5 ways employees benefit from electric car salary sacrifice scheme
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Learn about our schemeEvery business and organisation is only as strong as its people. Which is why employee benefits like electric car salary sacrifice are so important to attract, retain and motivate employees. In this blog, we explore the main ways employees benefit from an electric car work scheme.
How does car salary sacrifice work?
Let’s start by quickly explaining how electric car salary sacrifice works. The employer leases an electric car on behalf of an employee, while the employee agrees to surrender a portion of their salary equal to the monthly lease cost of the vehicle and any extras such as insurance and a home charger. These salary deductions are made from gross pay before income tax and national insurance contributions are calculated, resulting in significant savings.
1. How does car salary sacrifice work?
Benefit in Kind (BiK) is a tax for employees who receive benefits or perks on top of their salary. Employees who have the use of a company car for private use, pay a BiK contribution out of their monthly wage. Unlike some petrol and diesel cars whose BiK rates can be up to 37%, the current rate for electric cars is just 2% fixed until April 2025. A big saving. While the rate is set to increase by 1% each year until it reaches 5% in April 2028, it will remain low in comparison.
2. Up to 40% savings on a new electric car lease.
By opting into salary sacrifice, employees can reduce their income tax and National Insurance contributions, saving up to 40% on the cost of a new electric car lease. Since the payments come out of an employee’s gross pay, their monthly salary is reduced – meaning their income tax and National Insurance deductions are too.
3. No deposit or credit check.
Another employee benefit of electric car salary sacrifice is the fact that there is no deposit to pay or credit check to pass. Under this scheme, all cars are leased by the company on behalf of the employee.
4. Savings on running costs.
Employees could also benefit from savings on daily running costs by charging their car overnight at home, taking advantage of the cheapest off-peak tariffs. Electric cars are also exempt from road tax until 2025 and Clean Air Zone charges such as ULEZ. While maintenance services can be included in the lease package.
5. Supports sustainability.
Lot of people feel passionately about protecting the environment. Fully electric cars emit zero exhaust emissions – by offering electric vehicle fleet management, employers can support those employees who want to make more sustainable choices.
6. Electric car salary sacrifice scheme benefits for employers
Whether you’re looking to make your organisation a more desirable place to work, boost your ESG goals or want to save an average 13.8% in reduced national insurance contributions, electric car salary sacrifice could be for you. Best of all, there is no upfront cost to the business. As the electric car lease experts, we can shape a scheme around your needs.
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