What Are the Benefits of Salary Sacrifice for Employers?
Company Car Benefits for your Organisation
Salary sacrifice car schemes have been one of the success stories of recent times, and increasing numbers of organisations throughout the country now offer their employees the benefit of brand new cars in return for surrendering a set amount from their salary every month.
The proliferation of such schemes – in which staff can enjoy the benefits of salary sacrifice for a new car in much the same way they can for childcare vouchers, private healthcare, cycle-to-work, personal computers and other employee benefits – has seen them grow widely in both public and private sectors. As an employer, salary sacrifice benefits not only your staff, but also your reputation as an employer and your duty of care responsibilities.
Such has been the success of these tax-efficient employee benefits schemes that they have attracted the attention of HMRC. The tax-man has said a watching brief will be maintained over the rise of salary sacrifice car schemes to ensure they are not diverting excessive amounts of Income Tax and National Insurance Contributions away from the Exchequer.
However, as employees also pay Benefit-in-Kind taxation on the value of the car benefit – in exactly the same way they do with any other company car – the overall tax effect of such schemes are considerably mitigated. And any provider of salary sacrifice car schemes should always have sought and received approval for the scheme from HMRC beforehand.
What are the benefits of salary sacrifice car schemes for your staff?
Undoubtedly, one of the biggest single factors behind the increase in salary sacrifice car schemes is the wide availability of low-emitting, brand new cars which can be acquired in return for surrendering a set amount of salary each month, upon which no Income Tax or National Insurance is paid.
This opens up the prospect of tax-efficient new car ownership to much larger numbers of your workforce than simply those who might qualify for a company car through their job need, such as the sales team or service engineers.
Amongst other benefits of salary sacrifice car schemes for employees is the all-embracing nature of the package provided. This typically includes all servicing, fully comprehensive insurance, a no-quibble tyre policy, all automotive glass, annual road fund licence and breakdown and recovery assistance.
This adds up to a comprehensive and cost-effective car benefits package for employees that other funding methods, such as Personal Contract Purchase, find hard to match.
Employees do have to pay Benefit-in-Kind taxation on the value of the benefit, which is linked to the carbon dioxide emissions of the vehicle. But this has the benefit of promoting lower CO2 producing cars, often below 120g/km, as a result, as its means lower tax bills for drivers.
Ultimately, any salary sacrifice benefits for your staff also benefit you as an employer. Not only can it help with staff retention, but you’ll also see a number of financial benefits as an employer.
How does salary sacrifice benefit employers?
For an employer, there are a number of benefits from a salary sacrifice car scheme. To start with, they are very tax efficient, as both the employee and the employer are liable for reduced National Insurance Contributions.
As less tax and National Insurance Contribution is payable, it provides a ‘discount’ towards the cost of the benefit provided, making it financially attractive for both the employee and employer.
Surveys regularly confirm that a company car remains one of the most desirable benefits an employer can offer its workforce. To some, it can be the difference between accepting a job offer or not, or leaving or staying a current workplace, and it often has a direct impact on employee morale.
From the viewpoints of staff motivation, recruitment and retention, the fact that ‘company cars’ are more widely available throughout an organisation because they can now be accessed through a salary sacrifice scheme is also of considerable benefit to an employer – especially in those industries where staff recruitment and retention is a significant factor.
As the cars provided under a salary sacrifice car scheme are generally low carbon-emitting, due to the financial benefits involved, this can also help an employer reduce its corporate carbon footprint, also going some way to meeting its objectives under its corporate social responsibility program.
Another benefit of salary sacrifice for employers is that it helps to remove the risk often associated with employees who are able to take a cash allowance, but who choose to drive older vehicles which they have sourced with their own money.
Such vehicles may not be so regularly serviced and maintained, and may pose a potential threat from a duty of care perspective, as the company remains liable if any serious accidents should occur, and such vehicles are being used on company business.
A salary sacrifice car scheme, on the other hand, provides these employees with the opportunity to drive well maintained and modern vehicles, complete with the latest technology, low emissions and high fuel efficiency. As a result, it helps to improve driver safety and also helps employers meet their duty of care responsibilities.
Salary sacrifice benefits for employers significantly outweigh any extra commitments taken on by you and your organisation. Consider how a car salary sacrifice scheme for your organisation could result in financial benefits, as well as a more efficient workforce.
Choosing a suitable supplier
Selecting the right supplier to implement a new salary sacrifice car scheme is important, and an independent provider should be credible, knowledgeable and able to provide impartial advice on incorporating a successful scheme into a company’s overall employee benefits package.
The supplier should be able to fully understand the requirements an employer has in introducing a scheme, and will take the company through every step of the process, from designing the new scheme to providing support during launch and afterwards.
The supplier should also be capable of handling all the extra administration involved and provide the company with a dedicated team to oversee the entire process, including checking the authenticity of the proposed scheme with HMRC and obtaining approval beforehand.
Are you considering salary sacrifice benefits from an employer’s perspective? Discuss your options when it comes to offering your employees a salary sacrifice car scheme with one of our team. We can provide support and guidance as well as an innovative employee car scheme via our sister company, Maxxia.