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Contact Us: 01653 604300

Yorkshire Fleet

By Admin

man driving a car

When it comes to salary sacrifice schemes, there are many benefits that they provide for not just yourselves but your employees too. Because of this, salary sacrifice schemes are becoming increasingly popular among companies who want to offer attractive benefits to their employees. 

 

So much so that the uptake in salary sacrifice schemes was up 68% year-on-year in quarter three of 2023. If you’re a business, then this should definitely pique your interest and make you wonder how these schemes can benefit your employees, as this can make working for your company attractive to many more high quality applicants when it comes to recruiting, as well as improving the retention levels of your existing staff.

 

At Yorkshire Fleet, we understand the advantages and potential pitfalls of these schemes are the crucial factors for making informed decisions. In this blog post we explore the pros and cons of salary sacrifice schemes, helping you determine whether it is a suitable option for your employees.

 

What Is Salary Sacrifice

 

Let’s first take a look at what a salary sacrifice is so you can determine whether this is a perk you would be willing to offer your staff. Salary sacrifice is an arrangement where an employee agrees to receive a lower gross salary in exchange for non-cash benefits. This may seem like a drawback, but these benefits can include many options that are more appealing to employees such as company cars.

 

Choosing a company car salary sacrifice means that employees will let go of a portion of their pre-tax salary, in exchange for a company car. This agreement will be formed between the employee and employer, then the employer will administer the scheme, ensuring the agreed amount is deducted from the employee’s salary before tax is applied.

 

While the employee will benefit from a company car as part of the salary sacrifice scheme, the employer will also experience some advantages. Since the employee’s taxable income is lowered, this may result in a reduced income tax and national insurance contributions that they owe. Although one thing employers need to keep in mind is that the employee’s earnings mustn’t fall below the national minimum wage or national living wage after the sacrifice. 

 

The Pros And Cons Of Salary Sacrifice

 

Although company car salary sacrifice schemes can be advantageous in providing employees with valuable benefits while also offering tax efficiencies, it’s important that you weigh up the pros and cons before you start offering this benefit to your employees. Although this may seem like a fantastic perk that your employees will appreciate, there may be some minor disadvantages of a salary sacrifice that could mean that some staff will choose to opt out. 

 

Implementing a salary sacrifice scheme can offer numerous benefits to both employers and employees, but it also comes with certain challenges and considerations. Understanding these pros and cons of salary sacrifice schemes is crucial for any organisation, to make informed decisions about adopting such a program. In this section we will dive into the key advantages and disadvantages of offering a salary sacrifice initiative to employees, providing a balanced view to help you better assess whether it is a viable option for your company and its workforce. Here are some of the pros and cons of a salary sacrifice so you can better make your mind up: 

Mercedes fleet

Advantages Of Salary Sacrifice Schemes

 

  • Tax Efficiency

 

Those who opt in for a salary sacrifice will experience a lower taxable income by sacrificing a portion of their salary, which will lead to reduced income tax and national insurance contributions. This is one of the biggest benefits for employers as they will pay less national insurance contributions, and employees won’t be taxed as much. Since a portion of their salary is sacrificed, employees will pay less tax whilst still being able to have a company car, which can be significantly cheaper than owning a car the typical way without going through the salary sacrifice scheme.

 

  • Saves The Company Money

 

You may not realise this but salary sacrifice schemes not only save employees money, but this will also be a benefit for you as their employer. Employers benefit from reduced national insurance contributions as their contributions are based on the reduced salary, which leads to cost saving for the company as there are less payments that you have to pay out. The amount saved will differ from employee to employee depending on how much salary is sacrificed as well as the employee’s tax band. However, you could potentially save thousands for each company car on this scheme. There are even more savings up for grabs if you choose an EV as a company car, therefore this can be extremely beneficial for your company trying to save money.

 

  • Access To Benefits

 

This may be a personal benefit, however a salary sacrifice scheme allows your employees to have access to certain benefits that they might not be able to afford otherwise, for example driving a vehicle that they may not be able to pay for on their own. This can be a significant perk providing access to a variety of high quality reliable vehicles at a reduced cost. By sacrificing a portion of their salary, employees can enjoy the convenience and status of a company car without the financial burden of purchasing or leasing a vehicle on their own. 

 

  • Improved Work Life Balance

 

One benefit for employees is that having access to a company car through salary sacrifice scheme can significantly enhance an employee’s work life balance. Since this scheme gives employees the opportunity to have a car that they may not normally be able to own on their own, the convenience of having a reliable vehicle can reduce commuting stress, save time and provide more flexibility for both work and personal travel. This extra convenience can lead to a higher job satisfaction as well as improved productivity which can benefit both the employee and employer. Since employees can more easily manage their professional and personal commitments this can significantly boost work performance. 

 

  • Environmental Impact

 

Those who choose a company car salary sacrifice will often opt for the environmentally friendly options. This is because of the extra benefits that choosing electric vehicles can provide. EVs as company cars tend to mean more savings. This is because of the government’s initiative to reduce carbon emissions, therefore tax on these kinds of vehicles is much lower than petrol or diesel company cars. If you want to make more significant savings then it’s a good idea to look into EVs as company cars to see how this can benefit you and your employees. 

 

Disadvantages Of Salary Sacrifice

 

  • Minimum Wage Considerations

 

When looking at salary sacrifice advantages and disadvantages, it’s important that you take your employees wage into account. Since company car salary sacrifice means that employees sacrifice part of their salary for the benefit of a company vehicle, as their employer you need to ensure that this doesn’t bring their pay below the national minimum wage. If the employee is already on minimum wage, then they will not qualify for this additional benefit. 

 

  • Time Consuming

 

Although choosing a car salary sacrifice can be very beneficial to both employees and the company itself; implementing and managing salary sacrifice schemes can be complex and time consuming. This means that you will need help from experts in this field to make sure that everything is implemented smoothly. You will also need to stay up to date with tax laws and regulations to ensure compliance. Naturally, we’d recommend working with a car salary sacrifice scheme partner like ourselves. This way you can make sure everything is well taken care of and the time consuming factors of salary sacrifice schemes are mitigated.

 

  • The Quality of the Salary Sacrifice Scheme Depends on the Provider

 

How effective a salary sacrifice scheme is depends on how reliable the provider is. If you choose a salary sacrifice provider who offers poor service, lacks transparency or fails to give you adequate support, this can lead to major problems for both the employer and the employee. You may come across admin errors, inadequate customer service or even a lack of communication that could potentially lead to dissatisfied employees. This could be detrimental if they don’t stay up to date with the latest tax laws and regulations which will become a problem for you. Therefore, in order to find success with salary sacrifice schemes, it’s vital that you select a reputable provider like Yorkshire Fleet to help ensure that everything runs smoothly for your business and your employees. 

image of a man at the wheel of a car

Salary Sacrifice At Yorkshire Fleet

 

Although there are a number of salary sacrifice advantages and disadvantages, implementing a salary sacrifice scheme offers substantial benefits, from tax savings, to enhanced perks for employees to an improved overall environmental impact. However, the quality of such schemes is determined by partnering with a reliable and reputable provider. Yorkshire Fleet stands out as an ideal choice for you to start offering salary sacrifice, whether that’s a standard company car or an electric vehicle.

 

At Yorkshire Fleet we have a commitment to sustainability, ongoing support and a track record of excellence, ensuring that both employers and employees can reap the maximum benefits from their salary sacrifice arrangements.

 

By choosing Yorkshire Fleet, you are committing to offering valuable benefits to your employees, aligning with corporate goals and maintaining compliance with all relevant regulations, all while meeting the needs of your workforce helping your company stand out as an amazing place to work. 

Contact us today and start offering a car salary sacrifice initiative to your team, and start experiencing the perks of this scheme with us today!

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