Salary sacrifice company cars: Building a business case

The benefits of a company car salary sacrifice scheme might seem obvious, but the selling points must be set out clearly

Building the business case for car salary sacrifice schemes involves two things: making the case internally for doing so in the first place, and making the case to employees once it is up and running.

Promoting a scheme to staff is covered later in this guide, so here we will address the first issue. Although there is the potential for employers to make NI savings, the main motivation – and therefore the way to sell it to the business – tends to be more around staff retention and loyalty, environmental kudos, health and safety (in management of vehicles) and being able to offer a benefit at little, if any, cost.

Chris Bolan, head partner at Compass Reward Consulting, says: “For the employer, it is a valuable addition to its benefits package at low or no cost. But the savings tend not to be the main point. Staff retention is often more of an issue because you are offering people a benefit they would otherwise not be entitled to.”

Nevertheless, many departments will need to be convinced that it is the right thing to do, notably finance, HR (if not already championing a scheme) and any benefits team, procurement, payroll, health and safety, any existing fleet managers and, of course, the board.

Examples of potential savings

Paulo Larkman, head of fleet consultancy services at Lombard, says it makes sense to draw up some clearly costed examples of the potential savings that could be achieved (see below).

“A well-thought-out and accurately delivered salary sacrifice scheme can provide a quantifiable benefit to both the business and staff,” he says.

Another key “selling point” is how a scheme might mitigate the Corporate Manslaughter Act (introduced in April 2008), which significantly raised the penalties for managers who turn a blind eye to health and safety issues involving grey fleet drivers, says David Hosking, managing director at Tusker. Many providers will also carry out DVLA licence checks to ease health and safety worries.

Other supporting arguments could be to highlight the corporate discounts a provider might offer or the comprehensive nature of its insurance (general accident and/or early termination), breakdown recovery, maintenance or employee support desk package, all of which makes it possible to budget more accurately for the whole-life cost of any car.

Green issue is strong selling point

Another easy point to make is that a scheme is little different to the known quantity of contract hire, just with a slightly different structure and more benefits for the employee. The green issue, with the fact that benefits tend to be greater when the scheme is weighted towards low-CO2-emitting vehicles, can be another strong selling point.

If you can show that introducing a scheme will require minimal tweaking of your own computer or payroll systems and existing benefits or flex platforms, then that will be another advantage.

Finally, it is worth investigating what will be the situation in terms of document, set-up and credit acceptance fees, implementation costs and deposits. Obviously, if a provider is offering some or all of the above for free (as many do), that will be a further “sell” to the business.

Because salary sacrifice car schemes are still relatively new to the market, their advantages and potential risks may need some explaining. Most early adopters have tended to be big employers that already work with a benefits provider, so it is relatively easy to show how it can be bolted onto an existing sacrifice package, says Mark Sinclair, director at Alphabet.

“It is a way of enhancing the employee experience without spending money. There is also an element of locking in staff, because they are taking the benefit for two to three years.”

But Bolan cautions: “It can be a great idea, but it has to be done in a structured way, and going for an off-the-shelf or one-size-fits-all offer might not be the best way. There are employment law and tax issues that need to be addressed.”

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