How Does Salary Sacrifice Actually Work for a Small Business
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Your business doesn't have to implement an electric car salary sacrifice scheme … however those businesses that benefit most are often the ones that assumed it was too complicated to bother with in the first instance
According to the latest registration figures it is estimated that between 20-25% of electric car registrations are from EV salary sacrifice – and that figure is still growing as more and more companies see the benefit of implementing a scheme in their business.
The salary sacrifice sector is dominated by larger national companies with big marketing budgets putting their adverts and banners on social media and across the web – if you’ve ever noticed them, they generally have one thing in common – they are targeting larger companies and generally those with at least 100 employees or often even more.
Over 90% of the UK businesses employ less than 100 people – so does that mean that salary sacrifice isn’t available to you?
In simple terms it is a case of numbers … first year EV uptake in a new salary sacrifice scheme is anecdotally around 5% … so a company of 100 employees might order 5 vehicles in the first year and such a scheme is likely to be self-service via a portal as there with little resource dedicated to the customer potentially.
Does this all mean that salary sacrifice isn’t designed or available to smaller businesses?
Absolutely not, but it does mean you need a different kind of provider ... in a hurry for more information ?
So, What Actually Is Salary Sacrifice?
Because the salary sacrifice happens before tax and National Insurance are calculated, both the employee and the employer pay less.
For the employee, the saving can be substantial. A basic rate taxpayer could save somewhere in the region of 30–40% on the cost of running a new electric car compared to a personal lease. A higher rate taxpayer saves more. Add in the current 4% Benefit in Kind rate on electric vehicles and the potential savings become genuinely significant.
For the employee, there’s a National Insurance saving on the sacrificed salary and depending on your objectives and requirements you can choose how much of these savings are passed on to the employee.
Why Most Small Businesses Think a Salary Sacrifice Scheme Isn’t for Them
The minimum employee thresholds set by national providers aren’t arbitrary – it is just what works for them and they have the biggest marketing budgets.
Larger businesses have dedicated HR, personnel and often employee benefits resource and it is often perceived that running a salary sacrifice scheme involves a lot of administration, management and communication which is the domain of these teams in larger organisations.
That perception is how smaller business owners have concluded a scheme would add additional cost and burden to their business and as such would outweigh any benefits.
Working with a smaller regional provider like NEV Leasing removes that burden as they set up the scheme … create the launch and in life communication and marketing assets to build momentum and raise awareness of the scheme and provide the monthly payroll reports for each and every employee on the scheme.
If anything, an electric car salary sacrifice scheme can work even more effectively in a smaller company because of who is actually running the scheme and how much attention your business and employees get as a result.
Starting With One Vehicle
One of the questions we hear regularly from smaller business owners is whether it’s worth setting up a scheme if only one or two employees are likely to use it initially.
The answer is yes and here’s why.
The NEV Leasing scheme itself doesn’t require a minimum number of vehicles to be ordered before it becomes active. If your business has one employee who wants an electric car through salary sacrifice, that employee can benefit from day one. As awareness grows within the business and the first employee becomes an advocate and living proof of the savings possible then interest – and ultimately uptake naturally grows.
We’ve seen schemes that started with a single vehicle grow steadily as the original driver becomes the most effective advertisement for the scheme that exists … and if it doesn’t – then it is still one more EV driver and one more of your employees reducing their tail pipe emission.
The Rate Question Nobody Talks About
When a national provider quotes your employees on salary sacrifice, they’re often quoting at the system rate - the rate that’s been built into the platform and applied uniformly.
That’s not necessarily the best rate available and it’s hard to notice in the myriad of salary sacrifice calculations.
At NEV Leasing, we have an employee portal that provides rate illustrations – and includes special offers … but every illustration is followed up with a real live rate checked against our network of providers to ensure the best rate available is the one that is quoted and ordered. This agile approach enables employees to access and take advantage of special stock offers and increased discounts and incentives from dealers and manufacturers when they are actively chasing the market.
That difference in rate can seem modest on paper but it translates into a meaningfully lower monthly payment for the employee. Just a £35 saving per month equates to a saving of over £1000 across a three-year agreement.
If you want to view the offers first hand - simply click on this link to our demo portal and use Customer ID 0Me6YRGroE to register to view our demo portal.
This approach and these savings directly improves uptake and the value the scheme delivers for your business.
This is one of the less visible differences between a scheme run through a large, automated platform and one managed by an independent broker who’s actively working on your behalf.
The Pop-Up Surgery Approach and Why It Makes a Difference
Often the biggest barrier to uptake is understanding the scheme … how it works and how to access it.
Larger companies spread across multiple departments and locations rely on the occasional email to spread the word.
Smaller or regional companies have the benefit of fewer locations and departments – added to which the smaller scheme provider is proactively taking care of communications and awareness so a bigger proportion of employees will hear and understand more about the benefits of the scheme.
Additionally, the notion of a “sacrifice” feels counter intuitive – it means you’re giving something up and it is therefore important for the employee to understand exactly what they get in return.
If any of your employees have engaged in the Cycle to Work Scheme or Childcare Vouchers, they will have used a salary sacrifice scheme – albeit likely to have been labelled salary exchange which feels more accurate.
The portal approach is great for illustrations, efficiency and out of hours activity, but a wholly self-serve solution can create friction and barriers to adoption – especially when employees have questions that can’t easily and quickly be answered.
For all of these reason NEV Leasing work differently.
For the businesses we work with across Essex and East Anglia, we offer regular pop-up salary sacrifice surgeries, in person, at your premises or at a convenient local venue. Employees can come and ask every question they have, be walked through real quotations together, talk about range and charging and other matters relating to the scheme.
And if they want to see a particular model, we can probably arrange that as well.
This isn’t just a webinar with the usual awkward Q&A session at the end or in the chat – this is a face-to-face conversation with someone who drives electric and can answer the question about whether a particular car will genuinely get someone from Ipswich to a client meeting in Cambridge and back without charging.
The difference this delivers in employee interest, engagement and therefore scheme uptake is significant – adding to the success of your businesses scheme.
What Employers Are Actually Trying to Achieve
Much of the current advertising simply highlights what a scheme can offer … big savings for employees and various employee, ESG and cost benefits to the employer.
Not every business is drawn to salary sacrifice for the same reason so we will always understand why a business is considering a salary sacrifice scheme in the first instance – their motivations and objective will dictate how the scheme is structured, implemented and communicated.
Staff retention and recruitment.
The job market for skilled employees in professional services, construction, logistics and other sectors remains competitive. A well-run salary sacrifice scheme is a tangible, visible benefit that shows up on a payslip every month. It’s increasingly being cited by candidates as a factor in choosing between employers – both for those staying in their current role and those choosing a new employer.
ESG credentials.
More businesses are being asked about their environmental position by clients, procurement teams, and by their own
staff. A salary sacrifice scheme that puts employees into electric vehicles is a simple, measurable contribution to reducing the business’s Scope 3 emissions and demonstrates a genuine commitment rather than a policy document.
Replacing or improving on a cash allowance.
If your business currently provides a cash car allowance to some employees, salary sacrifice may offer a more tax-efficient alternative for both parties. It can also reduce risk as the employee is automatically covered for business use as part of the fully comprehensive insurance cover. Our NEV Leasing salary sacrifice calculators help businesses make the comparison to understand which arrangement is optimal – request yours here.
Doing something genuinely useful for employees.
Sometimes the motivation is more straightforward. As employee’s personal costs continue to rise an employer can help and provide something meaningful by simply giving them access to a benefit that delivers a real, quantifiable and significant saving on something most employees use every day.
Ultimately it is unlikely that your business has to implement an electric car salary sacrifice scheme … however those businesses that benefit most are often the ones that assumed it was too complicated to bother with in the first instance.
How the Process Actually Works
For a smaller business, the process of setting up a salary sacrifice scheme with NEV Leasing is simpler than most people expect.
We start with a conversation about your business size, structure, existing vehicle arrangements, employee profile and what you’re trying to achieve and from there we’ll explain the scheme in plain terms, answer your questions and give you an honest view of how and if it would work for your specific situation.
If you want to proceed, we handle the scheme setup, the employee communications schedule and assets, the quotations and the ongoing management.
When vehicles are ordered, we manage the process through to delivery – all you need to do is approve their order. And when your employees have the inevitable questions they can speak, email or WhatsApp a real person that knows their business – not just an online chatbot or call centre.
If you now thinking that maybe an electric car salary sacrifice scheme could work for your business and you are interested in learning more then call NEV Leasing on 01206 585837 to set up an initial call or in person meeting – alternatively, click on the link to arrange a call back at a time convenient for you.
Frequently Asked Questions on EV Salary Sacrifice for Small Businesses
Does the business need a minimum number of employees to set up an EV car scheme?
No. We work with businesses from one employee upwards. If a single member of staff wants to access salary sacrifice, we can make that happen.
What happens if an employee leaves before the lease ends?
This is one of the most common concerns and questions asked. We can set up the scheme in different ways to cover this risk depending on your business set-up and objectives for the scheme.
Does salary sacrifice affect an employee’s ability to get a mortgage?
It can affect the gross salary figure a lender sees, which is worth employees being aware of. It’s a question we raise proactively in our pop-up surgeries and discussions so employees can make an informed decision. It is worth noting also that it doesn’t appear on the employee’s credit file as a loan or credit agreement.
Can employees choose any electric vehicle?
Within the parameters of the scheme, yes. We help employees find the right vehicle for their actual needs such as commute length, lifestyle, charging situation and rather than just picking the cheapest option on a list. For business reasons the company may choose to exclude certain vehicle types from the scheme.
What does it cost the business to set up?
Nothing … NEV Leasing do not charge to set up, administer or operate the scheme and you get to choose what happens with your Class 1A NIC savings
We’re based outside Essex so can we still use NEV Leasing?
Yes. We work with businesses across East Anglia and beyond. Our pop-up surgeries cover Essex, Suffolk, Norfolk and the wider East Anglia region, but we’re happy to discuss how we’d support businesses further afield.
Thinking About Salary Sacrifice for Your Business?
If you’ve read this far, you’re probably further along in your thinking than you realise, and the next step is nothing more than an exploratory conversation.
Call us on 01206 585837, email getintouch@nevleasing.com or arrange a call back at a time that suits you.
We’ll start, as we usually do, with a few questions.