This article is written by our channel sponsor, Tusker
Companies must take care when setting up salary sacrifice schemes to ensure they don’t take employees below the minimum wage level, says salary sacrifice car specialist, Tusker, whose market leading system has an inbuilt fail-safe to ensure employees can’t surrender too much of their salaries.
The warning comes following press reports of an industrial tribunal ruling against Pendragon, the UK’s biggest car dealer which also has a leasing company at No. 17 in the FN50 league table of leading leasing companies.
Following the ruling, Pendragon was ordered to pay £35,000 in fines and compensation orders for reportedly paying at least 40 of its staff less than the minimum wage.
HM Revenue and Customs told the tribunal that Pendragon deducted money for lease car payments and salary sacrifice schemes, which brought what some staff received as a basic wage, without commission, bonuses or other extras, below the national statutory minimum of £6.08 per hour.
Salary sacrifice schemes need to be properly constructed and implemented with inbuilt safeguards to prevent employees from surrendering too great a proportion of their salaries, said David Hosking, managing director at Tusker which currently has over 75 live salary sacrifice car schemes in operation.
“It is imperative that an employee has an accurate picture of the costs involved so they are able to make an informed decision. This is especially true if the salary sacrifice they make takes them from a higher tax band into a lower one, or even takes them below minimum wage, as this would make them ineligible to have a vehicle on our scheme.
“Our SalarySacrifice4Cars system (SS4C) can be set to prevent employees from sacrificing more than an agreed percentage of their salary or going below a pre determined minimum level. This means that if an employee enters details that take them below the set minimum level, they would be automatically prevented from having a car.
“The recent ruling against Pendragon underlines the benefit of using only an experienced supplier in setting up your salary sacrifice arrangements as any errors can clearly be extremely costly.
“If the salary sacrifice scheme is not correctly introduced, there may be serious tax, pensions and employment law implications, which is why working with an experienced provider is so essential,” he added.
Working with Tusker means that all relevant issues, such as salary sacrifice levels, early termination risk for redundancy or resignation or even excess mileage charges, are fully explored at the implementation stage and robust processes put in place to minimise the risks for both employers and employees, he said.
“With each of our schemes, we ensure they are all HMRC complaint and the salary sacrifice calculation is built into our online fleet management system, Fleetdesk4, which allows all employees to see a clear breakdown of all costs and savings when selecting their new vehicle, along with any options.
“In this way we can ensure as far as is possible that our client are protected and cannot fall foul of current legislation,” he said.
Hosking also explained that clear communication with employees was imperative to ensure mistakes and misunderstainding did not occur.
“Having implemented over 75 live schemes, we know that transparency and effective communication is all important and pivotal to the success of our scheme. Successful communications methods, in our experience, include salary sacrifice roadshows, internal company magazines, emails and flyers.”
Tusker’s market-leading SS4C scheme enjoys a healthy take-up in both private and public sector organisations. For those schemes that have been running for 12 months or more, average take-up is 4.5%; on those that been running for over 24 months it is 6.8%; while for those that have been running for three years or more, take-up is currently averaging 8.3%.
“With that level of experience and take-up, we are confident that our schemes are correctly constructed, legally sound and capably administered,” added David Hosing
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