Fleet News

Insight: Salary sacrifice – why it's time for a closer look

Salary sacrifice schemes are proving an increasingly popular way to get employees behind the wheel of a new car.

They bring a wealth of benefits not only for staff but also for employers – ranging from cost savings and tax efficiencies to strengthened employee attraction and retention.

And that’s before improved employee duty of care and a reduction in carbon emissions are taken into consideration if the scheme is used to convert employees using older private cars for business use.

An estimated 25,000 employees are now driving around in a salary sacrificed car. Meanwhile, a survey by Alphabet of 250 fleets with more than 150 vehicles found that 27% more were offering salary sacrifice in 2012 compared with 2011.

Private sector businesses have been quickest to take up these advantages so far, although much of the volume has come from the public sector.

The same report found that 36% of private fleets with more than 150 cars offer a salary sacrifice option, but they are also gaining ground in the public sector with 22% of non-commercial fleets now offering them to employees.

In short, the opportunity for members of staff to drive a new, fully-maintained car at a lower cost than in the private market is proving to be compelling.

But just how successful have those schemes which were among the first to be launched in Britain proved to-date?

Those organisations spoken to by Fleet News that launched salary sacrifice schemes around two to three years ago have, in general, been pleased with progress to date.

Nonetheless, virtually all have cited employee take-up as an issue with schemes, but are quick to point out that this increases if the launch coincides with a concerted marketing programme.

Some of the newer schemes to market, such as the programme launched in 2011 by Hitachi Capital, have seen much higher conversion rates because they have been targeted at the right customers in a proactive approach by the leasing company.

Other challenges include ensuring staff understand the scheme’s benefits, anticipating vehicle replacement cycles among those employees eligible for a salary sacrifice car, getting the fleet, HR and finance departments to work together, and realistic expectations about the scheme’s ability to lower CO2 emissions.

One of the biggest fleets in Britain to have adopted a salary sacrifice scheme is IT services giant IBM.

The company remained with its funding provider LeasePlan while bringing in Alphabet as a second supplier when the scheme was launched in May 2010.

The move provided 18,000 employees with the opportunity to access a car, including some that were entitled to a company car.

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