SALARY sacrifice is currently the fastest growing car funding method in the UK – and with good reason. It’s a great perk for staff while delivering savings for your business.
Under a salary sacrifice scheme an employee exchanges some of their gross salary for an ultra-low emission (75g/km or less) car (although in most cases this will be a fully electric zero emission car).
With the reduced salary there’s less income tax and National Insurance to pay. There is some benefit-in-kind tax to pay for the car but this is negligible in comparison to the other tax savings on offer (company car tax for a full electric vehicle is currently 2%).
So how do you set a salary sacrifice scheme up and make it successful?
Here are our best practice tips.
1. Have clear goals
The first step is to be clear about why you need a salary sacrifice car scheme – is it going to replace your company car scheme or will it sit alongside it, perhaps as an alternative to employees using their own private cars for business journeys (the so-called grey fleet)?
“Maybe benchmarking has revealed a gap in your total reward offering. Perhaps you want to support organisational CSR objectives or offer additional tangible benefits that will attract and retain the best talent,” says Paul Gilshan, the CEO of salary sacrifice provider Tusker (pictured right).
“Whatever your reason, being clear about why you need a particular new employee benefit will help you: decide which providers to invite to pitch; create an effective scorecard to consistently and objectively rate suppliers; and set clear KPIs against which to measure the success of your benefit implementation – like improved engagement, wellbeing or reduced CO2 emissions.”
2. Find the right provider
There is a wide range of car salary sacrifice providers you can partner with, from major leasing companies, who offer salary sacrifice alongside their other funding products, to specialist providers.
Some providers only offer electric vehicles (EVs) while others offer a wide range of electric, hybrid and petrol vehicles.
Be aware that 40% of people cannot charge at home due to the nature of their accommodation, so an option is to have plug-in hybrids in the vehicle mix to include those employees who fear they may never have access to regular charging.
Tusker has found that offering the widest possible range of electric, hybrid and petrol vehicles helps meet the needs of individuals.
As well as the vehicle offering, check what administrative support a provider can give you.
“Make sure you have selected a supplier which handles all the administration, especially around the complexity of employment law and HMRC, which can be a minefield for the uninitiated,” says Leech.
“Also make sure that, from the employer’s side, you minimise the risk and beware of schemes which include heavy caveats around employees who leave the scheme. We provide a 30-day no quibble clause where an employer can hand back a car where an employee leaves for whatever reason and provide further protection for when employees fall below the minimum wage, normally as a result of maternity or sickness.”
Make sure you see the provider’s technology in action as a system which is easy to use will help with employee take up and satisfaction with the scheme.
“Employees expect benefits to be served via slick, intuitive tech that’s designed to service employee benefits first and foremost,” says Gilshan.
Gofor recently launched an online driver portal (pictured above) as a means of making it as simple as possible for drivers to compare the different cars available to them at a sacrifice that works for their individual circumstance
This is a far more engaging way for employees to shop around and initial feedback has been incredibly positive
A good salary sacrifice partner will also provide the necessary insight and materials to help educate employees about areas such as early termination, motor insurance, benefit in kind tax, income tax and national insurance contributions, Lesslie adds.
If you’re a public sector employer, look for providers who work with a range of frameworks and manage pensionable income and pension impact. This will give you cost-effective access to employee benefits with all the normal safeguards, while saving time and money, Gilshan says.
3. Involve the correct stakeholders
Salary sacrifice providers agree that having the right stakeholders within your business involved as early as possible is key to launching a scheme successfully.
“Defining the right stakeholders can be determined by the size of your business but in an ideal scenario, a combination of an HR representative, who has oversight of your overall employee benefits package, a finance representative, who can help embed properly within your payroll system and manage salary queries, and an internal communications representative, who knows the best methods and channels to engage your employees, tends to be a good mix,” says Lesslie.
Gilshan advises introducing everyone with a kick-off meeting and covering key milestones “so everyone’s clear on who’s doing what and when”.
“This should take no more than two hours and your provider should shoulder the brunt of the workload, leaving your team with just a few actions,” he says.
4. Choose the right employee communication
There are lots of different ways of communicating and educating employees about a car salary sacrifice scheme.
“Getting your internal promotion right is crucial, and it takes more than an ‘all employees’ launch email,” says Lesslie.
“From initial launch emails, education articles for company intranets, on-site EV demo days to launch, joining business town halls or similar all staff meetings, and a dedicated webinar series, there’s lots of options and touchpoints to explore.
“A good example here is our work with Roc Technologies, a technology solution provider. We complemented an on-boarding webinar series here with an on-site launch day where Michael Hook, our salary sacrifice product specialist, and Paul Reeves, Roc’s account manager and our EV infrastructure specialist, were on hand to deliver a presentation and drop-in info sessions, whilst also having a Polestar 2 available for any Roc employees who wanted a test drive.”
Gilshan adds that a good provider should support you with comms that can be branded and adapted to suit your organisation.
“Just before your benefit goes live, we recommend a pre-launch meeting with your provider to discuss next steps and ensure everything is ready for the big launch,” he says.
5. Make sure you regularly review your salary sacrifice scheme
Measuring the scheme’s success following launch is an on-going process, and should include not only the take up of vehicles but the savings in CO2 emissions, especially in your local area, according to Leech.
“Remember, employees will not just use their EV for work journeys but, for many, all their motoring will be on the school run or on holiday,” he says.
Gilshan advises that stakeholders should re-group not only to measure success but to “revalidate next steps”.
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