EV Salary Sacrifice: The Business Benefit Your Company Can’t Afford To Miss
Electric car salary sacrifice schemes can be a great way for businesses to promote sustainability and reduce their environmental impact. These schemes allow employees to purchase electric vehicles at a reduced cost through their pre-tax salary, which can save them money on their vehicle purchases while also reducing their carbon footprint. This is a great government initiative designed to get more people in the UK driving more sustainably.
We'll explore how salary sacrifice schemes create significant financial benefits, boost talent retention, support environmental goals, and can be implemented with minimal complexity. Let's have a look at why implementing a company's electric car scheme could be transformative for your business.
Electric Vehicle Benefits
First of all, let’s cover the key electric vehicle benefits. Making the switch to an electric vehicle brings multiple advantages for both you and the environment. EVs cost significantly less to run, with charging costs as low as £630 annually compared to around £1,230 for petrol vehicles. Maintenance costs are also lower since EVs have fewer moving parts, resulting in up to 43% less in servicing fees.
On the environmental front, electric cars produce zero direct emissions, helping reduce your carbon footprint and improve local air quality. Plus, as the UK's electricity grid becomes greener, the environmental benefits of electric cars continue to grow. Drivers also enjoy a quieter, smoother driving experience, instant torque for better acceleration, and various tax benefits including zero road tax. Through salary sacrifice schemes like The Electric Car Scheme, employees can save between 30-60% on any electric car, making the switch to electric more affordable than ever.
The Key Benefits Of Implementing An EV Salary Sacrifice Scheme
There are several compelling reasons why businesses should consider setting up an electric car salary sacrifice scheme and the electric vehicle benefits overall:
Cost savings for employees: By leasing an electric vehicle through a salary sacrifice scheme, employees can save money on the purchase price of the vehicle and also on fuel costs. This can make electric vehicles more accessible and affordable for employees, which can help to promote sustainability and reduce the business's carbon footprint.
Attracting and retaining top talent: Electric car salary sacrifice schemes can be a great way to attract and retain top talent. Many employees are looking for ways to reduce their environmental impact and will be attracted to companies that offer sustainable options.
Improving company image: Companies that promote sustainability and take steps to reduce their environmental impact can improve their public image and reputation. This can help to attract new customers and build stronger relationships with existing customers, which can lead to increased sales and revenue.
Cost savings for the company: In addition to the cost savings for employees, businesses can also save money by promoting the use of electric vehicles. This can help to reduce the company's reliance on fossil fuels and lower its carbon footprint, which can lead to cost savings in the long term.
Let's explore these EV benefits in more detail and examine why implementing a company electric car scheme could be transformative for your business.
Financial Benefits: A Win-Win for Business and Employees
When it comes to employee benefits, finding initiatives that deliver value to both your business and your workforce can be challenging. An employee electric car scheme stands out by offering substantial financial advantages for everyone involved. From tax efficiencies to long-term cost savings, let's explore how this scheme can benefit your bottom line while helping your employees access affordable electric vehicles.
Business Tax Savings
Implementing an electric vehicle salary sacrifice scheme creates substantial savings through reduced National Insurance Contributions (NICs). By offering this scheme, your business can benefit from significant NIC savings on the sacrificed portion of employees' salaries, helping to reduce your overall payroll costs.
Employee Cost Savings
Through an employee electric car scheme, they can save between 30-60% on a new electric vehicle compared to traditional leasing or purchasing. These savings come from:
Income tax savings,
National Insurance contribution reductions,
Access to corporate rates on vehicles,
Benefit in Kind tax rate of just 2% for electric vehicles.
HMRC Advisory Rates for Electric Vehicles
In a significant development for EV adoption, HMRC has introduced important updates to their Advisory Fuel Rates. The new rate for electric vehicles is now set at 7p per mile, adjusted from the previous 8p per mile rate effective September 2024. This change brings greater clarity and consistency for businesses operating electric fleets or offering EVs as company cars. While this rate may appear modest compared to petrol and diesel rates, it reflects the lower running costs of EVs and provides a more accurate reimbursement framework for employees using electric company cars.
Real Cost Example
Let's look at a typical scenario for a 40% rate taxpayer, who wants to travel 10,000 miles per annum and wants to lease a car for three years. You can see the breakdown if someone was going to lease a Kia Niro Electric from The Electric Car Scheme.
| Salary Sacrifice Calculations | Kia Niro Electric | |
|---|---|---|
| Average Monthly Salary Sacrifice (inc VAT) | £594 | |
| Employee Income Tax Savings | - £238 | |
| Employee National Insurance Savings | - £12 | |
| Average Benefit-in-Kind Over Term | £50 | |
| Net Cost / You Pay | £395 |
You can see in this example if the employee decides not to use their EV salary sacrifice scheme, they would be paying £594 per month to lease the Kia Niro. However, with a salary sacrifice scheme, they could save £238 on income tax and £12 on national insurance. They will have to pay £50 per month on Benefit-in-Kind tax, but this means the employee will save £299 every month by paying from their pre-tax salary! Ultimately, making premium electric vehicles accessible to more of your employees. You can check out our EV salary sacrifice calculator if you’re interested to see how much employees in other tax brackets could save.
Talent Attraction & Retention Impact
Beyond the initial benefits mentioned earlier about attracting and retaining top talent, a business electric car scheme offers additional advantages:
Modern Benefit Appeal
Today's workforce, particularly millennials and Gen Z, actively seeks employers who offer innovative benefits and demonstrate environmental responsibility. An employee electric car scheme helps you:
Stand out in job postings,
Attract environmentally conscious candidates,
Demonstrate investment in employee wellbeing.
Employee Satisfaction and Loyalty
Companies offering EV benefits often report:
Increased employee satisfaction scores,
Improved engagement levels,
Stronger employer brand perception.
Environmental Leadership
While we've touched on the environmental benefits, let's explore how sustainable company car schemes can position your business as an environmental leader.
Tangible Sustainability Progress
When it comes to environmental initiatives, quantifiable results matter. An EV salary sacrifice scheme doesn't just sound good on paper - it delivers concrete environmental benefits that you can measure and report. Here's how electric vehicles make a real difference:
Zero tailpipe emissions,
Reduced carbon footprint,
Lower noise pollution,
Improved local air quality.
Enhanced Company Reputation
In an era where corporate environmental responsibility is under increasing scrutiny, actions speak louder than words. Implementing a business electric car scheme sends a clear message about your company's commitment to sustainability, bringing numerous advantages:
Demonstrates corporate responsibility,
Attracts environmentally conscious customers,
Strengthens stakeholder relationships,
Enhances brand value.
Meeting ESG Goals
Environmental, Social, and Governance (ESG) criteria have become crucial benchmarks for modern businesses. A sustainable company car scheme can provide a practical way to meet these growing expectations and demonstrate your commitment to sustainability. Through implementation, your company can address:
Carbon reduction targets
Sustainability commitments
ESG reporting requirements
Industry environmental standards
Simple to Implement, Easy to Manage
One common misconception is that implementing an electric car salary sacrifice scheme is complex. With the right provider, it's surprisingly straightforward.
Provider-Handled Administration
The success of your business's electric car scheme largely depends on a smooth, efficient administration. A quality provider takes care of the heavy lifting, managing all crucial aspects of the programme to ensure a seamless experience for both you and your employees:
Vehicle ordering and delivery
Documentation and contracts
Payment processing
Maintenance scheduling
Minimal HR Team Involvement
At The Electric Car Scheme, we understand that your HR department already manages numerous responsibilities. That's why it's crucial to choose a scheme that minimises additional workload. With the right provider, your HR team can rest assured they won't be overwhelmed with:
Complex paperwork,
Vehicle management,
Employee queries,
Technical support.
Built-in Risk Protection
Any new business initiative comes with potential risks, but a well-designed company electric car scheme includes comprehensive protection to give you peace of mind. Look for these essential safeguards:
Early termination protection,
Comprehensive insurance,
Maintenance coverage,
Gap insurance.
Getting Started
Taking the first step toward implementing an EV salary sacrifice scheme requires careful planning and consideration. Let's break down the key elements you need to address.
Key Considerations
Before diving into implementation, it's important to assess your organisation's readiness and requirements. Take time to evaluate these crucial factors:
Employee salary levels and eligibility
Company size and structure
Environmental goals and targets
Budget and resources
Next Steps
Once you've evaluated the key considerations, a structured approach to implementation will help ensure success. Here are the best next steps to consider!
Review scheme options and costs,
Assess employee interest - you want your employees to use this benefit, so assess their thoughts!
Plan implementation timeline,
Prepare a communication strategy - get your employees excited about the scheme!
In today's business environment, offering a company electric car scheme isn't just about providing another employee benefit - it's about future-proofing your business. With significant financial advantages, powerful recruitment benefits, and meaningful environmental impact, it's an opportunity your company can't afford to miss.
Overall, electric car salary sacrifice schemes can be a great way for businesses to promote sustainability, reduce their environmental impact, and save money. By offering this option to employees, businesses can attract and retain top talent, improve their company image and save money in the long term.
Ready to transform your business with an electric vehicle scheme? Learn how The Electric Car Scheme can help you implement a successful salary sacrifice programme that benefits both your business and your employees.
Overall, electric car salary sacrifice schemes can be a great way for businesses to promote sustainability, reduce their environmental impact, and save money. By offering this option to employees, businesses can attract and retain top talent, improve their company image and save money in the long term.
Last updated: 29.01.25
Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
