"
+        "See https://policyengine.org/uk/research/uk-salary-sacrifice-cap for methodology."
+    )
+    entity = Person
+    definition_period = YEAR
+    value_type = float
+    unit = GBP
+    reference = "https://policyengine.org/uk/research/uk-salary-sacrifice-cap"
+
+    def formula(person, period, parameters):
+        cap = parameters(
+            period
+        ).gov.hmrc.national_insurance.salary_sacrifice_pension_cap
+
+        # If cap is infinite, no haircut applies
+        if np.isinf(cap):
+            return 0
+
+        # Get the broad-base haircut rate (applies to ALL workers)
+        haircut_rate = parameters(
+            period
+        ).gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate
+
+        # Apply haircut to employment income before any salary sacrifice adjustments
+        # Use employment_income_before_lsr to avoid circular dependency
+        employment_income = person("employment_income_before_lsr", period)
+
+        # Return negative value (this reduces employment income for everyone)
+        return -employment_income * haircut_rate
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.py b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.py
index 8206d1736..563009178 100644
--- a/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.py
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employee.py
@@ -5,31 +5,20 @@ class salary_sacrifice_pension_ni_employee(Variable):
     label = "Employee NI on salary sacrifice pension contributions above cap"
     documentation = (
         "Additional employee National Insurance contributions due to "
-        "salary sacrifice pension contributions exceeding the £2,000 cap. "
-        "The excess is subject to standard NI rates: the main rate for "
-        "earnings below the Upper Earnings Limit, and the additional rate "
-        "for earnings above it."
+        "salary sacrifice pension contributions exceeding the cap. "
+        "The full excess is redirected to regular pension contributions "
+        "and subject to NI (but gets income tax relief)."
     )
     entity = Person
     definition_period = YEAR
     value_type = float
     unit = GBP
-    reference = "https://docs.google.com/document/d/1Rhrfrg7A_oZHudmA775otAn1EE4-YthgeyS9nL-PrE8/edit?tab=t.0"
+    reference = "https://policyengine.org/uk/research/uk-salary-sacrifice-cap"
 
     def formula(person, period, parameters):
-        # Use adjusted salary sacrifice after behavioral response
-        ss_contributions = person(
-            "pension_contributions_via_salary_sacrifice_adjusted", period
-        )
-        cap = parameters(
-            period
-        ).gov.hmrc.national_insurance.salary_sacrifice_pension_cap
-
-        # If cap is infinite, scheme is inactive (no charge)
-        if np.isinf(cap):
-            return 0
-
-        excess = max_(ss_contributions - cap, 0)
+        # Get the excess that's redirected to regular pension
+        # This is the amount subject to NI
+        excess = person("salary_sacrifice_returned_to_income", period)
 
         # Use existing NI Class 1 parameters
         ni_params = parameters(period).gov.hmrc.national_insurance.class_1
@@ -39,7 +28,7 @@ def formula(person, period, parameters):
         )
 
         # Apply appropriate NI rate based on income level
-        # Main rate (8%) for income ≤ UEL, additional rate (2%) for income > UEL
+        # Main rate (8%) for income <= UEL, additional rate (2%) for income > UEL
         ni_rate = where(
             employment_income <= upper_earnings_limit,
             ni_params.rates.employee.main,
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.py b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.py
index ec3c01bb8..ed9de113a 100644
--- a/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.py
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/salary_sacrifice_pension_ni_employer.py
@@ -5,29 +5,20 @@ class salary_sacrifice_pension_ni_employer(Variable):
     label = "Employer NI on salary sacrifice pension contributions above cap"
     documentation = (
         "Additional employer National Insurance contributions due to "
-        "salary sacrifice pension contributions exceeding the £2,000 cap. "
-        "The excess is subject to the standard employer NI rate of 15%."
+        "salary sacrifice pension contributions exceeding the cap. "
+        "The full excess is redirected to regular pension contributions "
+        "and subject to employer NI."
     )
     entity = Person
     definition_period = YEAR
     value_type = float
     unit = GBP
-    reference = "https://docs.google.com/document/d/1Rhrfrg7A_oZHudmA775otAn1EE4-YthgeyS9nL-PrE8/edit?tab=t.0"
+    reference = "https://policyengine.org/uk/research/uk-salary-sacrifice-cap"
 
     def formula(person, period, parameters):
-        # Use adjusted salary sacrifice after behavioral response
-        ss_contributions = person(
-            "pension_contributions_via_salary_sacrifice_adjusted", period
-        )
-        cap = parameters(
-            period
-        ).gov.hmrc.national_insurance.salary_sacrifice_pension_cap
-
-        # If cap is infinite, scheme is inactive (no charge)
-        if np.isinf(cap):
-            return 0
-
-        excess = max_(ss_contributions - cap, 0)
+        # Get the excess that's redirected to regular pension
+        # This is the amount subject to employer NI
+        excess = person("salary_sacrifice_returned_to_income", period)
 
         # Use existing NI Class 1 employer rate parameter
         ni_params = parameters(period).gov.hmrc.national_insurance.class_1
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/total_national_insurance.py b/policyengine_uk/variables/gov/hmrc/national_insurance/total_national_insurance.py
index 668f2b89c..e97222431 100644
--- a/policyengine_uk/variables/gov/hmrc/national_insurance/total_national_insurance.py
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/total_national_insurance.py
@@ -11,5 +11,4 @@ class total_national_insurance(Variable):
     adds = [
         "national_insurance",
         "ni_class_1_employer",
-        "salary_sacrifice_pension_ni_employer",
     ]
diff --git a/policyengine_uk/variables/gov/hmrc/pensions/pension_contributions_via_salary_sacrifice_adjusted.py b/policyengine_uk/variables/gov/hmrc/pensions/pension_contributions_via_salary_sacrifice_adjusted.py
index e42ee5637..1a35f459d 100644
--- a/policyengine_uk/variables/gov/hmrc/pensions/pension_contributions_via_salary_sacrifice_adjusted.py
+++ b/policyengine_uk/variables/gov/hmrc/pensions/pension_contributions_via_salary_sacrifice_adjusted.py
@@ -2,19 +2,17 @@
 
 
 class pension_contributions_via_salary_sacrifice_adjusted(Variable):
-    label = "Adjusted salary sacrifice pension contributions after behavioral response"
+    label = "Adjusted salary sacrifice pension contributions (capped)"
     documentation = (
-        "The actual amount of salary sacrifice pension contributions after employees "
-        "adjust their behavior in response to the salary sacrifice cap. When the cap "
-        "is active and employees face NI charges on excess contributions, they may "
-        "reduce their salary sacrifice to the cap level. The reduction rate is "
-        "controlled by the employee_salary_sacrifice_reduction_rate parameter."
+        "The actual amount of salary sacrifice pension contributions after "
+        "applying the cap. Contributions above the cap are redirected to "
+        "regular employee pension contributions and subject to NI."
     )
     entity = Person
     definition_period = YEAR
     value_type = float
     unit = GBP
-    reference = "https://docs.google.com/document/d/1Rhrfrg7A_oZHudmA775otAn1EE4-YthgeyS9nL-PrE8/edit?tab=t.0"
+    reference = "https://policyengine.org/uk/research/salary-sacrifice-cap"
 
     def formula(person, period, parameters):
         intended_ss = person(
@@ -28,16 +26,6 @@ def formula(person, period, parameters):
         if np.isinf(cap):
             return intended_ss
 
-        # Calculate excess above cap
-        excess = max_(intended_ss - cap, 0)
-
-        # Get behavioral response rate
-        reduction_rate = parameters(
-            period
-        ).gov.contrib.behavioral_responses.employee_salary_sacrifice_reduction_rate
-
-        # Amount employee reduces their salary sacrifice
-        reduction = excess * reduction_rate
-
-        # Adjusted salary sacrifice (cannot go below zero)
-        return max_(intended_ss - reduction, 0)
+        # Cap the salary sacrifice at the limit
+        # Excess is redirected to regular pension contributions
+        return min_(intended_ss, cap)
diff --git a/policyengine_uk/variables/gov/hmrc/pensions/salary_sacrifice_returned_to_income.py b/policyengine_uk/variables/gov/hmrc/pensions/salary_sacrifice_returned_to_income.py
index 1cf50760a..e316979b9 100644
--- a/policyengine_uk/variables/gov/hmrc/pensions/salary_sacrifice_returned_to_income.py
+++ b/policyengine_uk/variables/gov/hmrc/pensions/salary_sacrifice_returned_to_income.py
@@ -2,25 +2,40 @@
 
 
 class salary_sacrifice_returned_to_income(Variable):
-    label = "Amount of salary sacrifice returned to employment income"
+    label = "Amount of salary sacrifice redirected to employee pension contributions"
     documentation = (
-        "The amount of salary sacrifice that is returned to regular employment income "
-        "when employees reduce their salary sacrifice in response to the pension cap. "
-        "This amount becomes subject to regular income tax and NI as employment income."
+        "The amount of excess salary sacrifice (above the cap) that is redirected "
+        "to regular employee pension contributions. This maintains total pension savings "
+        "while subjecting the excess to National Insurance (but not income tax, since "
+        "regular pension contributions receive income tax relief). "
+        "\n\n"
+        "The full excess is redirected - the employer cost increase is handled via "
+        "the broad-base haircut (salary_sacrifice_broad_base_haircut) which reduces "
+        "ALL workers' employment income by ~0.16%, not just affected workers."
     )
     entity = Person
     definition_period = YEAR
     value_type = float
     unit = GBP
-    reference = "https://docs.google.com/document/d/1Rhrfrg7A_oZHudmA775otAn1EE4-YthgeyS9nL-PrE8/edit?tab=t.0"
+    reference = "https://policyengine.org/uk/research/uk-salary-sacrifice-cap"
 
     def formula(person, period, parameters):
         intended_ss = person(
             "pension_contributions_via_salary_sacrifice", period
         )
-        adjusted_ss = person(
-            "pension_contributions_via_salary_sacrifice_adjusted", period
-        )
+        cap = parameters(
+            period
+        ).gov.hmrc.national_insurance.salary_sacrifice_pension_cap
+
+        # If cap is infinite, no excess to redirect
+        if np.isinf(cap):
+            return 0
+
+        # Calculate excess above cap - full excess is redirected to regular
+        # employee pension contributions (no targeted haircut on the individual)
+        excess = max_(intended_ss - cap, 0)
 
-        # The difference is returned to employment income (cannot be negative)
-        return max_(intended_ss - adjusted_ss, 0)
+        # Full excess is redirected to employment income (and then to employee
+        # pension contributions for income tax relief). The employer NI cost
+        # increase is spread across ALL workers via salary_sacrifice_broad_base_haircut.
+        return excess
diff --git a/policyengine_uk/variables/input/consumption/property/employee_pension_contributions.py b/policyengine_uk/variables/input/consumption/property/employee_pension_contributions.py
index 341eab20c..b0da36b0b 100644
--- a/policyengine_uk/variables/input/consumption/property/employee_pension_contributions.py
+++ b/policyengine_uk/variables/input/consumption/property/employee_pension_contributions.py
@@ -3,9 +3,15 @@
 
 class employee_pension_contributions(Variable):
     label = "employee pension contributions"
+    documentation = (
+        "Total employee pension contributions including reported contributions "
+        "and any excess salary sacrifice redirected to regular pension contributions."
+    )
     entity = Person
     definition_period = YEAR
     value_type = float
     unit = GBP
-    uprating = "gov.economic_assumptions.indices.obr.average_earnings"
-    adds = ["salary_sacrifice_returned_to_income"]
+    adds = [
+        "employee_pension_contributions_reported",
+        "salary_sacrifice_returned_to_income",
+    ]
diff --git a/policyengine_uk/variables/input/consumption/property/employee_pension_contributions_reported.py b/policyengine_uk/variables/input/consumption/property/employee_pension_contributions_reported.py
new file mode 100644
index 000000000..df551660e
--- /dev/null
+++ b/policyengine_uk/variables/input/consumption/property/employee_pension_contributions_reported.py
@@ -0,0 +1,16 @@
+from policyengine_uk.model_api import *
+
+
+class employee_pension_contributions_reported(Variable):
+    label = "employee pension contributions (reported)"
+    documentation = (
+        "The reported employee pension contributions from survey data, "
+        "before any adjustments for salary sacrifice cap reforms. "
+        "Note: This variable is populated from the 'employee_pension_contributions' "
+        "field in the microdata via input aliasing."
+    )
+    entity = Person
+    definition_period = YEAR
+    value_type = float
+    unit = GBP
+    uprating = "gov.economic_assumptions.indices.obr.average_earnings"
diff --git a/policyengine_uk/variables/input/employment_income.py b/policyengine_uk/variables/input/employment_income.py
index ad6a2666f..ce09eaa5e 100644
--- a/policyengine_uk/variables/input/employment_income.py
+++ b/policyengine_uk/variables/input/employment_income.py
@@ -15,5 +15,6 @@ class employment_income(Variable):
         "employment_income_behavioral_response",
         "employer_ni_fixed_employer_cost_change",
         "salary_sacrifice_returned_to_income",
+        "salary_sacrifice_broad_base_haircut",
     ]
     uprating = "gov.economic_assumptions.indices.obr.average_earnings"
diff --git a/uv.lock b/uv.lock
index 22f2fc5e0..f668d9358 100644
--- a/uv.lock
+++ b/uv.lock
@@ -1197,7 +1197,7 @@ wheels = [
 
 [[package]]
 name = "policyengine-uk"
-version = "2.61.2"
+version = "2.65.0"
 source = { editable = "." }
 dependencies = [
     { name = "microdf-python" },