Salary sacrifice schemes can offer great benefits and savings to both employers and employees.
One of the main benefits is the reduction of employee National Insurance (NI) payments, which will be 2% less at 10% from January 2024 on earnings between £12,570 and £50,270. These NI savings apply to every employee member of the salary sacrifice scheme.
Vehicles of choice for salary sacrifice are usually electric cars due to low benefit in-kind rates of just 2% on net zero vehicles; this makes electric cars an excellent choice for employees. Employers operate a cleaner, greener fleet, lower their carbon footprint and by offering this scheme, it has an impact on positive recruiting and staff retention.
Usually included in salary sacrifice is full maintenance and servicing, tyres and breakdown recovery throughout the UK and Europe. Vehicle insurance and a choice of charging points can also be added as part of the fixed cost motoring salary sacrifice package.
It is important to be aware that salary sacrifice is not for everyone and may not always offer the most cost-effective option compared to the company car scheme or contract hire.
Contract hire is usually the funding method of choice for companies and associations. The effective rental is fully reclaimable plus VAT. The none cash benefit (salary sacrifice car) that is deducted from the employee's salary is also plus VAT. This leaves the employer with a VAT reclaim saving of 50% of the rental element and 100% of the maintained element. The VAT reclaimed is a further saving for the company, or it can be passed on to the employee as a cost-saving benefit.
AVC has been specialising in offering all aspects of vehicle leasing, funding and finance for over 25 years. We have an online comparison tool that allows both employers and employees to configure their salary sacrifice quote and savings summary on the car of choice in just seconds.