An introduction to EV salary sacrifice schemes for businesses
As companies seek innovative ways to support green initiatives and provide appealing benefits to their workforce, EV Salary Sacrifice Schemes have emerged as a popular solution. But what exactly are these schemes, and how do they function?
An EV Salary Sacrifice Scheme is an arrangement wherein employees agree to ‘sacrifice’ a portion of their pre-tax salary in exchange for a leased or subscription electric vehicle.
What are the benefits to businesses of EV Salary Sacrifice Schemes?
One of the attractive features of the EV salary sacrifice schemes is the potential for employees to save money in various ways:
Potential reduction in taxable salary
By sacrificing a portion of their pre-tax salary, employees can effectively lower their taxable income. This can lead to paying less income tax and taking home a larger portion of their earnings.
Lower running costs
Electric vehicles, in general, have less wear and tear. Additionally, the cost of electricity for charging is less than petrol in the UK.
Modern and eco-friendly perks
An EV salary sacrifice scheme showcases a business’s commitment to innovative and environmentally-friendly benefits. For the environmentally conscious job seeker, this can be a decisive factor when choosing an employer.
Enhanced corporate reputation
Organisations that proactively contribute to environmental solutions will receive goodwill from the public for doing so! This can lead to increased trust and loyalty for a brand.
While the idea of introducing an EV salary sacrifice scheme sounds promising, the execution can sometimes be less straightforward, there are many considerations for businesses to think about:
Are there any negatives of EV Salary Sacrifice Schemes?
Administrative challenges
For HR and finance departments, setting up and maintaining the scheme can involve a myriad of complexities, from ensuring compliance with tax regulations to managing the intricacies of vehicle leasing agreements. There are dedicated EV salary sacrifice schemes out there that will pick up this administration burden, and usually, they operate at zero cost to the business (they take their fees from the tax and NI savings).
Communication barriers
It’s imperative that employees fully grasp the implications of entering such a scheme. It’s a complicated setup and you need to work with a scheme that has a solid communication program and employee education resources.
Charging infrastructure limitations
Even with the growing number of charging stations, there are still plenty of charging challenges in the UK!
Not every workplace or residential area has the necessary infrastructure to charge EVs. This can be a real hindrance for employees, especially if they live in regions with fewer charging facilities.
Impact on gross salary
A reduced gross salary might impact an employee’s affordability check when it comes to getting a mortgage or loan. Employees must understand these implications before entering the scheme.
Real world case study: Tusker Cars and EDF Energy
EDF, Britain’s foremost producer of zero-carbon electricity, boasts a vast portfolio of eco-friendly energy solutions including nuclear power stations, onshore and offshore wind farms, thousands of EV charge-points, and combined heat and power plants. With a mission to spearhead Britain’s move to Net Zero, EDF has been consistently innovating and looking for ways to amplify its commitment to a cleaner future.
Electric vehicles (EVs) and ultra-low emission vehicles (ULEVs) have become the cornerstone of sustainable transportation, but the costs and uncertainties associated with their ownership can deter many potential users. Furthermore, as a large corporation, EDF had to navigate potential safety and liability concerns around the utilisation of grey fleet vehicles.
In February 2020, EDF partnered with Tusker to roll out a salary sacrifice car benefits scheme for its employees across the country. The strategy was straightforward: empower employees to drive EVs and ULEVs without the typical financial burdens and uncertainties tied to ownership.
Key features and outcomes of the scheme included
- A steady 4% uptake since its launch, translating to 437 vehicles ordered.
- Monthly sign-ups averaging 13-14 new employees, attracted by the pronounced benefits.
- Significant financial savings for employees, with average savings reported between £150-£200 per month.
- A staggering 93% of the participants chose purely electric vehicles.
Infrastructure development saw 20 EDF sites equipped with charging facilities, and a plan to introduce an additional 300 charge points by December 2021.
Is an EV Salary sacrifice scheme right for my business?
EV Salary Sacrifice Schemes have many benefits from environmental impact to financial incentives, but it comes with a set of challenges. As showcased in our case studies, the key lies in proactive problem-solving and ensuring clear communication between employers and employees.
For organisations and employees pondering this move, it’s crucial to weigh the pros and cons, and stay informed about evolving regulations. While the EV Salary Sacrifice Scheme offers multiple advantages, its successful implementation requires a proactive approach.
Businesses should invest time in thorough research, regular consultations with tax and regulatory experts, and continuous communication with employees. Making an informed choice based on current circumstances and future projections will determine the scheme’s success in any business environment.
