How can employers benefit from a salary sacrifice car scheme?

A salary sacrifice car lease scheme is an agreement that reduces an employee’s pre-tax salary. In return, employees have access to exclusive electric and hybrid car lease deals, while saving on tax and National Insurance contributions too.

If you’re an employer interested in offering a salary car sacrifice scheme, what factors should you consider and what are the benefits? Let’s explore salary sacrifice leasing from an employer’s point of view.

Do employers have to offer a salary car sacrifice scheme?

The first thing to know about salary sacrifice is it’s an optional scheme and doesn’t have to be part of your rewards package. However, you might find competitors in your marketplace are offering this increasingly popular staff benefit, which might put you at a disadvantage when looking for new talent.

How does my business implement a company salary sacrifice car scheme?

At Synergy, we understand that every company is different. Our team can make sure your scheme is tailored to meet your business requirements. If you’re looking to implement a salary sacrifice car scheme but aren’t sure where to start, speak to our team.

Factors for employers to consider before entering into a salary sacrifice lease car scheme

Here are a few factors to consider before offering a salary sacrifice lease car scheme to your employees.

  • Legal and tax advice – As an employer you’ll need to ensure the scheme can be adopted by your company and verify all information with your tax adviser or accountant.
  • Employee understanding – If you’re introducing a company salary sacrifice car scheme, consider how this will be communicated to employees. They’ll need to understand any terms and conditions to help avoid confusion further down the line.
  • Review your scheme – Once up and running, regularly review your scheme as part of your compliance process. This will help the scheme continue to meet your business needs.

Are all my employees eligible for the car leasing salary sacrifice scheme?

The availability of a salary sacrifice scheme depends on the eligibility criteria set out by the employer, which can include factors like age or length of service. Another consideration is that employees won’t be eligible if the sacrificed amount takes their salary below the national minimum wage.

Who owns the car in a salary sacrifice scheme?

It’s important to know that the employee will not own the vehicle. Once they have chosen the car, it will be funded through a contract hire agreement by their employer for a fixed term.

There are often a few options at the end of a car leasing contract. When the term ends, the car is usually handed back and a new salary sacrifice lease is put in place. Employee’s must maintain the car according to manufacturer guidelines and book servicing when required.

Does the employer own the car at the end of a car sacrifice scheme?

Because leasing is an alternative to ownership, the employer won’t own the car at the end of the salary sacrifice term. The car is returned to the finance provider at the end of the lease period. There might be the option to pay towards ownership in some cases, but this is dependent on individual circumstances and isn’t guaranteed.

What are the vehicle salary sacrifice scheme costs to the employer?

If you choose to set up your salary sacrifice scheme with Synergy, there won’t be any associated costs. You’ll instantly improve your benefits package, and your team can save up to 40% when they switch to an electric vehicle.

What are the benefits of a salary sacrifice car for employers?

An attractive salary sacrifice scheme is a great benefit for employees, but there are still ways employers can benefit too. These include the following.

Tax efficiency

Salary sacrifice car schemes can help employers reduce their national insurance contribution payments while still being HMRC and VAT-compliant. This offers significant savings, especially when multiple employees choose the scheme.

Increased employee satisfaction

By introducing salary sacrifice leasing, you’ll be helping staff save money on a brand-new car, with benefit schemes like this already proving incredibly popular with employees. Staff will likely feel more rewarded, meaning your company can improve employee satisfaction.

Reduced employee turnover

Once the scheme is introduced and employee satisfaction improves, you might also find your company’s employee turnover is reduced. People are less likely to move elsewhere if they feel rewarded and looked after, helping employers retain their best talent.

Reduced administration costs

If you choose to set up a salary sacrifice scheme with Synergy, your company can reduce potential administration costs. We’ll support employees through our dedicated online portal, helping to source and deliver vehicles without investment from their employer.

Enhanced company image

Finally, this scheme can enhance your company’s image and reduce your overall environmental impact. By encouraging employees to switch to electric and hybrid cars, employers can simultaneously improve their brand image and begin to meet stricter environmental targets.

What happens if an employee leaves during the lease term of the car?

If you’re concerned about employees leaving during a salary sacrifice lease term, Synergy can help build provisions into your scheme. For example, you can opt for an early termination process where a fee is payable or look to repurpose the lease vehicle and offer it to another member of staff.

Is salary sacrificing a car worth it for employers?

If you’re considering a salary sacrifice lease car scheme, we’d suggest speaking to our business and fleet team. They’ll give you the freedom to set up a scheme that works for your company and its employees.

To find out more, get in touch with us today.