We're all pretty well-versed when it comes to salary sacrifice schemes. They come in many shapes and sizes, from payroll giving schemes, to pensions, cycle-to-work, and more recently, electric cars on subscription.
But how do electric cars on a salary sacrifice scheme benefit businesses?
Let's start with the basics.
What is a salary sacrifice electric car scheme?
Salary sacrifice schemes allow employees to sacrifice some of their gross salary (pre-tax) in return for an electric car.
Instead of the employee leasing or subscribing to the car directly, and paying for it post-tax, the monthly cost is taken pre-tax. This, therefore, reduces the employee's tax liability and allows them to save 30-60% of the cost of the car (depending on their salary).
There is still some tax to pay (sigh!) because these schemes are a staff benefit. This is called Benefit-in-Kind tax (BiK). More on that later.
So why are electric car salary sacrifice schemes good for business?
There are plenty of benefits of choosing an EV salary sacrifice scheme as part of your staff rewards and benefits package – both for you as the employer and for your employees.
1. Attracting & retaining the best talent
Recruiting the best talent is a very competitive space. And for a lot of job seekers, they are not just looking for the highest salary offering. They want to know what company perks they get access to, and if the company cares about their people and the planet. Offering a great perk like this could just set your company apart from the rest.
2. Great for Corporate Social Responsibility (CSR)
Increasingly, consumers are more and more aware of the environmental and/or social impact a company has before they part ways with their cash. CSR is where a company considers how it impacts the environment and society for the better. It's the idea that businesses have a responsibility when it comes to improving not only our livelihoods with a new product but also our impact on the planet or humanitarian social issues. It considers all viewpoints from those purchasing, to those investing or employed by the company.
Salary sacrifice EV schemes are a great opportunity to lower the environmental impact of your workforce by providing an affordable way to move closer to zero-emissions. Plus, it positively boosts the environmental mentality within your business – which could lead to improvements elsewhere.
Larger organisations must also measure and report on their Scope 1, 2 & 3 carbon emissions each year. Being able to report that your staff use zero-emissions vehicles for their commute will help to reduce the company's overall Scope 3 emissions and contribute positively toward their emissions goals.
3. Show your stakeholders that your business cares about people and the planet
Good CSR is important for you to show your stakeholders and investors that you care. It's not just your staff or customers.
Investors are increasingly aware of the impact their investments are making on our planet, including how any businesses they support behave when it comes to their Corporate Social Responsibility. Businesses that are seen not to take it seriously will quickly realise when their primary income streams decide they no longer want a piece of the pie, for fear of inquiry on their investments.
Now, here's where electric cars really get to shine.
The BiK rate on electric cars set by HMRC is currently very low (2% until April 2025), compared to up to 37% for a petrol/diesel equivalent. This means that salary sacrifice schemes for electric cars are one of the most affordable ways to get a car and drive electric.
5. Better fairness amongst staff
In comparison to company cars, which are usually just offered to senior members of staff, salary sacrifice car schemes allow nearly all employees of a business to sign up, if they wish. This helps businesses to alleviate any hierarchal challenges and helps with CSR commitments too.
Subscriptions-based EV schemes, offer even more benefits for businesses compared to leasing:
6. Everything's included in one package
Your employees don't need to arrange their own insurance or worry about servicing and maintenance. On a subscription package, everything's included in the monthly payment.
7. It's convenient and everything is managed for you
On an EV salary sacrifice scheme through subscription, everything is managed for you. Payroll, HMRC set up, the lot. It's also cost-neutral to the company. So, you can offer your staff a great perk, without having to fork out.
8. There's no early termination fee
If your company chooses a subscription-based EV salary sacrifice scheme, unlike traditional leasing methods, there's no early termination fee. So, your business can rest assured that even if an employer leaves the company – you will not be liable for the remaining cost of the car.
So, there you have it
You can see now why so many companies are turning to salary sacrifice electric cars as a company perk – it's a win-win! Not only are you providing your staff with a high-value perk, but you're also positively contributing to your CSR goals, for no additional cost.
For more information on elmo's electric car salary sacrifice scheme, head on over to their website.