Is Salary Sacrifice Worth It?
As an employee, you may have heard the term salary sacrifice. But what exactly is this scheme, and how can it benefit you? In this blog, we’ll explore how salary sacrifice schemes for cars can improve cost savings, enhance personal mobility, and contribute to environmental sustainability.
What is Salary Sacrifice?
Salary sacrifice, also known as salary exchange, is a scheme where an employee agrees to forgo part of their salary in exchange for receiving a car or another non-cash benefit. This arrangement allows employees to use their pre-tax income to pay for these benefits, resulting in potential savings on income tax and national insurance contributions.
Salary sacrifice schemes have been gaining popularity in recent years due to their attractive incentives, such as access to desirable assets or services at a reduced cost. By participating in a salary sacrifice program, employees can enjoy the convenience and financial advantages of obtaining valuable benefits while optimising their financial situation. It’s a win-win!
Fleet Evolution’s Electric Salary Sacrifice Arrangement
As a leading provider of electric salary sacrifice schemes, we offer a compelling solution for employees seeking to embrace sustainable mobility through salary sacrifice schemes. Our Electric Salary Sacrifice Arrangement focuses specifically on electric vehicles (EVs), aligning with the global shift towards reducing carbon emissions and promoting environmental sustainability. Get in touch with us today for more information!
How Does Salary Sacrifice Work?
Salary sacrifice allows employees to exchange a portion of their pre-tax salary for certain non-cash benefits. Let’s explore how salary sacrifice arrangements work in a bit more depth:
Agreement
The employer and employee agree to participate in a salary sacrifice scheme and outline the available benefits. This ranges from cycle to work schemes to cars. For example, if you’re choosing an electric car salary sacrifice scheme, here at Fleet Evolution, you’d get a fully insured electric vehicle at no extra monthly cost!
Sacrifice Amount
Then, the employee determines the amount of their salary they wish to sacrifice to receive the chosen benefit. This agreed amount is deducted from their gross salary before tax, and National Insurance contributions are factored in.
Benefit Provision
Once the salary sacrifice amount is agreed upon, the employer arranges to provide the chosen benefit. For example, if the benefit is a company car, the employer may lease or purchase the vehicle, and the provider will handle its insurance, maintenance, and related expenses.
What does Salary Sacrifice mean for tax and National Insurance contributions?
As mentioned, salary sacrifice car schemes can positively impact the income tax and national insurance contributions as your gross salary will be reduced. This means you will pay reduced tax contributions due to your lowered gross income.
The Benefits of Salary Sacrifice For Employees
Let’s explore the various benefits of opting in for a salary sacrifice scheme if you’re an employee:
Environmental Benefits
With greenhouse gas emissions on the rise, now more than ever, it’s essential to make an environmentally friendly switch. Choosing an electric salary sacrifice scheme allows you to do just that. With zero emissions, you can be sure that this car will help you do your part for the environment.
Reduced Fuel Costs
Choosing an electric vehicle is the perfect answer to those rising fuel costs. Simply charge your car at work, home or on the go and experience the reduced costs that come with making a better environmental choice.
Tax Savings
Salary sacrifice is also an excellent way for the employee to potentially lower the amount of income tax they are required to pay, as their gross salary is technically lower. It’s important to note that salary sacrifice may affect eligibility for certain tax credits or benefits, so employees should seek advice to understand the implications.
What is the Administrative Burden as an Employee?
As an employee, you may be wondering what admin you’ll have to complete when signing up for a salary sacrifice scheme. Luckily for you, expert providers such as us here at Fleet Evolution take care of that as part of our inclusive service.
We complete the following:
- Recharges go direct to the employee.
- HMRC Clearance.
- Driverline Team on hand for employees.
- Engagement Team on hand for employers
- We write contract variations
Setting Up A Salary Sacrifice Scheme as an Employee
If you’re an employee that’s ready to set up a salary sacrifice car scheme, begin by inquiring about available schemes with your employer. Our top recommendation would be to reach out to a provider who can give you more information on the subject first. For example, here at Fleet Evolution, we have an employee zone in which we give helpful information about the salary sacrifice arrangement we offer, as well as how to get signed up.
Once you’ve found out if a salary sacrifice scheme is available at your company, let them arrange the rest. Salary sacrifice schemes also offer numerous benefits for employers, so its a mutually beneficial arrangement. Then, your salary sacrifice provider will take care of the paperwork and other bits of admin so that you and your employer can enjoy the range of benefits.
Am I Eligible For A Salary Sacrifice Scheme?
To check if you’re eligible for a salary sacrifice scheme, you must meet the following criteria:
- You’re over the age of 21
- You’ve worked at your company for a minimum of six months
- Your salary must not fall below the national minimum wage or living wage during monthly payments after any salary sacrifice arrangements.
- You must have had a full driving licence for more than six months with no more than six current endorsement points for all vehicle drivers.
To conclude, taking advantage of salary sacrifice for cars allows employees to enjoy financial savings, drive environmentally friendly vehicles, and contribute to a greener future. It’s a great opportunity to optimise personal finances, enhance mobility options, and make a positive impact on the planet. So, don’t hesitate to explore and embrace the benefits of salary sacrifice schemes for cars today!
Employee Salary Sacrifice FAQs:
We’ve answered some of the most frequently asked questions about employee salary sacrifice below:
What is employee salary sacrifice?
Employee salary sacrifice refers to an arrangement where an employee agrees to give up a portion of their salary or wages in exchange for certain benefits or perks provided by their employer. A common example is workplace pension schemes, where an employee’s gross income is salary sacrificed so that their pension contributions can increase. Other examples include childcare vouchers, car leasing, or other non-cash benefits.
Is salary sacrifice good for employees?
Salary sacrifice benefits people in many ways. By sacrificing a portion of their salary, employees may gain access to various tax advantages or perks they wouldn’t otherwise have. For example, contributing to superannuation through salary sacrifice may allow employees to boost their retirement savings while enjoying potential tax benefits. Similarly, salary sacrificing for childcare vouchers or other non-cash benefits can help reduce out-of-pocket expenses for employees.
What are the disadvantages of salary sacrifice?
While salary sacrifice can offer benefits, there are also potential disadvantages that employees should consider:
- Reduced take-home pay: By sacrificing a portion of their salary, employees will have less money available for immediate expenses or discretionary spending. This reduction in take-home pay can impact an individual’s cash flow and lifestyle choices.
- Pension and entitlement implications: Salary sacrifice contributions into superannuation or other pension schemes may have implications on entitlements, such as government benefits or employer-matching contributions. It’s essential to understand how salary sacrifice may affect these aspects.
- Tax implications: While salary sacrifice can provide tax benefits, it’s crucial to consider the overall tax implications. Employees should be aware of potential changes in their tax obligations, such as changes in marginal tax rates or the impact on government benefits.
Can you salary sacrifice statutory maternity pay?
No, statutory maternity pay cannot be salary sacrificed, it has to be paid in full.
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