Electric Vehicle Salary Sacrifice

Salary Sacrifice Scheme

Highlights:

• Typical corporate fleet size 50 – 1000
• Only available for battery electric vehicles
• Employee eligibility – minimum age 21 and in continuous employment for at least 12 months
• Complete maintenance and breakdown, including breakdown, maintenance, servicing, and tyres
• Insurance cover arranged through an insurance company or provided by the employer

Broker responsibilities:

• Scope and design of the salary sacrifice scheme
• Interactive digital quote tool
• In-life management

Salary Sacrifice Scheme Details

• Salary sacrifice is a way for an employee to legally give up (sacrifice) a portion of their salary in return for something else, in this case, a car.
• The employer and employee agree to amend the employment contract terms reducing the employee’s entitlement to cash remuneration.
• The cash entitlement sacrifice is made in return for a form of the BEV 
   (battery electric vehicle).
• Both employer and employee can benefit from salary sacrifice. For example, when a portion of the employee’s salary that is subject to NIC (National   Insurance Contributions) and income tax is swapped for a benefit that is NIC and income tax-free or partially exempt non-cash benefit.
• The employee’s net salary must not be reduced below the National Minimum Living Wage rate by the salary sacrifice agreement.
• Salary sacrifice schemes allow businesses to offer the additional benefit of a BEV to all permanent employees who meet the eligibility criteria.
• Employees receive a fully electric vehicle in return for a fixed monthly deduction from their gross salary, giving them NIC and income tax savings.
• Limiting the scheme to fully electric vehicles maximises savings by reducing   Benefit in Kind tax costs and simplifies scheme administration.
• The scheme supports sustainability and helps employees do their part to   achieve net-zero emissions

Salary Sacrifice works Costs

• Car’s gross cost. Monthly gross lease from the quotation portal, including maintenance, servicing, and tyres

Minus

• NIC and income tax savings. Reduction in NIC and tax payments. Monthly gross lease x NIC and marginal income tax rate

Plus

• Benefit in Kind tax. Collected in tax code. BIK rates for EVs are 1% 2021/2022, 2% 2022/2023 and through 2024-2025

Equals

• The net cost of your car

Salary Sacrifice Benefits

Benefits for employees:

• A cost-effective way to drive a brand new fully electric car. There are many vehicles to choose from, all with the latest technology and equipment.
• Hassle-free – package includes breakdown cover, insurance, maintenance, road tax, servicing, and tyres.
• Significant savings – benefit from NIC and income tax savings
• Simple process – create as many quotes as needed to choose the right car. No online credit checks and low upfront costs.
• Low-cost driving – fully charging an electric vehicle is significantly cheaper than purchasing a full tank of diesel or petrol. EVs are permitted in Ultra Low Emissions Zones and are exempt from congestion charging. 

Benefits for employers:

• Enhanced reward packages and improved employee engagement. Attract, retain, and reward valued employees.
• The BEV only approach simplifies the operation and administration of the scheme making it easier to communicate compelling offers.
• Supports sustainability – fully electric vehicles are much better for the environment, reducing business travel emissions.
• Easy implementation and minimal costs
• Tax-efficient – employers receive NIC savings from the sacrificed salary

Salary Sacrifice Sustainability

The salary sacrifice scheme only relates to fully electric vehicles. Therefore, it is vital that employees/customers carefully consider their options and ensure the vehicle type is suitable for their business and individual needs.

Manufacturers’ figures may differ from real-world driving. Your actual range will depend on several factors, including the number of passengers, load weight, outside temperature, equipment usage, and driving style. The graphic above is just a guide, and you should make an informed decision based on your research and personal circumstances. 

Stakeholder Responsibilities

The broker is responsible for:

• Facilitating the insurer and quote provider
• Providing policy documentation and scheme design after consultancy
• Providing employee support and guidance on salary sacrifice
• Undertaking driver’s license checks
• Co-ordinating charging points
• Supporting customers through the quotation and order process
• Managing contractual amendments and lifestyle events
• Checking minimum salary thresholds

The insurer is responsible for:

• Providing insurance quotations for a fixed contract period
• Collecting insurance premiums
• Reviewing policy in the event of a claim

The quote provider is responsible for:

• Calculating driver rentals and appropriate salary deductions
• Providing a breakdown of the quote, including NI, tax, and BIK
• Amending the employee contract
• Overseeing the App/website

Express Vehicle Contracts is responsible for:

• Providing non-regulated CH product and permission to use it for salary sacrifice
• Supporting the customer with any contractual amendments
• Concessions around settlement figure/provision pot
• Training support and product material for brokers
• EV rate books price guide

The employer is responsible for:

• Agreeing the eligibility criteria and scheme design
• Facilitating deductions through payroll
• Arranging insurance
• Agreeing provisions for lifestyle events
• Distributing product material to eligible employees
• Checking minimum salary thresholds

The employee is responsible for:

• Requesting quotations through quote provider/broker
• Signing the addendum confirming the order
• Advising employer of any changes in lifestyle events/mileage
• Any insurance claims