Salary Sacrifice
What is an EV Salary Sacrifice scheme?
An electric vehicle salary sacrifice scheme, allows you to offer your employees an attractive and affordable way to drive a brand-new electric vehicle.
How does EV Salary Sacrifice work?
The process is simple. Employees select a car from a list, and then you deduct the monthly rental cost from their salary.
The important bit is that this deduction comes from their pre-tax income, so it’s before they pay income tax and National Insurance. This means they reduce their yearly tax bill.
They would then normally then have to pay benefit-in-kind (BIK) tax for the use of the car at the same rate as their income tax band.
However, with electric cars there are some very generous tax rules that significantly reduce the BIK tax rate – and these are set to stay in place for the next few years at least.
We think this makes salary sacrifice one of the cheapest ways to drive a new electric car.
Why should employers offer a salary sacrifice scheme?
Salary sacrifice schemes offer employers a number of valuable benefits: You can:
- Provide an attractive perk for employees, including those who wouldn’t normally be eligible for a company car.
- Support safer, more cost-effective and more environmentally friendly travel.
- Reduce employers National Insurance contributions.
- Reduce the complexities of cash allowances.
- Reduce your reliance on the ‘grey fleet’ (which tends to be older and less efficient vehicles).
- Cut the cost and carbon footprint of business trips.
What to consider before launching a salary sacrifice scheme
An effective supplier is an integral part of a successful salary sacrifice scheme. Our consultative approach can help you answer the key questions before the scheme is introduced – and we can then support you throughout its life as well.
- Who will run the scheme?Â
A single point of contact for the leasing company can help ensure the scheme is managed properly and continues to fit your goals – such as restricting choice lists to electric vehicles.
- Can employees afford the rentals?
Although salary sacrifice can be made available to all employees, the monthly payments can’t take their remaining pre-tax income below the minimum wage threshold.
- How are you managing risk?Â
There are financial risks we can help you manage. For example, you could include early termination cover for monthly payments in case of long-term sick leave, redundancy, resignation or salary reduction.
- How will it fit with other car schemes?
Salary sacrifice can complement a traditional company car scheme, and some employees may be eligible for both. We can help develop a driver portal that meets your business needs; either presenting both schemes together for easy comparison or separating drivers based on their circumstances to avoid confusion.
- How will you explain the scheme to employees?
We can help you introduce the scheme to employees, so you can make them aware that it is a genuine benefit that they should be keen to explore. This can include a range of support materials, such as our employee guide.
Speak to the team today
Our EV Salary Sacrifice scheme lets employees pay for an electric car from their gross salary. If you have more than 1,000 employees in your company, we can help you and your employees go electric. We're ready to help take those next steps with you. Fill in your details below and we'll be in touch to help you navigate a changing world.