Using salary sacrifice schemes can benefit staff and reduce tax liability on company cars, explains James Fields-Davis, head of fleet development at Volkswagen Financial Services Fleet (VWFS Fleet)
Finding and keeping talent is proving a challenge for many businesses at the moment. In today’s job seeker market, it is becoming crucial that businesses offer competitive employee benefits packages to attract talent into their business and retain their skilled workers.
Securing new talent is set to get even harder, with the latest statistics showing the UK employment level at a 40-year high. While many firms have turned to salary reviews to hold onto staff, people are increasingly looking beyond just the salary when deciding on a new role; the benefits package can make the difference between someone accepting the job or not.
A cost-effective benefit that businesses should consider is a salary sacrifice car scheme, a highly attractive financial benefit that can ease the pressure for many workers. The cost of living crisis is putting additional financial strain on many people, making everyday bills, such as car payments, a potential source of anxiety.
Salary sacrifice gives individuals the opportunity to ‘sacrifice’ a portion of their salary, pre-National Insurance and income tax, to put towards a brand new vehicle of their choice, making it a cost-effective way of financing a car they may not have otherwise had the budget for.
In addition to helping employees finance vehicles, salary sacrifice is an excellent way to offer electric vehicles or ultra-low-emission vehicles (ULEVs) to those who may not qualify for a company car.
Offering electric vehicles can help businesses move to a low-carbon future – an issue that increasingly matters when attracting and retaining top talent as 65% of UK office workers would be more likely to work for a company with robust environmental policies.
The financial benefits
There are significant financial benefits to be gained for both employers and employees following the introduction of a salary sacrifice scheme that includes electric vehicles (EVs).
The benefit-in-kind (BIK) tax obligation for EVs is just 2%, and it will stay at this level until April 2025. It is a powerful incentive for employees to switch to electric cars as opposed to staying with petrol or diesel vehicles, where the BIK rate could exceed 30%.
And it is not just employees that can financially benefit. Offering electric vehicles through a salary sacrifice scheme also offers substantial Class 1A National Insurance (NI) savings for employers.
Businesses can typically save around £80 to £100 per employee per month for each zero-emission vehicle on the scheme. Employees also see lower NI contributions – a highly attractive option considering the current cost of living crisis that is squeezing most incomes.
At a time when businesses need to offer competitive benefits to stand out in the recruitment market while potentially battling rising costs themselves, salary sacrifice doesn’t cost anything to offer, so is a way of keeping up with the talent market without increasing overheads.
Driving the sustainability agenda
By encouraging the adoption of electric vehicles among staff, companies can also offset their carbon emissions, and this is critical as sustainability strategies become increasingly important for all responsible businesses.
Organisations are looking to implement clear, deliverable plans that enable them to transition to a net-zero future. Company car fleets and even the ‘grey fleet’ – where employees use their personal car to commute or for business purposes – are large contributors to emission levels and, as such, collective action needs to be taken.
Luckily for businesses, they are also one of the easiest things to change in order to reduce overall company emissions. Offering EVs via a salary sacrifice scheme to employees who may not qualify for a company car - but who are creating emissions by driving to the workplace - can be a quick win for businesses looking to address their carbon footprint and tackle climate change.
Running cost benefits
As well as personal tax benefits, employees selecting an EV will also find their running costs are significantly less, particularly if they can charge up at home overnight or at work if the business has installed EV charging points. With the cost of filling a family car with fuel now exceeding £100, it is clear to see the transport running cost advantages that an EV delivers.
For companies wishing to investigate how they can add salary sacrifice schemes to their list of employee benefits, VWFS Fleet runs salary sacrifice roadshows. They highlight the many tangible benefits to staff and organisations and showcase innovative online tools such as ‘EV-4-Me?’ that help advise employees on whether an electric vehicle fits their journey needs.
Salary sacrifice can revolutionise your benefits package and attract desperately needed talent through a financial incentive outside of salary when recruiting while also improving the company’s carbon footprint and reducing costs.
If you have questions on more ways to support employees who have money worries, visit BrAInbox today where you can find answers to questions like How can I help employees affected by cost of living increases?