The workplace has changed immeasurably since covid. Flexible working is one of the most noticeable changes as employees put greater value on an improved work-life balance.
Working from home is increasingly demanded by employees, while employers are responding with improved office environments. It’s all very much part of the working landscape of 2023 as demand for skilled workers outstrips the available talent pool.
For employers, it’s a case of balancing work requirements against the pressures of an increasing wage bill. But there are ways to introduce benefits that provide a real perk that’s valued by the employee while remaining relatively cost neutral to the business.
One of the on-trend benefits identified by Startups magazine for 2023 are flex benefits, where employees can tailor a package to suit their lifestyle.
Employees offer up a portion of their gross salary in return for a menu of employment-enhancing options. These often include school nursery vouchers, and day care vouchers, but increasingly important is the provision of salary sacrifice for an electric car.
Car salary sacrifice is the fastest growing funding method according to the British Vehicle Rental and Leasing Association Outlook report, up 33% year on year.
Little wonder, as the scheme offers plenty of opportunities for HR departments to engage with employees with a meaningful benefit that’s cheaper than employees leasing a vehicle privately.
The secret to car salary sacrifice’s success is that it takes advantage of the extremely low benefit in kind company car taxation levied on electric cars, which is currently 2%, only rising to 3% in tax year 2025/26. It also avoids HMRC’s Optional Remuneration Arrangements (OpRA) since the vehicles are Ultra Low Emission Vehicles which are exempt from OpRA.
What’s more, the employee’s own personal credit lines remain unaffected since the car is leased through the employer’s company, with all costs included (except for the electricity) included in the package, which is removed from the salary before the deduction of tax.
The net result is that employees can access electric vehicles at a cost that is lower than if they had leased the vehicle personally, without having to pay an initial rental and without affecting their own credit worthiness.
Vauxhall Corsa-e 100kW GS Line 50kWh 5dr Auto [11kWch]
|Salary sacrifice all inclusive
|PCH basic online offer
A saving of £6120 over three years.
Example based on a 40 year old 20% UK tax payer, living in Derby: 36 month, 24,000 miles contract.
The contract term, mileage, zero initial deposit are matched against the same car on a personal lease.
In addition with salary sacrifice, there’s no credit check, there’s fully comprehensive insurance for the driver and two additional nominated individuals. Plus all routine service, maintenance and breakdown cover, along with replacement tyres and road fund licence are included. It’s very much the total package. But with savings worth over £6000 to the employee, such are the tax advantages of this employee benefit.
However, salary sacrifice goes beyond the staff benefit. Salary sacrifice for electric cars can also play a significant role in staff retention. Depending on how the employer wants to structure the agreement, early termination payments for leavers can be included in the scheme, offering a benefit that also ties in the employee deeper into the company.
For companies wanting to benefit their staff, as well as retain them, then salary sacrifice works on both levels, and should seriously be considered by employers in a competitive market for the best talent.
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