Many UK business owners believe switching to environmentally friendly practices means sacrificing profit. This is a misconception! Thanks to new strategies, offering employees electric vehicles can save money.
This article discusses how businesses can implement a salary sacrifice scheme to offer their employees electric vehicle (EV) leasing. It also reveals how such a system can save money while being kind to the environment and providing additional benefits.
How It Works
Leasing EVs to employees is easier than you think! The business sets up an opportunity for employees to choose which model of EV they would like, and a portion of their salary is deducted. This system is usually set up through a leasing company.
Employees can choose from a predetermined list of EVs, offering them a range of choices.
EV leasing through a salary sacrifice scheme provides major cost benefits to both employers and employees. You can work out how much you can save to see exactly how the system can benefit you.
What is a Salary Sacrifice Scheme?
In a salary sacrifice scheme, the employer offers something to the employee for a reduction in their salary. The reduction amount is determined and agreed upon by both parties.
Benefits of Offering EV Leasing
EV leasing provides many benefits, such as:
Financial Benefits
The primary benefit of an EV leasing scheme is increased profit. Providing such a system reduces an employee’s overall salary, which means the employer pays less National Insurance contributions.
CSR Profile
The UK is committed to maintaining corporate social responsibility (CSR), which refers to the responsibility each business has to consider its social, economic, and environmental impact. Providing EV leasing boosts a company’s CSR profile.
Employee Retention
Employees who are offered more incentives are more likely to stay at their companies for longer due to increased satisfaction and perceived benefits.
Hiring
Hiring employees is made easier when the company offers excellent benefits. EV leasing is seen as a significant benefit that attracts top talent and saves the company recruiting costs.
Benefits for employees
Employees benefit from this system, too. They can lease an electric car for much cheaper, and save yearly: Forbes cites a study from the Michigan Transportation Research Institute that finds EVs cost less than half as much to drive than gas-powered vehicles.
Additionally, their taxable income is reduced, and there’s no impact on credit like there is when purchasing a car through a traditional route. EVs have lower costs and do not pay road tax.
Benefits of EVs and UK Policy
It’s no secret that EVs are more environmentally friendly. They rely on electricity rather than gas, which eliminates harmful emissions.
EVs are part of the UK’s Net Zero Strategy, which plans to decarbonize all sectors of the economy entirely by 2050.
The UK offers chargepoint grants to make it easier for citizens to switch to EVs. You can apply for the grant if you rent or own a flat or home, you have a private parking space, and you have an eligible vehicle. You can receive either £350 or 75% off the cost, whichever amount is lower.
However, most employer salary sacrifice schemes already include a free or heavily discounted chargepoint installation, making the process even easier.
Other Considerations
Limits to Salary Deductions
By law, an employee’s salary cannot be lowered below the national minimum wage level.
State Benefits
Leasing an EV might affect what state benefits you are able to claim. A salary sacrifice scheme lowers your overall salary, and in many cases, the UK government uses this revised salary to determine what taxes you have to pay. Your lower wage may lead to changes in these taxes and benefits:
- State Pension
- Child Benefit
- Tax Credits
- Parental Pay
- Contribution-based Benefits
- Universal Credit
Other Forms of Finance
Because the scheme lowers your overall salary, you may not be accepted for the same loan applications, and your borrowing capacity may be reduced.
However, some lenders take salary sacrifice schemes into consideration, so the lowered salary won’t hurt your creditworthiness.
Before taking on a scheme, ensure your future opportunities won’t be hurt. You can also ask to work with lenders who take schemes into consideration.
Is an EV Leasing Scheme Right for Me?
EV leasing schemes can save employers and employees significant amounts of money yearly, making them a good choice for most. Additionally, driving an electric car helps the environment!
