An Employer’s Guide to EV Salary Sacrifice
A guide to electric vehicle (EV) salary sacrifice schemes for businesses.
Last updated: Jul 26, 2024 • 4 min read
Summary:
Employers can use a salary sacrifice scheme to save on National Insurance contributions and offer a tax-saving benefit to employees, allowing them to lease an EV for up to 60% less compared to private leasing.
What is salary sacrifice?
A salary sacrifice scheme is an arrangement that allows an employee to exchange part of their salary in return for some form of non-cash benefit from their employer.
These schemes are commonly used for employees to receive benefits such as childcare vouchers and pension contributions. Some businesses also offer car leasing through salary sacrifice, with EVs being particularly popular in recent years.
The cost of leasing an EV is deducted from the employee's gross salary, which is before tax and National Insurance contributions are calculated. This results in tax savings for the employer and employee, and makes this option around 30 to 60% cheaper than private leasing.
Why should employers offer an EV salary sacrifice scheme?
As an employer, offering an EV salary sacrifice scheme can increase the appeal of your business to future and current employees. In a competitive talent market, benefits like this one will help you stand out among other businesses.
Key business benefits of an EV salary sacrifice scheme:
Attract new talent: Salary sacrifice, especially with the option to lease an electric car, could be a standout feature in the benefits package you advertise and offer.
Improve employee retention: Boost satisfaction and increase loyalty among existing staff by offering a salary sacrifice scheme. It makes driving an electric car more affordable while reducing taxable income – a win-win for your employees.
Support your green values: Many businesses have commitments or values related to sustainability. Offering EVs via salary sacrifice offers a great opportunity to lead by example and support your green ambitions.
Save National Insurance: The deduction made from an employee’s gross salary reduces National Insurance contributions for the employee as well as the employer.
How to get started with an EV salary sacrifice scheme?
As an employer, you’ll have to partner with one of the many companies facilitating EV salary sacrifice schemes. Once you have signed your business up to a scheme, the provider will typically handle the rest:
Advice on how to promote the scheme to employees
Support employees during the EV selection process, including organising test drives
Allow your employees to manage the scheme online or over the phone
Some providers may even offer reduced energy tariffs, free public charging or perks like free home chargers for employees who lease a car through your salary sacrifice scheme.
What is the cost of an EV salary sacrifice scheme?
Depending on which scheme provider your business partners with, you may pay little to no fees as an employer to offer salary sacrifice to employees. It’s another reason why EV salary sacrifice has become so popular in recent years.
As staff sacrifice from their gross salary, the portion eligible for National Insurance (NI) contributions is decreased, meaning both the employer and employee pay less NI.
You can find more information about salary sacrifice on the government’s website.
Is EV salary sacrifice worth it for employers?
EV salary sacrifice is a standout benefit that employers can offer as part of a wider benefits package. It creates savings for employers and can be an excellent perk to attract and keep talent in the business at no extra cost to you.
Whether you’re a small business or large corporation, you should consider joining an EV salary sacrifice scheme to enhance your employee benefits, save on NI contributions, and support your environmental commitments as a business.