Fleet News

Funding: salary sacrifice to grow in 2014

By Gordon Calder-Jones, business development director, Maxxia

A growing number of organisations are using the salary sacrifice model to offer more inclusive car schemes that not only enhance recruitment and retention, but also lower cost and risk.

The advantages of a salary sacrifice car scheme for businesses include NIC savings, cash savings and the opportunity to offer an attractive employee benefit.

Although the business still has to pay Class 1A NICs on the provision of the car, this can be substantially less than the NICs that would have been paid on the salary sacrificed.

Further cash savings can be realised because of the differential between the 10-25p typically paid for miles covered by a company car, rather than 45p per mile under authorised mileage allowance payments (AMAP) for an employee-owned vehicle.

Salary sacrifice also enhances a firm’s green credentials as it is financially most attractive when buying a low
emission car.

Most commonly, the business case for adopting a salary sacrifice scheme will be a combination of duty-of-care issues, reducing the organisation’s carbon footprint and reducing or eliminating grey fleet mileage.

But offering a range of enticing tax-efficient benefits is becoming increasingly essential for organisations needing to attract and retain the best talent.

To de-risk a salary sacrifice car scheme, a range of mandatory insurances can be built into the arrangement to cover areas such as redundancy, early termination, and death in service, as well as maternity, paternity, and critical illness.

And the cost of this insurance can be included in the monthly amount of the salary sacrificed by the employee.

Salary sacrifice company car schemes may not be suitable for every employer and are most relevant for those with at least 500 employees.

Businesses will need to investigate whether a salary sacrifice scheme is appropriate for their needs and not assume it can be an automatic substitute for traditional car schemes.

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