As highlighted by the recent news that there are currently more open vacancies in the UK than people registered as unemployed, the recruitment world has become incredibly competitive. As a result, many businesses are looking to workplace benefits as a smart way to retain their current employees, while also attracting new ones. In particular, car salary sacrifice is seen as an especially attractive benefit.
With the move away from petrol and diesel car manufacture in 2030, electric vehicles (EVs) are growing ever more popular – and with some distinct savings benefits to all concerned, they’re also becoming a staple of car salary sacrifice schemes.
In this post we’ll outline the benefits of EV cars and salary sacrifice – starting with an explanation of these schemes and what they mean in the context of electric vehicles.
What is salary sacrifice for electric cars?
EV salary sacrifice lets an employee pay for the leasing of an electric car directly from their gross salary, with the money taken out via PAYE before tax and national insurance are deducted. Because of this they get to enjoy significant savings on both. Employees can have any car on sal sac, but there are greater tax advantages in the vehicle being an EV.
There are also many additional benefits of salary sacrifice and electric vehicles for both employers and employees, as we’ll outline below.
The main advantages of electric vehicles and salary sacrifice schemes
- Reduce scope three emissions: While all business fleets have a Europe-wide mandate to conform with scope one emission-reduction measures, something that’s often less talked about are scope three emissions. These are the emissions that a company generates indirectly, such as the CO2 resulting from worker commuting in ICE cars. One of the big benefits of EV cars and salary sacrifice is that EVs are emission-free, meaning your business’s scope three emissions will drop for every employee who uses the scheme. Admittedly, reporting on scope three emissions is currently voluntary, but the goodwill and PR benefits of having an earnestly greener business should not be underestimated – and nor should the overall benefits to the planet itself.
- Enjoy cost savings across the board: Another significant benefit of salary sacrifice and electric vehicles is that the scheme is cost neutral – it costs nothing for your company to roll it out. Zero-emission vehicles also make sizeable benefit in kind (BiK) tax savings, meaning fleets can enjoy savings on National Insurance contributions for employees partaking in the scheme.
- Attract and retain talent: One somewhat unexpected side effect of the Covid-19 pandemic has been the reluctance of workers to re-enter the jobs market following a long period of instability. That’s created a candidate’s market where roles are available, but top talent is in short supply. Amidst this, attractive benefit schemes can be a big difference maker when it comes to attracting or retaining new employees. With over half of young drivers saying they want to drive EVs, the benefits of EV cars and salary sacrifice from a recruitment perspective are obvious.
- Drive a new EV for less: We’ve already mentioned tax and NI savings as one of the biggest benefits of electric vehicles and salary sacrifice, alongside the EV BiK cost which currently stands at just 2%. And when you consider that the capital cost of electric vehicles is considerably higher than petrol, diesel or hybrid options, these significant savings have an even greater bearing
- Don’t pay maintenance costs: another of the advantages of electric vehicles and salary sacrifice schemes from an employee perspective is that many of the typical costs of running a vehicle are included in the lease agreement. And because your employer might also recover the VAT cost of rental and maintenance too, employees can have as much as 30-60% of the savings passed on to them
- Do your bit for the planet: The third and final employee benefit of EV cars and salary sacrifice is that zero emissions don’t just benefit fleets looking to avoid EU sanctions. Recent studies show that modern consumers care about sustainability more than ever before, and switching to electric fuel is exactly that. Electric vehicles are distinctly better for the environment, which means that promoting an EV salary sacrifice scheme isn’t just an attractive option for companies, it’s also the morally right one in the eyes of many employees.
Is salary sacrifice for an electric car worth it?
With big tax breaks, low hassle on admin and maintenance, and a better outlook for both fleet emission targets and the entire planet, the advantages of electric vehicles and salary sacrifice schemes are obvious. So whether you’re an employer looking to set up a scheme from scratch, or you’re an employee looking to spend your company car allowance, EV salary sacrifice is well worth investigating.