Salary sacrifice is an arrangement where an employee gives up some of their salary for goods or a benefit, in this case the monthly leasing fee for an electric vehicle (EV). ElectriX now has one of the most flexible electric car salary schemes on the market, to suit the needs of both employees and employers. A salary sacrifice scheme is a voluntary arrangement that has to be implemented by the employer and agreed upon by the employee, and it mustn’t bring the employee’s salary below the National Minimum Wage.
What are the benefits of an electric car salary sacrifice scheme for both the employer and employee?
One major advantage of an electric car salary sacrifice scheme for employees is money saved on tax. The sum for the lease is taken from the employee’s gross salary at source, resulting in tax savings of up to 40% depending on their tax bracket. While Benefit-in-Kind (BIK) tax must be paid, for now it stands at just 2% and will remain at this level until 2025, after which it will go up by 1% a year until 2028. By comparison, current BIK rates for Real Driving Emissions Step 2- (RDE2-) compliant diesel cars can be much higher – up to 37%.
There are plenty of benefits for the employer, too. For one, they will save up to 13.8% on National Insurance on any funds processed via salary sacrifice. Secondly, and perhaps more importantly, research shows just how important benefits are to employees and their decision to stay with the company. Replacing staff members is expensive, too, with some reports estimating that the average cost of replacing an employee is between six and nine months’ salary when factors such as recruitment and training are considered.
Of course, the general employee salary sacrifice benefits of leasing an electric car are numerous. By not owning the car, they avoid the considerable depreciation that goes with the purchase of any vehicle, especially relevant given the relatively high purchase price of many EVs. They also get to drive away a new car. Then there’s maintenance and insurance: these can be covered by the scheme. Not least are the charging costs. Charging at home using an EV friendly off-peak tariff could be as cheap as 9p per kWh (as at September 2023). With petrol prices at about £1.53 per litre (September 2023).
There are other, less tangible benefits for both employers and employees. For the former, hiring a fleet of EVs will have a considerable impact on the company’s sustainability profile. Sustainability is often a vital part of an organisation’s scope and function.
From a prospective employee’s point of view, working for a company that provides an electric car salary sacrifice scheme at a considerable saving is of course a major benefit, and when that vehicle is electric, it speaks volumes about the organisation’s commitment to the future and the health of the planet. Credentials such as these not only help to boost staff loyalty, they also make a company an attractive proposition for those wishing to join.
Learn more about the electric car salary sacrifice scheme offered by ElectriX.