Employer’s Guide to Salary Sacrifice Cars
If you’re an employer, you’ll know that attracting and retaining top talent is crucial to the success of any business. This often means offering incentives that go above and beyond the standard insurance and retirement plans. But did you know that salary sacrifice car schemes are a great way to do this?
In this blog, we’ll be going through what a salary sacrifice arrangement is, how you can apply and the numerous benefits it will offer to your employees. So, let’s get started.
What is Salary Sacrifice?
Salary sacrifice schemes, also known as salary exchange, are an arrangement where an employee agrees to reduce their salary in exchange for non-cash benefits. Examples include: workplace pension schemes, cycle-to-work schemes, and other benefits such as childcare vouchers.
Salary Sacrifice Car Schemes
Salary sacrifice arrangements improve employees’ mental and physical wellbeing whilst offering excellent financial benefits for the employer. One of the most popular schemes is a salary sacrifice car scheme, in which employees can obtain a brand-new car at discounted rates by sacrificing a portion of their pre-tax salary.
Within this agreement, the employer leases the car for a set period of time to the employee. Over this period, the employee then repays the cost of the lease through a reduction in their gross annual salary. In turn, this reduces the amount of income tax they are required to pay, meaning they have more disposable income and a new vehicle.
Most people are eligible for salary sacrifice schemes as long as they’re over 21, in full-time employment, and their salary will not fall below the national minimum wage after deductions.
The Benefits of Salary Sacrifice For Employers
When it comes to salary sacrifice arrangements for employers, this is a mutually beneficial arrangement. Not only will your employees be able to save more on taxes, but you could also benefit from lower payroll costs and increased overall productivity. Here are some of the biggest benefits that employers can gain by offering a salary sacrifice car arrangement:
Cost Savings
The most obvious benefit of salary sacrifice arrangements for employers is the cost savings associated with offering them. By allowing your employees the option to reduce their taxable income, you can reduce your corporation tax and national insurance contributions, as you’re paying less in overall wages. This can result in significant savings for employers, especially for those larger businesses.
Easy Set-Up
Setting up a salary sacrifice arrangement doesn’t have to be a challenge. If you’re looking to lease vehicles to your employees, you can often get a solution tailored to your business and employees’ needs with minimal effort. This makes it easier than ever for employers to offer the benefit of salary sacrifice schemes without having to put in too much legwork.
For example, here at Fleet Evolution, we’re able to set up a salary sacrifice electric car scheme quickly and easily, so employers can get the most out of these arrangements while their employees enjoy greater savings. Simply get in touch today, and we can start the process without hassle.
Retain Top Talent
If you’re a business owner, you’ll know that attracting and retaining top talent is crucial to the success of your business. A salary sacrifice car arrangement can go a long way towards helping you do this. Employees can benefit from the savings on their tax and national insurance contributions, so they’ll be more likely to stay with your company. They’ll also have a range of company benefits that they may not receive elsewhere, so this is the perfect way to keep them incentivised.
Improved Employee Financial Wellbeing
Not only can your employees save more on income tax and national insurance contributions, but they’ll also get access to company cars, which they may not otherwise be able to afford otherwise. Employees can save up to 45% on motoring costs through salary sacrifice car schemes! This means that your employees will be better off financially, which will lead to a better work-life balance and increased job satisfaction, translating into improved productivity.
Range of Options To Choose From
Working with an experienced salary sacrifice provider means you’re choosing to work with industry experts. This means you can offer your employees a range of options, from everyday electric cars to Teslas. Having this range of options to choose from will ensure that, as an employer, you have a range of options available.
What is the Administrative Burden for an Employer?
Unlike other schemes, our salary sacrifice car arrangements involve very little administrative burden to employers. As a fully managed scheme, we take care of all the paperwork and legwork, so you can get on the day-to-day running of our business. This makes it easier than ever for employers to offer this great benefit to their employees, without having to worry about the extra work.
Setting up a Salary Sacrifice Scheme for Employers
If you’re considering implementing a salary sacrifice arrangement at your company, then Fleet Evolution can provide you with the perfect solution. We have a range of tailored solutions designed to suit your business and employees’ needs, so you can get the most out of these arrangements.
Here’s a quick rundown on how you can get started with us:
- Fill out a contact form on our website, and we’ll get back to you with more information.
- Our advisors will help you decide which car leasing solution is best for your business. It doesn’t matter if you’re a company of 2 or 2000; we’ll be able to help provide your company with the latest electric vehicles.
- We’ll then tailor a solution specifically for you and your employees, with the option of adding on any additional benefits or perks if needed.
- Once you’re happy with everything, we can set you up and ready to go in no time. With a 30-day leaver policy, we’re flexible and able to adjust our services as needed.
It’s that simple!
We hope that this blog has given you some insight into the advantages of salary sacrifice car schemes for employers. Working with a specialist provider like Fleet Evolution can help your company to attract and retain top talent for the years to come. Not only do you benefit from improved employee well-being and an extensive range of options to choose from, but this is the perfect way to ensure that everyone benefits from the savings on their taxes and national insurance contributions. So why not give it a try?
Related article: Salary Sacrifice For Employers
Frequently Asked Questions:
We’ve answered some of the most frequently asked questions about a salary sacrifice arrangement below:
How does salary sacrifice work for the employer?
The employer will make a deduction from the employee’s salary before tax and national insurance contributions are calculated. The salary sacrifice deduction is then diverted into an approved company car scheme that is then used to buy the employee a car.
Do employers benefit from salary sacrifice?
Yes, employers can benefit from salary sacrifice arrangements as they pay lower national insurance contributions and reduce the amount of taxable income on cash earnings. This means that they pay less corporation tax and can use the employer contributions to invest in the business or on other potential employee benefits.
How much does employer save on salary sacrifice?
The amount that the employer saves can vary depending on their business, the salary sacrifice arrangement and whether additional benefits have been added. However, as a general guide, employers can expect to save up to 13.8% in national insurance contributions for each employee enrolled in a salary sacrifice car scheme. Employees can save anywhere from 2-12%.
Can statutory maternity pay be salary sacrificed?
No, it cannot be sacrificed in return for a non cash benefit, it must be paid in full. The employer must pay the required minimum amount.
How does salary sacrifice pension contributions work?
With salary sacrifice pension contributions, the employee will forfeit part of their gross salary and instead have it invested in a pension scheme. The employer will then make National Insurance and income tax savings on this sum.