Why are businesses setting up EV Salary Sacrifice Schemes ... and Should You?
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We speak to Essex, Suffolk, and Norfolk businesses every day … but not everyone that calls us about salary sacrifice has done months of research
We speak to Essex, Suffolk, and Norfolk businesses every day … but not everyone that calls us about salary sacrifice has done months of research.
Some have had an employee ask about it…for some their accountant suggest it … some have seen a competitor mention it … and some have had a conversation at a networking event and thought, that sounds like it might work for us.
Whatever has sparked your interest the key question you are probably asking is along the lines of: “Is an electric car salary sacrifice scheme genuinely worth doing, or is it one of those things that sounds good on paper but in reality creates more work than it’s worth?
It’s a reasonable question and the answer is almost universally yes - it is worth doing – however – the true value and worth will depend on your motives and your objectives for the scheme and how well the scheme is implemented and managed by your provider.
You don’t have to implement a salary sacrifice car scheme in your business … your business will of course continue without one … however as the following article will demonstrate – it could be significantly better with one.
What we can say without question is the businesses across Essex and East Anglia that have set up a salary sacrifice scheme with us haven’t regretted it – with many wishing they had set one up earlier.
The opportunity with EV salary sacrifice has changed – and smaller businesses are taking notice.
The impact of salary sacrifice is significant. SMMT registration data shows continued EV growth, while the BVRLA's Leasing Outlook suggests that between 20–25% of all new electric car registrations in the UK are now coming via salary sacrifice schemes.
As more businesses implement schemes that proportion is still rising.
Until recently the perception has been that a salary sacrifice scheme was a large corporate or large company benefit – something you would find at a business with a dedicated HR or benefits team and a few hundred employees.
The reality was always different and now the perception is also changing, and quickly.
The businesses we support across Essex, Suffolk, and Norfolk and in professional services like accountants, lawyers, surveyors, architects and estate agents and in construction, logistics, agriculture are implementing new schemes or changing providers on renewal for a variety of reasons.
Implemented and supported correctly the reality is that a scheme can deliver on more than one of those fronts simultaneously.
For an outline of the impact a salary sacrifice scheme can have on your business download our Employer Guide … call us on 01206 585837 or complete our call back form to arrange a call at a time to suit you.
Staff Retention: The Benefit that delivers every month.
Recruitment and retention are rarely off the agenda for smaller businesses – losing a valued employee has a proportionally much bigger impact on the business in terms of cost, lost productivity, recruitment fees and the lag to getting a new employee back up to speed.
Workforce analysts like Oxford Economics and the CIPD estimate the cost for a mid-management grade employee to be between £25k-£30k in the UK – anything that can be done to reduce the risk or frequency of staff turnover will have a tangible impact on the performance of the business, therefore.
A well-run salary sacrifice scheme gives employees a tangible, visible benefit that sits on their drive and appears on their payslip every single month. It is not a one-off bonus that gets forgotten … or pizza Friday and it’s not a promise of future progression and development – they all have their place and value, but a salary sacrifice car scheme delivers tangible and significant savings on something most people use every day.
We’re increasingly hearing from Essex businesses that salary sacrifice has started appearing in conversations with existing employeesdeciding whether to stay and potential new candidates considering a move to them and is also becoming part of the wider benefits conversation inthe same way pension contributions and flexible working already are.
Smaller businesses across East Anglia can’t always compete with the l larger organisations on base salary alone, but an accessible and well- communicated salary sacrifice car scheme can be a genuine differentiator.
If you want to see what a Salary Sacrifice Car Scheme can offer your employees download our Employees Guide.
Recruitment: Standing Out When It Matters
When you’re trying to attract the best talent, they need to be interested in the first place and if suitable you want the offer to have the best chance of being accepted – and doing so extends beyond salary.
An EV salary sacrifice scheme saves the employee money – plain and simple … with savings up to c.40% depending on the tax rate. If they are considering a switch to an electric car a salary sacrifice electric car scheme is the cheapest option for a PAYE employed person – and even those considering a used EV could save on a new car scheme.
The savings offered by salary sacrifice make a compelling addition to any job offer.
Businesses that communicate their scheme and benefit most effectively and don’t bury it in a benefits summary at the bottom of a job description make it easy for candidates to understand the extra it can add to the income.
ESG Credentials should be more than a policy document.
ESG is no longer just a concern for larger corporate organisations. Small to medium businesses working in the public sector or for the larger corporates are being asked to demonstrate their environmental, social and governance credentials as part of the procurement or tender process.
An electric car salary sacrifice scheme moves employees into electric vehicles and is one of the most straightforward and measurable ESG actions a smaller business can take.
It directly reduces Scope 3 emissions … the emissions out of direct control of the organisation … and those that are associated with employee commuting and business travel and produces numbers you can actually report.
Perhaps even more importantly, it demonstrates that the commitment is tangible and action has been taken. A sustainability policy is easy to write and file away but making it easy for your employees to switch to an electric car is something very tangible.
If your business is starting to think seriously about your ESG position and credentials for client-facing reasons, your own values, or because your staff expect it then salary sacrifice is one of the few initiatives that delivers on multiple fronts at once.
The National Insurance cost saving
When businesses focus on salary sacrifice, the conversation often centres on the employee impacts or benefit - and understandably so as the savings are significant and easy to illustrate.
When an employee takes a salary sacrifice arrangement, the sacrificed amount reduces the gross salary on which employer National Insurance contributions are calculated – resulting in a saving to the business averaging between £60-£120 per month per employee – based on average gross sacrifice of £400-£800 and the current 15% NIC rate.
Selected salary sacrifice scheme providers will take some or all of this saving as their fee for managing the scheme – many others don’t, however, including NEV Leasing and it is worth considering the scheme as a whole to ensure it has the best possible chance of delivering on your objectives.
Some employers will simply keep the savings as a net saving for the business, whilst others will pass a proportion or all of the savings to the employee to reduce the cost of the vehicle even further.
The NEV Leasing Salary Sacrifice does not impose management charges leaving you to choose what to do with the NI savings … retain them, reinvest them into the business, or pass them on to employees as an enhanced benefit.
That flexibility matters, particularly for smaller businesses that want the scheme to work commercially as well as strategically.
Can Salary Sacrifice replace cash allowance for employees?
If your business currently provides a cash car allowance to some employees, salary sacrifice is without question worth considering.
Cash allowances are straightforward to administer but they come with risks and limitations.
The employee pays income tax and National Insurance on the allowance before they can actually spend it. From what is left they have to fund, maintain and insure their own vehicle – and then re-charge the business 55p per mile for business use for the first 10k business per year.
The business will also pay national insurance on the cash allowance amount each month.
Salary sacrifice changes the landscape considerably and can do so without the employee or the company losing out.
If the business continued to pay the employee the same level of allowance it will result in a cost saving through the NIC savings and also reduced mileage reclaim costs as a salary sacrifice car is classed as a company car for fuel reclaim purposes at a rate of 7p per mile – a saving of 48p per mile for the business.
The risk of cash allowance is also reduced as every salary sacrifice car is automatically covered for business use insurance for the employee and for the duration of the agreement.
It’s not always the right swap for every employee or every business, but the comparison is certainly worth making – our cash allowance vs salary sacrifice scheme cost comparison calculator is a great place to start – click here to download or call us on 01206 585837 to go through the numbers with you.
In summary … Should you set up an EV Salary Sacrifice Scheme in your business?
If any of the above resonates as a benefit to your business in terms of staff retention, attracting new talent, ESG, the NIC savings, replacing a cash allowance, or simply wanting to offer something genuinely useful then the answer is probably yes … or at least, it’s worth picking up the phone and starting the conversation.
The businesses we talk to that decide against it are usually those where the operational fit genuinely isn’t there … a seasonal or fluid workforce or one where the majority don’t have the charging infrastructure at home to make an electric car practical. We’ll tell you if that’s the case.
Not every decision needs to be a commercial or economic one.
Some business owners look at what their employees are spending on running a car and simply want to offer them something better.
That’s a perfectly valid reason to set up a scheme as the savings available to employees are significant and can make a tangible difference.
The businesses that delay because they assume it’s complicated, that it’s designed for bigger companies, or that the timing isn’t quite right are those that most often look back and wish they’d started the conversation earlier.
At NEV Leasing we don’t ask you to complete a form to see if you “qualify” for a scheme … there’s no minimum employee number … no setup or management fees and absolutely no obligation from an initial conversation.
Whatever your motivations or reasons for considering a salary sacrifice scheme a straight forward discussion about whether a scheme would make sense for your business is a great place to start.
To start your conversation call NEV Leasing on 01206 585837 or complete our call back form to arrange a call at your convenience.
Frequently Asked Questions about EV Salary Sacrifice Schemes for Businesses
How do we know if we qualify for a salary sacrifice scheme?
Some providers may ask you to complete a short form to see if you qualify for their scheme – NEV Leasing and other regional providers don’t include this criteria – it is more a case of whether it can work for your business – rather than ours.
Do we need a large workforce to make salary sacrifice worthwhile?
No. We work with businesses of any size, including those starting with a single vehicle. The scheme is just as valid for a ten-person business as it is for one with a hundred employees … the structure and the approach simply adjusts to fit.
How long does it take to set up a scheme?
Once we’ve had an initial conversation and agreed the structure, setup is typically quick and straightforward. We firstly set up the funder credit line and then manage the implement plan, administration, employee communications and the payroll reporting.
What if only a few employees want to participate?
That’s how most schemes start. First-year uptake is typically around 5% so a business of forty employees might see two or three vehicles in year one. As those employees become advocates and colleagues see the real-world savings, uptake tends to grow naturally. An NEV Leasing scheme can run with just one employee.
Does the business take on any financial risk?
The vehicles are on a business contract hire agreement which is contracted to the business. We discuss the options for managing leaver risk at the outset and before implementation so you understand exactly what you’re taking on before the scheme is launched and any vehicles are ordered.
Can we offer salary sacrifice alongside an existing cash allowance?
Yes. Some businesses run both, giving employees the choice. Others phase out the cash allowance as salary sacrifice takes over or new employees join. We can help you think through which approach works best for your current arrangements and provide the necessary calculators to understand the numbers involved.
How does NEV Leasing support businesses based in Essex, Suffolk and beyond?
Once the decision has been made to go ahead we set-up the credit line with the funder and plan the implementation of the scheme to the employees. We take of creating all marketing and communications with your input and approval, set up the portal, register employees, and deliver the in-life management, promotion, and communications for the scheme.
These include regular in-person “pop-up” surgeries where we simply set up in your reception, a meeting room to break-out areas and are on hand for employees to discuss all matters relating to electric vehicles or salary sacrifice so they can fully understand the scheme and make an informed and confident decision of taking advantage.
Ready to Find Out Whether Salary Sacrifice Makes Sense for Your Business?
An initial conversation costs nothing and commits you to nothing. If it’s right for your business, we’ll tell you. If it isn’t, we’ll tell you that too.
Call us on 01206 585837, or complete our call back form to arrange a call at a time that suits you.
We’ll start, as we always do, with a few questions.