How to ensure car schemes are inclusive

In its 2023 Company car benefits survey, Willis Towers Watson (WTW) found that 68% of respondents offered either a company car or car allowance to employees, while 22% planned to remove company car eligibility from certain roles due to inflationary pressures. So, what can employers do to ensure that their company car schemes are inclusive and offer equal provision to all staff?

Employers are interested in fairness and inclusion and want to be able to offer car schemes to all staff, says Cheryl Clements, head of business development at Tusker. “If employers are going to implement a car scheme, it’s important that it’s applicable and open to as many of their employees as possible,” she adds. 

Making schemes inclusive

Company car schemes can typically include company-owned or leased vehicles, employee car allowances, and employee car ownership schemes (ECOS). Some schemes are targeted at specific employee cohorts within an organisation, linked to job roles and needs, rather than being offered on a perk basis. 

What an employer needs to, and can afford to, offer to staff is the key to inclusivity, says Simon Staton, client management director at Venson Automotive Solutions. “As part of the process, employers need to consider if a company car scheme will help them remain competitive and attractive to existing and new employees, which could mean that providing a cash allowance for a car is required, regardless of projected staff take-up,” he says.

Employers can ensure their company car schemes are inclusive by minimising any restrictions to participation, for example, by opening it to all employees, rather than selected grades, and ensuring no one is excluded due to financial reasons. 

Organisations should also ensure they select a provider that makes schemes as inclusive as possible, which could mean the opportunity to offer longer agreement lengths to bring overall cost down, such as 24, 48, 54 or 60 months, and a range of models depending on employees’ income or needs. 

Thom Groot, chief executive officer of The Electric Car Scheme, adds: “Employers should also make the process easy and simple to use by ensuring car pricing is visible on websites rather than having to request a quote via phone or email.” 

Salary sacrifice arrangements

Another way to ensure a car scheme is inclusive is to offer it through a salary sacrifice arrangement, which is available to all staff. Where employers operate salary sacrifice arrangements, they need to be aware that some employees may be excluded from participating due to their salary level because such schemes cannot be offered to staff who would earn less than minimum wage following any wage deduction. 

However, Clements says: “Many previously thought that salary sacrifice car schemes were only really available to higher earners, but that isn’t the case anymore. The scheme suits lower earners and provides them with more value.”

More employers are implementing salary sacrifice arrangements to cover a wider range of employees, says Andy Bruce, chief executive officer (CEO) at Fleet Alliance. “Salary sacrifice car schemes have become popular because of the tax and cost savings they deliver, and are effective in helping organisations meet environmental, social and governance targets and deliver on net zero carbon plans,” he explains. ”They are particularly tax advantageous for electric cars (EVs) [because] BIK taxation for EVs is just 3% for the current tax year, rising to 4% next year and 5% in 2027/28. They also produce savings in income tax, national insurance contributions (NIC) and VAT.”

If an employer switches from a traditional company car scheme to a salary sacrifice arrangement, any employees who previously received a car as part of their benefits package may find they incur additional costs as a result. Employers can offer an allowance to support with these, as well as any associated costs, such as charging points for EVs. 

“Offering innovative ways to support employees with car charging costs via salary sacrifice is key to lowering running costs, especially for staff that cannot charge at home,” says Groot.

Lower-priced and used cars

Second-hand cars are critical to improving affordability within car schemes for employees. These are now more common on providers’ online portals and quotation tools.

“Preloved cars up to three years old are becoming more popular, because they are cheaper and more accessible for lower earners,” says Clements. “They are sometimes priced on an individual quotation basis, with quotes run manually after a used car has been located. There are also platforms where used car quotations are scaled in the same way as new cars, and provide full-service history.”

Car prices are falling and becoming more affordable, with British Vehicle Rental and Leasing Association’s (BVRLA) September 2024 research highlighting that used EV prices are expected to drop by an additional 28% between 2024 and 2030. This increases their accessibility and inclusivity.

Caroline Sandall-Mansergh, consultancy and channel development manager at Alphabet, says: “Many car schemes could be made more inclusive to include new and used vehicles. Ideally, employers’ car schemes need to keep pace with more accessible and used vehicles entering the market, which should include pre-owned EVs and plug-in-hybrids, to help make it more affordable and easier to transition.

Providers can also use competitive tendering to select the best and lowest rates on employees’ behalf, which can save on procurement costs and make EVs available at attractive prices, explains Bruce.

“We are seeing a strong early response to the provision of used electric cars through salary sacrifice,” he adds. “With current market uncertainty around second-hand EV values, many leasing firms have been developing second-life leasing products targeted at SMEs [small and medium-sized enterprises] and salary sacrifice customers.”

Implementing inclusive initiatives

Working with a provider that can facilitate inclusive car schemes can make it easier for employers to implement these. Employers should, therefore, ensure they select the right one to offer this, and structure the scheme in the most beneficial way for all employees, including those who join another organisation before their car lease ends, or if individuals go on maternity leave. 

“A well-structured scheme will include early termination insurance to make it easy for an employee who leaves before the end of the car lease period, as well as maintenance, comprehensive insurance, and breakdown cover,” says Bruce. 

Organisations should make it as easy as possible to engage staff with the scheme. They can raise awareness by email, educating staff about how the scheme works, and answering technical questions about company car tax and calculating savings.

“Employers should choose a provider that hosts information and engagement sessions, including drive days for the whole office to try out the latest EVs,” adds Groot. 

With the right company car scheme in place, more employees will be able to partake, while employers have a cost-efficient benefit that enhances satisfaction and attracts new talent.