28 October 2023
4 Things You Might Not Know About A Salary Sacrifice Scheme
Employers are applying an increasing focus on employee benefits and salary sacrifice schemes are at the top of that list as one of the most popular. How an employee is educated and informed about employee benefits plays a huge role in how such schemes are accepted and rolled out and hence how successful they are. Often this just focuses on the headline benefits, and in some cases it is also important to acknowledge that there are supplementary benefits for the employer also.
This is particularly true when we consider salary sacrifice schemes, and in the case of salary sacrifice car schemes, some of the more minor benefits are often the ones which make a key difference to a business and hence are the ones that secure buy-in for the both the employer and employee.
In this article we have gathered together four features of a salary sacrifice car scheme that you might not know about, but which we think are hugely beneficial if you sign-up for a scheme today.
- Reduced benefit-in-kind payments
Benefit-in-kind tax, or BIK tax, is a tax on non-salary perks, and in this case that is the use of what is effectively a company vehicle. This is something that is well established, and particularly to employees who are at executive level or who have always had access to a company car. However, the beauty of salary sacrifice car schemes is that they are totally inclusive, and are open to everybody, so for a younger employee or someone not usually offered access to a company vehicle, it is important to know about and understand benefit-in-kind tax. The salary sacrifice car scheme run by Pink Salary Exchange exclusively offers electric vehicles (EVs), and in terms of BIK tax, this is reduced for EVs. For the next two tax years BIK tax for EVs is fixed at 2%, meaning the employee is paying much less BIK tax if they opt for a salary sacrifice car scheme with Pink Salary Exchange, compared to, for example, taking out a business lease on a petrol or diesel vehicle.
- No deposit
A major factor in deciding whether leasing a car is right for the employee, is the size of the deposit or upfront payment they need to make. This can put people off, even if this upfront cost is essentially part of the overall cost they are paying anyway. With a salary sacrifice car scheme there is no deposit to pay because the financial costs are structured in a different way. The only ‘cost’ to the employee is the portion taken out of their salary on a monthly basis, this keeps it simple and makes it much easier to budget for, because there are no hidden costs or nasty surprises.
- Flexible terms
It is common for a person to struggle with the commitment of a loan repayment or, in this case, a portion of their salary being diverted to a non-salary perk. In such circumstances employees are not usually expecting the finance source to be too accommodating, but because a salary sacrifice scheme is run through an employer, and therefore employees are a highly valued asset in this scenario, there is much more flexibility applied. If an employee is faced by changing financial circumstances, for example their partner loses their job, or goes on maternity leave, then there is scope to change the structure and reduce the portion taken from an employee’s monthly salary. Of course, this will effectively extend the ‘lease’ period because the total overall amount is still repayable, but the scheme does allow for an employee to manage these changing circumstances and lessen the immediate financial burden to make it more manageable.
- Employer benefits
Yes, as an employer, you have read that correctly. An employee benefit also has employer benefits. In this case you will also benefit from reduced national insurance payments to match those reductions enjoyed by the employee, while you will also be able to manage fleet costs easier. But a major management benefit is the idea that salary sacrifice schemes promote fairness and inclusivity across the board. As mentioned earlier, salary sacrifice offers the same benefit to all employees, so people at all levels feel valued and wanted. This will help with general morale and productivity, but also promotes you as a fair employer and means you can include the scheme as a key employee benefit to help attract and maintain the very best employees.
If you want any further help and advice on our salary sacrifice car scheme then contact our team of experts at Pink Salary Exchange.