How Salary Sacrifice Schemes Are Helping The UK Meet Climate Change Targets

08 June 2022

How Salary Sacrifice Schemes Are Helping The UK Meet Climate Change Targets

The fallout from the 2021 COP26 summit and increased media attention surrounding freak weather and global natural disasters has resulted in a much closer focus on climate change in recent months, and an acceptance that everybody has a responsibility to change their behaviour. The UK has a commitment to reach net-zero by 2050 and while various initiatives are ongoing to help meet that, businesses and their employees are accepting the challenge and doing their own work towards the 2050 target. And one of the most successful so far is starting a salary sacrifice scheme and promoting the use of electric vehicles (EVs).

Businesses have an established commitment towards environmental responsibility, with external environmental management standards such as ISO14001 commonplace within the business community and across all industry sectors. But the need for climate action has intensified in the last 12 months and businesses are now looking at new ways to offset carbon emissions and encourage responsible practices. Undoubtedly a very popular mechanism through which to do this is to start a salary sacrifice car scheme where employees benefit in a number of ways.

Benefits for employees of a salary sacrifice car scheme

  • Employees who accept an EV on a salary sacrifice scheme can have the portion of their salary taken from their gross income, rather than nett, so their tax and national insurance contributions are reduced.
  • Employees who have a company car and accept an EV, only have to pay 2% Benefit-In-Kind tax. This would be 30% for a petrol or diesel vehicle.
  • Driving an EV means much lower running costs compared to filling up with petrol or diesel at the garage, and particularly if you charge your EV at home overnight or are able to do so at work.
  • Service and maintenance costs are much reduced with EVs, because there are less moving parts and therefore less to go wrong.
  • Employees are directly reducing their own climate impact.

A common misconception about EVs is that they are costly, the driving range is poor and the charging infrastructure in the UK is inadequate. But all these factors have improved dramatically in recent years, with huge investment in EV technology from all the major car manufacturers worldwide, and from the UK Government and private businesses in public and private charging facilities. All the major vehicle brands offer a range of EVs for all market sectors and driving range can be well over 300 miles, and certainly there will be an EV to suit the type of mileage, the lifestyle and the style of driving you are accustomed to.

How EVs can also help employers running salary sacrifice schemes

It is not just the employee who benefits from the adoption of EVs through a salary sacrifice scheme, the employer does too:

  • Because the employee is saving on national insurance costs, the employer saves on their contribution also. This could be around £80-£100 per employee per month.
  • The business can use an increased EV take-up to offset their own carbon emissions. This includes the company car fleet but also grey fleet, where employees don’t qualify for a company car but do drive their own car to work.
  • The overall package of offering an EV through a salary sacrifice scheme is an appealing perk and can be used to attract a better standard of employee. There is also evidence that it improves morale and productivity within a workforce.

The UK is committed to meeting its climate change targets and every person has a duty and responsibility to do their bit. An easy way for businesses to do this is to start a salary sacrifice scheme and offer EVs to its employees. There are great benefits for all parties and certainly for the reduction of carbon emissions.

Contact Pink Salary Exchange today and we can start the ball rolling on your commitment to improve your climate action.

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