Salary sacrifice has played a major role in helping many businesses move more drivers into electric vehicles.
For employees, it’s offered a more affordable route into a new, fully maintained EV. For employers, it’s supported sustainability objectives, strengthened benefits packages and, in some cases, helped reduce reliance on older privately owned vehicles used for work.
Sohrob Aslanbeigi
Sohrob Aslanbeigi of Fleet Operations explains why salary sacrifice still has a role to play in a changing EV market.
The days of relying on low tax rates alone are fading. EV Benefit-in-Kind rates remain attractive compared with petrol and diesel vehicles, but they are rising year-on-year. Schemes now need to work harder – they need to be competitively priced, easy to manage, clearly communicated and designed around the needs of the business as well as the employee.
Here are five tests fleets should apply.
- Is the scheme still genuinely affordable?
Affordability is now one of the biggest tests of any salary sacrifice scheme.
As BiK rates rise, monthly costs become more sensitive to changes in vehicle price, funding terms and running costs. What may have looked like an easy decision for an employee a few years ago may now need more careful consideration.
Pricing can vary significantly depending on how vehicles are sourced. A scheme that relies on one leasing provider may be competitive on some makes and models, but less so on others. No single funder is likely to offer the best price across every vehicle, every time.
It also helps when a provider is free to shop around and is not tied to one funding source, manufacturer or dealer group.
A multi-bid approach allows quotes to be compared from a panel of lenders to keep monthly deductions as low as possible, protecting employees’ take-home pay and helping more people pass affordability checks.
- Does it support wider fleet strategy?
Salary sacrifice is often seen as an employee benefit, but it can also be a useful fleet management tool.
Grey fleets, for example can be notoriously difficult to manage, with employers often having limited visibility over the suitability of vehicles for business journeys and over how well they’re maintained.
Although salary sacrifice doesn’t address every grey fleet challenge, it can give employees a more attractive alternative to running an older private car – helping them to get behind the wheel of newer, cleaner and safer vehicles.
It can also make EVs more accessible to employees, while giving the business a practical way to support cleaner vehicle choices without expanding its company car fleet.
- Can the scheme flex around the business?
Not every business needs the same type of salary sacrifice car scheme.
Some may want to give employees a wide choice of vehicles, while others may want to have tighter control over price, range or emissions. The same applies to eligibility, which may need to be wider in some businesses and more tightly managed in others.
Scheme design is particularly important here. As more people become involved, from HR and finance to fleet and procurement, the scheme needs to flex around the business rather than forcing everyone into a standard, one-size-fits-all model.
Finance teams, for example, may want greater cost control, HR may prioritise fairness and accessibility while fleet managers may want reassurance around driver suitability, vehicle choice and risk.
A good scheme should be able to accommodate all of these different elements.
- Is it simple to run?
Salary sacrifice schemes shouldn’t create unnecessary work for fleet, HR, finance or payroll teams.
Delays and errors can creep in if processes rely too much on manual input. Eligibility checks, quote generation, approvals, vehicle orders, payroll updates and employee communications all need to be handled efficiently.
The best schemes are those where the provider takes on much of the heavy lifting, from implementation and employee support to order management and ongoing administration.
Employers should still have visibility of the scheme and how it’s managed, but they shouldn’t have to handle every operational detail themselves.
With the right technology, support and checks in place, salary sacrifice schemes should reduce administration, rather than add to it.
- Do employees understand what they’re signing up to?
Salary sacrifice represents a financial commitment and so employees need to be clear on the monthly cost, what’s included, how their pay is affected and what happens if their circumstances change. They also need the practical details upfront, from insurance, servicing and tyres to breakdown cover and charging, so there are no surprises later on.
This is especially important as costs come under closer scrutiny. Employees are more likely to trust a scheme if they feel the information is easy to understand.
Salary sacrifice is evolving
In many ways, salary sacrifice car schemes have becoming more important than ever as businesses look for ways to support EV adoption, reduce grey fleet risk and improve the employee vehicle offering.
The schemes that continue to deliver the best value, however, are those built around competitive pricing, careful governance, clear communication and simple administration.
Salary sacrifice still stacks up for fleets, but only if the scheme itself is built to keep pace.
