Employee benefits have been a staple part of an employee’s renumeration package for a number of years now. But as workplace cultures and employee expectations have changed, they have slowly evolved from very traditional perks to more directly impactful and beneficial incentives which can provide quite profound benefits to our lifestyle, and almost rank alongside salaries in terms of importance. And the salary sacrifice scheme is a good example of that.

Benefits provided by the employer have traditionally covered things like healthcare, holiday allowance, transport to work, childcare and flexible working hours. These can all be tailored to meet certain needs in our lifestyle and certainly provide a welcome benefit, but the salary sacrifice scheme has a much more significant impact on how we live and how we can manage major factors such as finance and motoring. And at the same time the benefit is felt in two ways as salary sacrifice triggers benefits for the employer also.

How Employees Benefit From Salary Sacrifice Car Schemes

Taking the example of a salary sacrifice car scheme, whereby employees give up a fixed portion of their salary each month in return for an exclusive lease agreement on a brand new electric vehicle (EV), here we have outlined the key benefits:

• Financial freedom – By leasing an EV through a salary sacrifice car scheme, employees are able to take the salary hit on their gross salary rather than net salary. This means they aue paying less income tax and national insurance and therefore, their take home pay increases.
• Tax savings – EVs are subjected to lower BIK tax rates than petrol and diesel vehicles.
• Cost-effective motoring – Leasing an EV through a salary sacrifice car scheme is cheaper than buying one outright on a finance package. This is because with leasing you don’t have to worry about depreciation and the final value of the car. The monthly cost included in the portion of an employees’ salary that they sacrifice represents the cost of depreciation to the leasing company, so they are not paying for ownership, they are simply paying for exclusive use of the vehicle for a pre-determined lease period. And there are no concerns about selling or disposal of the car, at the end of the lease term the employee simply returns it to the leasing company, and, if they want to, choose another one and start a new lease.
• Easy access – Employees have easy access to a great range of high value EVs, and because of the cost savings they are making, can choose a higher spec of vehicle for their money than they otherwise could afford.
• Convenient – The process is hassle-free, and the minimal admin involved is managed by the employer. Furthermore, all motoring costs are included in one monthly fixed cost taken from an employees’ salary, and this includes the lease cost, road tax and service and maintenance.
• Brand new vehicles – At the start of each lease agreement employees can drive a brand new vehicle, and hence they are always benefitting from the very latest technological advances in efficiency, performance, safety and infotainment. Brand new cars bring very few service and maintenance costs, whilst also being exempt from MOT costs for the first three years.
• Low-risk – Employers acknowledge that things change, and employees might leave their job, change jobs or their home circumstances might change. This could make the scheme less attractive financially, so most salary sacrifice schemes enable an employee to terminate the agreement early without any ongoing obligation for the costs.
• Climate impact – Employees are reducing their carbon emissions by driving an EV and therefore are reducing their climate impact.

How Salary Sacrifice Schemes Build Employee Loyalty

The employer can also expect to see some benefits from offering an attractive package of employee benefits, in the form of a salary sacrifice car scheme. While this should include things like a reduction in national insurance payments for each participating employee, better compliance, reduced fleet costs and easier management of grey fleet, the principal benefit for the employer is an increase in employee loyalty.

Salary sacrifice schemes have to be rolled out across the board in a business and have to be fully inclusive. This means employees at all levels of a business have the same opportunity to benefit, and means driving a vehicle through your company is not just the domain of high-level executives. This helps to promote an inclusive culture where everyone is in it together, is more engaged and feels more valued. In turn this can motivate the employee to perform better and to show more initiative, all combining to make the business more productive. A happier and more engaged workforce will also reduce staff turnover, making the business more stable and reduce recruitment costs. And ultimately, an employee renumeration package that includes a salary sacrifice car scheme will appeal more to a better standard of recruit and therefore will improve the quality and standards of the workforce over time.

If you want to learn more about the benefits of salary sacrifice car schemes and how it will work for your business, contact our team at Pink Salary Exchange today.