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TUSKER: Unashamedly driving down the salary sacrifice route

Date: 04 January 2013

Leasing company Tusker is building its business around what it sees as the continuing and growing popularity of salary sacrifice schemes. Paul Barker talks to the newly expanded board about their plans

A leasing company specialising and becoming known as an expert in one area of the market is nothing new, but in Tusker's case salary sacrifice has, the firm admits, grown into the "tail that wags the dog".

No longer predominantly a leasing firm, Tusker's salary sacrifice volume has just ticked past 50% of its book, and the target is 70-75% of the vehicle volume the firm writes.

"We're unashamedly happy to be known as salary sacrifice - it's core to what we do and our systems," declares new operations director Mark Sinclair, who joined the firm earlier this summer from Alphabet. "Small, entrepreneurial companies go in early in emerging markets - everyone can do it to tick a box on a tender - but if you have a contract hire product you are going to have to spend a lot of time and money to create a salary sacrifice system that works and gets the penetration rates."

His new boss, Tusker MD David Hosking, agrees. "There are very few people in the market doing it well and credibly," he tells BusinessCar. "We talk to the competition on a regular basis and a lot of people say they have got a salary sacrifice product but not many are doing anything about it."

Sinclair believes the intricacies of salary sacrifice schemes versus the potential volumes mean larger leasing firms are happy to let smaller companies become experts. "The big boys could sign three or four fleets that would achieve what we will in the long haul - to get the most out of it you need a specialist player," he says.

Hosking explains that salary sacrifice schemes are introduced by firms that want to offer a benefit to their staff, but, despite it affecting payroll, don't want to get involved in additional admin.

"We're talking about an emotive subject like cars, and combined with payroll reduction you can't get that wrong," he says. "Employers want the security of having people that have done it - we've successfully done it before and can prove it and we've even been recommended by competitors."

Tusker's bosses are confident that salary sacrifice is a benefit that's here to stay. "There has been a lot of speculation from some quarters about what happens if it is plugged or legislation changes," says Hosking. "We take great comfort in the last Budget announcement of BIK rates for the next five years and we're confident that's the regime they're looking to continue."

Sinclair also points out that the public sector is where salary sacrifice is particularly strong, and in the current climate it would be a "difficult" thing to change. The firm is aiming to treble its 5000 salary sacrifice units by 2014. "It's clearly getting more popular and commonplace, and more and more people are saying 'we need to do it because our competitors are doing it so we need it to show we're an employer that gives a good benefits package'," says Hosking.

The rise in low-emission yet aspirational and desirable products from manufacturers is, according to Tusker, aiding the popularity of schemes, with its management specifically pinpointing models including the Nissan Juke, Citroen DS3, Ford Fiesta and Seat Ibiza. The firm's research of customers has found 73% of respondents have never owned a new car before and wouldn't have considered one, while 71% didn't know what car they were going to choose when they started the process. "If you're a company car driver, you know what car you want," says Hosking, who also feels salary sacrifice drivers are more likely to care for the vehicle. "They are a very different population of drivers - they are treating the car as their own car so we're expecting to get some fantastic cars back at the end of the contracts."

Employee take-up has been a key bone of contention surrounding salary sacrifice, with an ACFO poll earlier this year revealing a rate of 0.6%. Tusker claims its average is 8.3% on its older schemes, and with Cumbrian Water, a scheme that has been running since October 2009 with 3000 employees, the figure is 9.5%, according to Hosking.

But Tusker's enthusiasm for salary sacrifice doesn't extend to setting up schemes that might not be suitable. "We have on occasions said salary sacrifice won't work - it's not a panacea and it won't work for everybody," declares Hosking. "The important thing not to do is implement a scheme that is not suitable for a business, then we'd end up losing one. We want to be sat here in two years' time saying we've got 250 schemes and never lost one."

There are ways to mitigate the risks of a salary sacrifice scheme, with businesses of low staff turnover and lower pay not suitable. "There are some tick-boxes we need to get through to ascertain if a scheme will work in the first place, where an employer is looking to mitigate the risk while implementing a benefit, but if the employer's churn rate is 55% because they run a call centre, it's a non-starter to mitigate the resignation risk," says Hosking. "We can mitigate the risk of resignation, maternity, paternity etc, and there are things like not making the scheme available until staff have been there for 12 months - that's a different set of numbers to the overall churn rate."

Tusker has also refused to enter into tendering where salary sacrifice schemes won't be sole-supply. "There are still fleet managers that want multi-supply provision, and building genuine long-term partnerships with salary sacrifice would be difficult in a multi-bid situation," says Hosking. "All our 91 schemes are sole supply. We have been asked to do multi-bid salary sacrifice and we've walked away. There's a huge amount of effort in implementing a scheme and if we're investing in marketing we want to know it's an investment with a return, not for others to walk in off the back of it."



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