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Salary Sacrifice Frequently Asked Questions For Employers
We answer the most commonly asked questions for employers on implementing a salary sacrifice scheme to reward and retain their best talent and support their environmental, social and governance (ESG) agenda through the move to electric vehicles.
We also answer the key questions for your employees here: Our Salary Sacrifice Frequently Asked Questions for Employees
Our team are on hand to help and answer any questions. Contact our Fleet and Business Team to discuss your individual requirements.
Contact our Salary Sacrifice Consultants today
FAQ's:
- What are the benefits of a salary sacrifice scheme for an employee?
- What are the benefits of a salary sacrifice scheme for an employer?
- Who is eligible for salary sacrifice?
- What is included in a salary sacrifice scheme for our employees?
- As a business, can we also offer other salary sacrifice arrangement such as the Cycle to Work scheme?
- Does the business need to alter our employees’ contracts to accommodate our salary sacrifice scheme?
- How will a salary sacrifice affect the pensions of my employees?
- Does a salary sacrifice scheme affect the tax credits of my employees?
- What happens to the salary sacrifice scheme when my employees are on maternity, paternity or adoption leave or have a long-term absence from work?
- Does an employee participating in the salary sacrifice scheme affect their ability to apply for mortgages and loans?
- Could my employees get a similar deal by visiting their local car dealership?
- What if an employee leaves and they have a salary sacrifice car?
What are the benefits of a salary sacrifice scheme for an employee?
Your employees can drive a brand-new vehicle as a non-cash benefit with significant cost advantages based on savings in income tax and national insurance contributions (NIC). They also benefit from our fleet discounts, and have maintenance, servicing and road tax included in one fixed monthly salary deduction, with no upfront payment.
Your employees can benefit from flexible contract terms and choose the right vehicle for them. By opting for a fully electric vehicle or plug-in hybrid car, they can benefit from low benefit-in-kind tax (BIK) making a salary sacrifice vehicle an extremely attractive benefit for many employees.
What are the benefits of a salary sacrifice scheme for an employer?
Offering an attractive salary sacrifice scheme for your employees helps you to attract and retain the best talent for your business. It also may offer savings for your company from reduced national insurance contribution payments. Salary sacrifice schemes are HMRC and VAT compliant.
Who is eligible for salary sacrifice?
Synergy Car Leasing offers a “white glove” approach, so we can help you set up your salary sacrifice scheme to meet your specific business requirements.
Salary sacrifice schemes are usually available to permanent contract employees, and some employers include a length of service requirement, e.g., after 12 months service employees become eligible. However, Synergy can help you to tailor your salary sacrifice scheme to match your business needs.
What is included in a salary sacrifice scheme for our employees?
Your employees can choose a brand-new car of their choice which is fully electric or a hybrid vehicle up to 75g/km of CO2. This means your employees can take advantage of low benefit-in-kind tax and therefore gain from the savings afforded by salary sacrifice, despite benefit-in-kind tax being payable.
The scheme will also include maintenance and servicing of the vehicle, as well as road tax. It will be the employee’s responsibility to ensure that the vehicle is serviced in line with the manufacturers’ guidelines, however the costs will be covered within the monthly payments.
Dependent on your individual scheme set up, the insurance will be provided by the company through the fleet policy (for which you can include the cost in the monthly payments if you wish to) or insurance can be included within our online portal, meaning your employees also save tax and national insurance on that cost too.
Many of our clients opt to include a “contingency fund” in place payable as a small percentage through the monthly rental to cover the cost of employees handing their car back. Therefore, there are no charges to your employees to exit the scheme if they leave the company for another role elsewhere or are made redundant. The alternative to this, is that that if an employee voluntarily left the company or was dismissed, they would be liable for any early termination costs of the vehicle which can be 50%-100% of any outstanding rentals for the term of the contract, and this would have to be recovered from the employee. However, we also offer an Early Termination provision if you wished to include that in the cost for employees, reducing the risk to the business.
Annual road tax and roadside assistance is also included.
As a business, can we also offer other salary sacrifice arrangement such as the Cycle to Work scheme?
You will be able to run other salary sacrifice schemes for your employees, so they have a range of benefits to choose from, depending on their personal needs and preferences.
Your employees will be able to participate in multiple schemes as long as their salary does not go below the national minimum wage.
Does the business need to alter our employees’ contracts to accommodate our salary sacrifice scheme?
Entering a salary sacrifice arrangement with your employees means a contractual change, so an amendment will be needed to clearly state the salary sacrifice amount and the remaining cash salary. This documentation is provided within our online portal. The business must ensure that any employee does not go below minimum wage levels when entering a salary sacrifice agreement.
How will a salary sacrifice affect the pensions of my employees?
By sacrificing a proportion of a salary for a non-cash benefit, in this case a car, overall cash earnings are reduced so any pension contributions will normally be based on the cash element of the salary only. This means that pension contributions may be reduced, however it will depend how your company sets up the scheme and the employer can use a notional salary to work out pension contributions if they wish to do so.
Does a salary sacrifice scheme affect the tax credits of my employees?
For lower paid members of staff or those claiming benefits or tax credits, it may be worth the individual contacting HM Revenue and Customs for advice to understand how it may affect their individual situation.
What happens to the salary sacrifice scheme when my employees are on maternity, paternity or adoption leave or have a long-term absence from work?
Your employees will continue to have use of the vehicle during maternity, paternity, or adoption leave.
If you have an employee who is absent from work and their pay falls below statutory minimum levels, the salary sacrifice scheme will be suspended. Once back at work, the agreement will resume and continue for the remaining number of months on the contract. This may mean that the salary deductions for the vehicle may continue after the car has been returned to make up for the missed payments.
Does an employee participating in the salary sacrifice scheme affect their ability to apply for mortgages and loans?
Many lenders nowadays accept details of the employee’s notional salary, which will include the value of the salary sacrifice. It is best to seek independent financial advice for individual circumstances.
Could my employees get a similar deal by visiting their local car dealership?
No, the savings through salary sacrifice can only be done through an employer’s scheme. In addition, there is no up-front payment, and with the advantage of low benefit-in-kind tax on pure electric vehicles, the net overall cost of a car through an employer’s salary sacrifice scheme offers significant savings.
What if an employee leaves and they have a salary sacrifice car?
If you are concerned about employees leaving when they have opted for a salary sacrifice car, there are certain provisions that can be included in the set up of the scheme. Broadly speaking there are 4 options to consider. The first is to include an early termination provision within your scheme. The second option is for the employer to charge an admin fee to the scheme users and save what it would have paid for national insurance contributions to build a contingency fund. Thirdly, the employee could pay the early termination fee. Or finally, the car could be repurposed and given to another staff member.
For an accurate quote, please speak with our team today to see how we can help your business and reward your employees.
Contact our Salary Sacrifice Consultants today