Salary sacrifice company cars: Sponsor’s comment: A strong benefit to drive value

A salary sacrifice company car scheme has much to offer but brings a lot to consider, says Ian Hughes, commercial director at Zenith.

It is nearly two years since we last sponsored the How to manage salary sacrifice company cars guide with Employee Benefits, and three and a half years since we first launched our salary sacrifice product. When we were looking at producing a new guide on company car benefits, salary sacrifice was the obvious choice. Over the last few years, interest in salary sacrifice car schemes has continued to grow. It is now firmly established as a valuable addition to many organisations’ reward packages.

One of the main attractions of a salary sacrifice car scheme is the strength of the benefit to employer and employee. As the economic climate continues to be unsteady, employees can be given the opportunity to drive a brand new car at little or no cost to their employer. Being all-inclusive, the scheme offers staff an easy-to-budget-for package. This also means employees are protected from market fluctuations relating to insurance and maintenance, which can drive up costs over a two to three-year period.

The benefit’s rise in popularity has been driven largely by the tax efficiencies and other cost benefits that it offers. By giving up part of their salary, employees pay less income tax and national insurance, and can also tap into their employer’s buying power, giving them access to corporate discounts. Many employees may think they cannot afford to drive a brand new car until they realise their salary sacrifice options.

Salary sacrifice schemes can provide significant added value by helping organisations to reward, retain and recruit employees, particularly at a time when salary budgets may be squeezed. The employer can also gain from carbon footprint reduction and improved duty-of-care compliance.

Any organisation considering a scheme must fully understand the benefits, risks and potential pitfalls. This guide gives employers an overview of how salary sacrifice works, what to look out for, recent developments and case studies, along with balanced views from industry professionals.

Once an organisation has assessed whether the benefit is right for it and has built a business case, it then needs to work with an experienced provider that can advise on matters such as scheme policy, car choices, manufacturer negotiations and implementation. A good provider should also help the employer to maximise employee engagement and take-up via a structured communications strategy.

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