The Growing Popularity of Salary Sacrifice Strategies

Delegates at the recent Association of Fleet Professionals’ annual conference heard a panel led by tax expert from BCF Wessex, Jeff Whitcombe, discuss the uptake of salary sacrifice along with tips for implementation.

Jeff said: “Salary sacrifice - or salsac - has become something of a buzz word thanks to low benefit in kind tax. If you give up some of your salary you will save income tax, National Insurance and the National Insurance levy. It really works in favor of the employee. The benefits are that employees get into company cars for a fixed budget, while for the employer there’s demonstrable progress on the green agenda as well as a duty of care aspect.”

Ali Argyll, business development director at salary sacrifice supplier Tusker, which has been successfully implementing schemes for the last 14 years commented:

“There are three areas to consider. The first is risk: what does it mean to the organization? Well, you’re providing a company car so you are altering an employee’s terms and conditions of employment. And If someone leaves most schemes offer risk protection against this so you are not left with unwanted vehicles.

“Secondly there’s the administration angle: are we getting tied into burdensome admin? Well it’s outsourced provision although there will be things to be done, but these tend to be call to action processes more than anything else.

“And, finally, where does it sit? You have to be aware that there are multiple stakeholders involved in a salary sacrifice scheme. Otherwise that’s it.”

Ali added that if companies already operated a company car scheme there was no point swapping to a salsac scheme. “Getting back to basics, it's a company car. There may be some slight cost savings by moving to salary sacrifice but essentially it’s still a company car.”

From an OEM’s point of view, Tom Brennan, head of fleet at Mercedes-Benz, said that salary sacrifice was currently driving a significant portion of the company’s business.

“Schemes are opening up all over the place,” he said. “In the fleet division 80% of orders are for electric or hybrid cars and 20% of these orders are salary sacrifice cars. Sustainability is key to us, so it allows us to access customers we would not normally do so.”

Finally, moderator Jeff Whitcombe addressed the implications of possible tax changes on the effectiveness of salary sacrifice schemes.

Currently electric cars are taxed at 2% of their list price. Any rise in benefit in kind would reduce the attractiveness of such schemes.

However, Jeff said: “The Government strategy is to encourage electric cars towards the 2030 deadline when new internal combustion engines will be banned from sale. So while we know the tax rates up to the end of fiscal year 2025, beyond that we might expect an uplift to 5% but I doubt if it would be much higher, and that would still make salary sacrifice attractive to employees and employers alike.”