Salary sacrifice is a popular scheme for both employers and employees to save money. Employers can save on National Insurance (NI) contributions, while employees can benefit from a wide range of perks such as full maintenance, servicing, tyres, and breakdown recovery, which are usually included in the salary sacrifice package. The vehicle of choice for this scheme is usually an electric car, as they have low benefit-in-kind rates that can result in significant savings for both parties. With the generous government benefit-in kind net zero subsidies, currently at just 2% on net zero electric vehicles, salary sacrifice becomes an even more attractive option for those looking to make a clean electric vehicle transition.
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 the low benefit in-kind rates of just 2% on net zero subsidies. This makes electric cars a new car bonus for employees with employers benefiting by positively recruiting staff and retaining staff.
Salary sacrifice is becoming an increasingly popular way for employees to save money on a new electric car. It's a simple process whereby the employer leases an electric car to the employee, who then pays less tax and National Insurance contributions (NICs) due to the reduced salary. The employer also benefits from paying less NICs. The lease cost is deducted from the employee's salary at source, hence the term "salary sacrifice".
Salary sacrifice schemes have been around since the 1970s, offering a win-win solution for both employers and employees to save on cost and taxes. Over time, salary sacrifice has evolved into a useful tool for employees to benefit from pension plans, child care costs, and now even electric cars. The net zero electric car scheme is becoming increasingly popular due to the National Insurance contribution and tax savings it offers. With benefit-in-kind subsidies at just 2%, employees can now afford to switch to clean electric vehicles, making it a new car bonus for them. Employers benefit from positive staff recruitment and retention.
A salary sacrifice car scheme is a non-cash benefit option for employees that can be a great alternative to a traditional company car or company car allowance. However, it is important to note that the employer and the organization must change the terms of the employee's employment contract to include the details of the non-cash benefit, which employees would need to agree upon.
Employers cannot reduce the employee's earnings below the National Minimum Wage, and there are procedures in place to ensure that the salary sacrifice deduction never falls below the national minimum wage, which is £11.44 per hour from 2024
The salary sacrifice scheme is a fantastic option for businesses looking to offer their employees a brand new, electric vehicle that is fully insured and maintained. This scheme allows employers to lease electric cars to their employees, with the costs deducted from the employees' salary as a non-cash benefit. This is a tax-efficient way of offering an incentive to employees, as it can result in additional Tax and (NICs) savings.