25 July 2018

Organisations of all shapes and sizes reward their employees in a variety of ways, with one of the most popular being salary sacrifice schemes. These schemes have a range of benefits for both employer and employee.

One key benefit for a business is that employee-leased vehicles are a more cost-effective solution than a fleet of company cars, as it means that employers don’t have the initial outlay of purchasing the vehicles themselves.

This month, we wanted to highlight the other benefits of car salary sacrifice schemes, as well as how fleet managers and business owners could roll them out throughout their business.

What is a salary sacrifice scheme?

SoccerLease was born out of an initial offering to football clubs that has now grown and evolved to offer all sporting clubs the chance to enhance their membership benefit packages and reward fan loyalty.

Who is SoccerLease for?

A salary sacrifice scheme is when employees agree to have part of their pre-tax salary deducted in exchange for benefits that are offered by an employer, e.g. a vehicle.

In the case of car salary sacrifice schemes, each employee who takes part will be able to lease a new car, which can be driven for business and personal use, with mileage claimed back if and when appropriate.

How do salary sacrifice schemes work?

Once the employee has signed up to the salary sacrifice scheme, their monthly payment is deducted directly from their pre-tax wage, which covers the cost of the vehicle lease.

Vehicle lease lengths and mileage allowances do differ, but these are agreed on prior to the contract being signed by the employee.

In some cases maintenance, servicing and MOT costs are included in the lease, so all the employee has to do is ‘add fuel and go’.

There is very little administration or involvement required by the employer as the lease is arranged directly with the employee.

What are the business benefits?

Enhanced employee benefit packages

Perhaps one of the most significant benefits to businesses is that a car salary sacrifice scheme can help motivate existing employees, whilst attracting new ones, especially if competitors aren’t offering attractive employee perks. 

Reduced vehicle maintenance costs

With car salary sacrifice schemes, maintenance, servicing, fully comprehensive insurance and the annual road fund licence are all bundled into the employee’s fixed monthly repayment.

If a business purchased a fleet of cars directly, they would be responsible for covering these costs.

Furthermore, with car salary sacrifice schemes provided by a vehicle leasing company, fleet managers and businesses don’t have to worry about unforeseen costs due to accidents as recovery is included and any repairs will go through insurance.

These savings could then be reinvested into the business, or they could be passed on back to the employees as an additional reward.

Reduced National Insurance Contributions

Car salary sacrifice schemes are a tax efficient way for businesses to ensure their fleets are always on the road, whilst still rewarding employees for their continued service.

This is due to the fact that the employee is reducing their monthly salary through a sacrificed payment, meaning the employer’s National Insurance Contribution payment will also decrease.

All employees are eligible

In the past, certain employee perks may have only been available for higher management or those in a certain pay grade. When it comes to salary sacrifice schemes, every employee is eligible.

Not only does this mean that it shows fair treatment across the business, it helps to motivate and reward employees on all levels.
Reduced administration for the business

When it comes to certain salary sacrifice schemes, the contract is direct with the employee, meaning there is minimised administration for the business.

For example, with Novalease, the employee manages the paperwork for the lease, along with ensuring that MOTs and servicing are completed on time.

 

Further reading

For more information and advice on what other kinds of employer benefit solutions are available, please read the information contained in our “I’m an employer” section.

It contains information on various products that fleet managers are able to use to reward employees, enhance their benefits packages, and reduce monthly fleet expenditure.

 

In conclusion, salary sacrifice schemes are a cost-effective, highly efficient way to reward employees for their continued service, along with helping to reduce the expenditure for a business. 

To find out more about our fleet management and leasing, employee benefits solutions and driver services, call a member of our team on 0844 854 5100 or email CSalmon@sgfleet.com.