How salary sacrifice schemes for cars can benefit employers

9th July 2020

When forecasts, targets and financial planning fall away, the most valuable asset a company has left is its people.

As we emerge from the COVID crisis, companies will need to recognise how their staff may now have new priorities and in order to emerge with a commanding position in their industry, employers will need to focus on retaining talent.

And that’s where salary sacrifice car schemes can help save the day.

As both a savings generator and staff benefit, salary sacrifice car schemes can help organisations adapt to the new future.

COVID-19 has also brought the importance of the environment into focus and salary sacrifice car schemes can help us to retain some of the new cleaner and greener habits we developed during the enforced lockdown.

There are three key areas in which a salary sacrifice scheme for cars can potentially deliver benefits to employers:

1. HR

Significantly enhance the total benefits package
Surveys regularly confirm that a company car remains one of the most desirable benefits an employer can offer its workforce.
A valuable retention, engagement and motivational tool
Salary Sacrifice car schemes can enhance a company’s image as an attractive employer; helping to attract talented new recruits and increase employee satisfaction. Personnel who are allowed to use their personal car both at work and for private use will be both happier and more loyal to their company.
Fairness among employees
Employee car schemes are an extremely attractive proposition for employees who previously have been ineligible for a company car, thus enabling companies to provide an “all employee” benefit. Offering a salary sacrifice car scheme can help alleviate some hierarchal issues by enabling wider car ownership throughout the company, irrelevant to seniority.

2. Financial

Potential to reduce National Insurance costs
Although the employer will still pay NI contributions on the provision of the car, this could be less than the contributions that would have been due on the portion of salary sacrificed, dependant on the vehicle choice and amount sacrificed. The savings can be kept by the employer as a cost saving to their business or passed back to the employee to lower their monthly payment.
VAT savings
Employers can also make another saving by recovering 50% of the VAT on lease and maintenance costs
Lower business mileage reimbursement costs
It is often overlooked that the employer can enjoy a saving on mileage allowances paid, depending on their policies, because the employee is no longer using their own car for business travel. Depending on levels of business mileage, this can deliver significant savings for the employer.
Low financial risk
Reputable salary sacrifice car schemes can include risk protection to mitigate any employer costs arising from resignation, redundancy, maternity/paternity leave, adoption and long term sickness

3. Corporate Social Responsibility

Improve compliance with Health and Safety and duty of care legislation
Another benefit of salary sacrifice for employers is that it helps to remove the risk often associated with employees who are able to take a cash allowance, but who choose to drive older vehicles which they have sourced with their own money.Such vehicles may not be so regularly serviced and maintained, and may pose a potential threat from a duty of care perspective, as the company remains liable if any serious accidents should occur, and such vehicles are being used on company business.A salary sacrifice car scheme, on the other hand, provides these employees with the opportunity to drive well maintained and modern vehicles, complete with the latest technology, low emissions and high fuel efficiency. As a result, it helps to improve driver safety and thus helps employers meet their duty of care responsibilities.

Help the environment and improve green credentials
From 6 April 2020, benefit-in-kind tax (BiK) for zero-emission vehicles was reduced to zero per cent, providing a powerful incentive for company car drivers to switch to electric vehicles.By encouraging the take up of low emission vehicles, a salary sacrifice car scheme will reduce your company’s carbon footprint and thus support your environmental agenda.

"Here at Molson Coors, we take our commitment to the wellbeing of our workforce very seriously and during these challending times, KINTO's salary sacrifice car scheme has significantly supported us in ensuring we offer a comprehensive and flexible benefits package to suit the changing needs of our employees, also allowing them to access a well maintained and modern vehicle."

Tina Samson, Reward Director, Molson Coors Beverage Company

With a benefit scheme that will not only boost employee retention but also help to build a greener, more reputable business, salary sacrifice car schemes are definitely worth the small amount of time and effort required to put into place.

Take a look at our comprehensive product offering or contact (Opens in new window) one of our fleet experts to learn more about how a salary sacrifice car scheme could result in financial benefits for your organisation, as well as a happier and more efficient workforce.

Click here to read our Salary Sacrifice Product Card.

"With benefit-in-kind (BiK) tax rates for all-electric cars reduced from 16% to 0% since April, now is a great time for companies to add a salary sacrifice car scheme to their staff benefit package, to offer their employees the opportunity to dramatically reduce their carbon footprint by switching to electric vehicles."

Jennifer Davis, Sales Director, KINTO

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