Electric Car Leasing Salary Sacrifice Scheme
Posted on 31st August 2022 at 16:14
With the ongoing cost of living crises it is important that employers look for ways to provide employees with cost savings that have little or no cost to the employer.
One way of achieving this is through salary sacrifice schemes, well known schemes include childcare vouchers and cycle to work, there are also many other uses for salary sacrifice, in this article we cover some of the essential considerations when implementing an electric car leasing scheme. To implement a salary sacrifice scheme the employer needs to ensure the following:
• Change the terms of the employee’s employment contract and employee needs to agree to this change.
The changes should be clear and understandable.
• The change in salary cannot be applied to the salary retrospectively
• The changes should be shown on the employee’s payslip
• Check with HMRC that the scheme has been implemented correctly and is approved
• Consult with pension providers on the effect the salary sacrifice will have on pension contributions and
particularly if the employee is near retirement
• Ensure that participation in the scheme should not reduce an employee’s cash earnings (hourly rate) to
below the National Minimum Wage
• Clarify how other pay and benefit elements will be calculated e.g. overtime, pay rises, pensionable pay,
ideally this should be notional pay (before the salary sacrifice came into effect)
• Make it clear that the reduced salary level does have to be used for the calculations for an employee’s
statutory payments (such as statutory maternity, paternity, shared parental, adoption and sick pay)
• Make it clear that the reduced amount of national insurance contribution can also affect the level of
state pension that the employee is entitled to
• Make it clear that the reduced salary level may impact on calculations based on salary as used by
mortgage lenders, loan companies etc
• Salary sacrifice schemes are to be implemented for more than 12 months to avoid the scheme being
considered not effective. HMRC considers easy convertibility of a benefit to cash as “money’s worth”.
However, the employee can opt out of the scheme if there is a significant “lifestyle change” e.g.
circumstances such as divorce, redundancy, pregnancy etc. The scheme should be covered by lifestyle
protection (or similar plans) and usually run for 24, 30 or 36 months.
• Ensure that the employee is provided with a “mock up” on the costs and savings
• Select a reputable company to implement the scheme
• Some providers allow the employee to keep the car if the outstanding amount is paid off, while others
will allow an employee to keep the vehicle and transfer the scheme to a new contract if changing
employer.
• Make it clear if the employer has a “hand back the keys” policy when an employee leaves the business
and what is expected e.g. full driving licence, driving for over a year, full time employee for more than a
year, insurance etc
• Check Benefit in Kind rates for electric cars starting from 2% for 2022/23 and submit through P11D’s
• The provider usually includes maintenance, insurance etc
If you require any further information on our HR Services please click here alternatively click on tags below for further reading.
All our blogs are written by our team of expert consultants, to speak with one our consultants you can fill out the form below, email us at info@auxil.co.uk or telephone 0330 088 4352.
Tagged as: Employee Benefits, Employee Consultation, Employee Engagement, Employee Motivation, Employee Recruitment, Employee Remuneration Package, Employee Retention, Salary Sacrifice Scheme
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