Is salary sacrifice worth it for my company in 2023?
- What is salary sacrifice?
- Is salary sacrifice a good idea for my business?
- Will it save my company money?
- When would salary sacrifice not be worth it for your business?
- Is salary sacrifice worth it for my company?
Have you been considering setting up a car salary sacrifice scheme for your company? Does the question “Is salary sacrifice worth it for my company?” pop up often in your mind?
Read on to explore everything you need to know about if salary sacrifice is worth it for your company, and if you should set one up today.
What is salary sacrifice?
A salary sacrifice scheme deducts a portion of an employee’s wage, and in return, the employer gives them a benefit. The most popular benefit is an electric car salary sacrifice scheme.
Thanks to its reduced Benefit-In-Kind, income tax, National Insurance contributions, low maintenance and running costs, and a bundle of other benefits, salary sacrifice schemes for electric cars are a very attractive incentive for existing and new employees.
Is salary sacrifice a good idea for my business?
So, now you understand the basic principle of a salary sacrifice car scheme, is it something you should consider setting up for your business?
Attract new talent
Standing out from the crowd against other competing recruiters can be hard.
A fantastic incentive to attract the best talent is by offering a car salary sacrifice scheme.
Not only are you showing your care for your employees, but you’re offering an electric car that they perhaps otherwise could not afford.
Vehicle fleet discounts
A car salary sacrifice scheme allows your company access to vehicle fleet discounts, which means employees get new cars for much less!
So, you will be offering an attractive incentive for new and existing employees – at a discount!
Employee appreciation
Setting up an electric car salary sacrifice scheme for employees can help them feel appreciated which promises great results for your company.
How?
The domino effect.
Appreciating your employees could go a lot further than simply making them feel good.
Appreciation has the power to, not only motivate employees including those around them but, in the long run, have an incredible knock-on effect on the growth of your business.
Staff who feel valued and respected as people are much more likely to return the favour.
Did you know that 43% of employees become demotivated due to feeling invisible or undervalued?
Imagine 43% of your own employees feeling demotivated or unappreciated – how likely is that to spread to the rest of your employees, and affect your business long-term?
So, is salary sacrifice worth it for your business?
What you should be answering is: How much are your employees worth to you?
Inexpensive company car tax
Electric car salary sacrifice schemes return very little company car tax. The Benefit-In-Kind rate as of 2023/2024 is at just 2%.
Although employees still have to pay tax, when comparing this tiny 2% to a whopping 37% BIK rate on diesel cars – it seems like a well-worth deal.
Following on from appreciating employees, an employer who looks out for and ensures their staff are better off financially is much less likely to experience high employee turnover.
Reduced Income Tax & National Insurance
As you most likely already know, employers pay 13% of National Insurance (NI) contributions for each employee.
In an EV salary sacrifice scheme, because the employee’s salary is reduced that also means reduced tax and NI contributions – for employees and employers.
So, everyone can enjoy great money-saving benefits.
Green credentials
More and more businesses are taking steps towards reducing their carbon footprint and improving their green credentials.
An electric car salary sacrifice scheme is the perfect way to achieve this goal.
It works two-fold.
- Improve your company’s green credentials
- Employees feel good about reducing their CO² emissions on the roads
In fact, studies have shown those who take an active step towards improving their environmental footprint have improved overall well-being and mental health.
Just imagine the positive effect this could have on employees’ day-to-day mental well-being and work life.
It’s very simple. Happy employees = thriving business.
Employee loyalty
If you want to reduce the risk of losing employees, the best thing you can do is nurture your existing staff.
This is when an EV salary sacrifice scheme would be very much worth it for your company.
The thought of losing an employee may vary from business to business. For those who say “I can just replace them”, you’re not wrong. But guess by how much?
To replace 3 employees, you’re looking at around £90,000.
The domino effect.
If one of your best employee leaves, who’s to say this won’t influence the rest of your best talent?
By setting up a car salary sacrifice scheme, you will be nurturing your employees who have stuck with you and saving your business potentially hundreds of thousands of the big bucks.
Will it save my company money?
Setting up a car salary sacrifice can cost money to start with, but it doesn’t have to.
Some salary sacrifice car scheme providers do charge to set up the scheme for you. Some charge a monthly fee whereas others charge a percentage of monthly rentals.
What sets OSV apart?
OSV does not charge you to set up a standard salary sacrifice car scheme. For a bespoke service, there is a fee – however many other providers do not provide this option at all.
Let’s revisit the figures from earlier: the cost of losing an employee is around £30,000.
To reduce the risk of losing £30,000 you must invest in your employees.
If we look at car salary sacrifice as an investment in your new and existing employees, not only do you get to enjoy benefits such as reductions in NI employer contributions but you are also reducing the chance of losing £30,000 or possibly hundreds of thousands more.
So, yes. An electric car salary sacrifice scheme can save your company money.
When would salary sacrifice not be worth it for your business?
Credit check
To set up an electric car scheme your business will have to be credit checked. This is to ensure the company can demonstrate affordability.
If your business is not in good shape financially, then a salary sacrifice would not be worth setting up.
If the business is in good shape, however, then for the benefit of employees feeling valued and bettering retention among staff – then a salary sacrifice scheme is well worth it for your business
Employee wants to own the car
Typically, all vehicles are on a Business Contract Hire and there is no option for an employee or the company to purchase a vehicle at the end of the agreement.
As the employee is paying for the car through salary sacrifice, and enjoying all the benefits it has to offer – it has to be leased by the business, therefore it is a company car.
To avoid any surprises and disappointments it’s best to educate your employees and establish the salary sacrifice car scheme guidelines and rules from the start.
However, as part of the OSV Salary Sacrifice Scheme, we can discuss the best bespoke requirements where there could be the option to own.
Employees are on lower income
If the majority of your employees are on a lower income, and their taking part in a salary sacrifice scheme would take them below the minimum wage threshold – then setting up a scheme would not be suitable for your company.
An employer cannot allow employees to take part in a scheme where it takes them below the minimum wage. Even if they could just about make it, you have a responsibility for duty of care for your staff to ensure they are financially comfortable.
So, we would advise refraining from offering the scheme to employees that meet this threshold.
What if the employee damages the car?
If an employee damages the company car, then they are responsible for repairing it whilst in the contract. Some providers offer insurance to cover this.
Employers should note that they are responsible for the condition of the vehicle when it is returned to the leasing company.
What if an employee goes on maternity/paternity leave?
Once an employee is on maternity or paternity leave, they must still receive the car scheme benefit. The responsibility for this goes to the employer.
The employer must cover payments for the car if the employee’s pay goes below the statutory minimum.
An employee leaves
If an employee leaves your company whilst in a car scheme contract, then the payments of the vehicle is the responsibility of the employer to pay. This can include any remaining costs of the car.
Is there a solution to this?
Yes! OSV’s Early Termination Insurance. This covers you for:
- Employee resignation
- Long-term sickness absence
- Accidental death
- Maternity
- Adoption and Paternity
- Loss of license on medical grounds
For more information get in touch with us today.
Is salary sacrifice worth it for my company?
By now you may be thinking: “Is salary sacrifice worth it for my company?”
If you already have business goals in place such as improving employee engagement and retention, or possibly recruiting the best talent then an electric car salary sacrifice scheme is well worth considering.
Not only will you be growing your business and boosting workplace and employee morale, but your company will be saving money.
On top of this, your company’s green credentials will be greatly improved – something all businesses should strive to do with the 2030 ban on the sale of new ICE cars approaching.
Fed up with looking for your next vehicle?
Need advice from an experienced Vehicle Specialist on what vehicle is right for you?
Book your FREE consultation now