Why Salary Sacrifice Schemes Are So Popular With Employees

17 Feb 2023

Here at SG Fleet, we take employee appreciation seriously, having previously spoken about the importance of staff wellbeing. That's why we thought we'd take a look at salary sacrifice schemes and why they're so popular with employees.

What is a Salary Sacrifice Scheme?

For those who might not have considered incorporating a salary sacrifice model in their business, let’s just quickly cover what it entails. In this context, a salary sacrifice scheme (also called a car salary exchange) refers to a vehicle lease whereby the cost of the car is deducted from the employee’s monthly salary before tax – thus saving them money. It can be arranged directly between a business and its employees or via a third party.

Why Salary Sacrifice Schemes Are Becoming So Popular

Last month, we wrote about the findings of the British Vehicle Renting and Leasing Association (BVRLA) Industry Outlook Report. One of the key positive messages from the report was the growing popularity of salary sacrifice schemes, with a 20.5% increase in cars funded through such programmes. While the volume, 37,000 cars, is relatively modest for the time being, the trajectory showed every chance of continuing to rise.

So, what are the benefits of salary sacrifice schemes that make them so popular with employees?

Brand-New Car Excitement

For most people, the commute isn’t the highlight of their day. Sitting in traffic or avoiding roadworks can make the journey to and from work feel like a chore. And remember, there are numerous people for whom driving forms a cornerstone of their working day, whether meeting clients or travelling between premises. 

However, by utilising one of the benefits of a salary sacrifice scheme, employees can at least spend that time in the comfort of a new and up-to-date vehicle. Purchasing their own new car might be financially difficult or undesirable for an employee, but a salary sacrifice scheme can provide a cost-effective way of getting access to a brand-new vehicle.

A woman is visibly happy in her salary sacrifice scheme car

Reduces Hassle and Expense

Many salary sacrifice schemes include maintenance, servicing and roadside recovery benefits, while others might include insurance as part of the package deal. Not only could this see your staff saving money, but it also saves them the hassle of shopping around to find the best deals for each service, thus having a positive impact on their work-life balance.

Tax Benefits

The numerous tax benefits are another reason why salary sacrifice schemes are popular with employees. Because the value of the package is deducted from the employee’s salary before tax and National Insurance is considered, it can see staff save on their contributions towards these costs. As well as this, any road tax costs are often included in the monthly package price.

Easy to Set Up

Purchasing a new car or shopping for your own private car lease can be time-consuming and complicated. Many dealers or leasers will require extensive information regarding income, dependents and planned mileage, and an often-sizeable deposit.

One of the benefits of salary sacrifice schemes is that it all but removes these obstacles. Staff can access a new, reliable vehicle without the financially tricky up-front payment and the difficulty of credit checks, meaning that your employees can be on the road quickly and with minimal effort for all involved.

A woman smiling out of the window of her orange salary sacrifice scheme car


With the growth in popularity of electric vehicles (EVs) showing no signs of slowing, they are also becoming more popular prospects for salary sacrifice schemes. The extension to 2025 of the 2% Benefit in Kind company car tax rate means that employers are being supported to enhance their company fleets with more EVs and hybrid vehicles. Not only does this allow your employees to reduce their carbon footprint and live greener lives, but it could also see them saving significantly by driving an EV, which often has drastically lower running costs than traditional internal combustion engine cars.

The high up-front cost of EVs rates is one of the most significant challenges people face when deciding to switch to a more sustainable vehicle. It’s hardly surprising, then, that salary sacrifice schemes are so popular with employees looking to move to EVs, as this obstacle is removed for them.

An orange car on salary sacrifice being charged up electronically


A long-term employee benefit of salary sacrifice schemes is that it’s much more flexible than buying their vehicle. Employees can drive brand-new cars for as long as they choose to, and, should they decide it’s no longer the right structure for them, they can simply hand the vehicle back. This is all the more important for employees relocating to more urban settings, where running a car might not be in their best financial interests.

Show your employees you appreciate them with a Salary Sacrifice offering

Our salary sacrifice programmes are innovative and user-friendly. Employers will benefit from many features, including fair and transparent risk mitigation mechanisms, fully outsourced scheme administration, and no setup costs.

Meanwhile, employees will have access to a wide range of makes and models, with the ability to add up to two drivers with fully comprehensive insurance and business cover in one simple monthly payment.

Find out more about how we can support you with one of our car salary exchange packages here, or, for more details, don’t hesitate to contact us.

Further Reading

-       Industry Outlook 2023

-       What’s The Difference Between Hybrid and Electric Cars

-       Leasing and Owning Fleet Vehicles: The Pros and Cons

-       Clean Air Days: Ways to Reduce Fleet Emissions