ADVERTISEMENT FEATURE: Electrification, made easy
22 September 2021
Renewed incentives for ultra-low emission vehicles have made salary sacrifice schemes an affordable and attractive way for employees to go electric - and LeasePlan can help tailor a scheme to your needs.
Salary sacrifice schemes can be an effective way to recruit, motivate and retain staff, while also benefitting the way your organisation operates. They enable employees to exchange some of their gross salary for a range of attractive benefits - such as childcare, pensions, and health insurance - at discounted rates, which would be unavailable to individuals. It could also bring the electric car they aspire to within their reach.
How does electric car salary sacrifice work?
The process is simple. Drivers choose a vehicle that suits their needs, their employer rents it from a supplier, such as LeasePlan, then deducts the monthly rental costs from their gross salary. As long as the car emits 75g/km CO2 or less, their income tax and National Insurance contributions are calculated based on their remaining salary, and they pay a Benefit-in-Kind (BIK) charge for the use of the vehicle.
This makes salary sacrifice the most affordable way for drivers to go electric. Company car tax was revised in April 2020 to incentivise the cleanest models. Rates for battery-electric vehicles are set at 1% for the 2021/22 financial year, then frozen at 2% until April 2025, which means drivers get low monthly tax liability guaranteed for the two or three-year duration of a typical lease arrangement.
Employers also don't pay Class 1A National Insurance contributions on the salary sacrificed, if it's funding a vehicle emitting 75g/km or less.
Great for drivers
Providing a salary sacrifice scheme unlocks several benefits for your employees.
- Affordability: Drivers can take advantage of the bulk buying power of their employer's fleet and discounts that wouldn't be available to individuals. There's no initial deposit, no credit checks to go through and BIK for electric vehicles is usually lower than the income tax for the salary sacrificed.
- Peace of mind: New cars are safer, cleaner and more reliable than older ones, and there's an ever-expanding line-up of battery-electric models to choose from. Many offer ranges in excess of 200 miles with ultra-fast charging for longer trips, while 'fuel' costs are much lower than a petrol or diesel car.
- Predictability: Drivers depend on their cars, and leasing removes the worry of unexpected expenses. Insurance, servicing and maintenance, vehicle excise duty, breakdown cover, accident management and 24-hour emergency assistance are all bundled into a single, fixed monthly payment. The only extra cost is electricity.
- Choice: Leasing offers a lot of flexibility for drivers. At the end of the contract, drivers can choose to exchange their car for a newer model, buy it outright, or simply hand it back (subject to excess mileage and wear and tear charges).
Great for employers
An electric vehicle salary sacrifice scheme can also help your organisation achieve its own targets.
- Supporting change: Over half of UK drivers recently surveyed by LeasePlan said they were considering an electric car, but higher purchase costs are one of the biggest barriers. Salary sacrifice helps overcome that sticking point, enabling them to choose vehicles they might not otherwise be able to afford.
- Motivating staff: Salary sacrifice schemes can be made available to all employees, as long as the rental payments don't take their remaining salary below the minimum wage threshold. This removes the hierarchy attached to a company car scheme and can be a useful tool for organisations to attract, motivate and keep the best staff.
- Cleaner travel: Unlike cash-for-car, you're in control. Drivers choose from a list of approved vehicles in line with your organisation's corporate social responsibility targets. Steering them towards electric vehicles reduces mileage claims and the carbon footprint of business travel, and they're also compliant with incoming clean air zone requirements.
- Duty of care: Over half of employees' business miles could be in their own cars. Helping them into a new electric vehicle can benefit productivity by reducing the stress and distraction of breakdowns and unexpected bills. With the latest safety technology on board, they can help fulfil duty of care obligations and avoid the administrative burden of checking 'grey fleet' vehicles are insured and maintained for business use.
We're here to help. Since 2010, LeasePlan UK has set up many salary sacrifice schemes in the UK, covering more than 90,000 employees. Our expert consultancy team can walk you through the entire process, providing clear and unbiased advice for you and your drivers, and setting up a dedicated ordering portal tailored to your priorities and aspirations. We can also put you in touch with other customers to find out first-hand how these schemes have benefitted their organisation.
Click here to find out more about salary sacrifice