Fleet News

Ask Nigel: salary sacrifice

In our regular feature, Nigel Trotman, Fleet News Hall of Fame member and two-time Fleet News Award winner, gives advice on your fleet challenges and queries.

Q: We have been looking at salary sacrifice for quite a while but I am undecided whether it is a good thing to do. We have just over 1,000 employees, of which 300 are grey fleet drivers and more than 100 are company car drivers. We are mainly looking at salary sacrifice to help grey fleet drivers and to become more environmentally- friendly as a few have really old cars with high  CO2 emissions. What’s your advice?

A: Yours is an interesting question and one that a large number of fleet managers have found themselves asking in the past couple of years.  The success of salary sacrifice in other areas of employee benefits has inevitably seen more  organisations explore the potential for cars for all employees as part of an enhanced employee offer.

Like any such change, however, adopting salary  sacrifice for cars is not a simple decision, and you need to be certain that it will work for your organisation, since, as with any approach to funding, it does not work for everyone. Your reasons focus on emissions but you also need to consider other aspects such as improving the employee offer and potentially saving money. A change to salary sacrifice must also, of course, ensure that the fleet remains fit for purpose.

Salary sacrifice has been a regular topic at industry conferences in recent years, with presentations covering the details of what to consider, the potential risks, and so on. I do not propose to try to explain all of these here – I would need more space! Suffice to say  I believe that the best approach is to talk to experts, especially ones already using salary sacrifice.

You should therefore start with a conversation with your fleet provider, understanding what they offer, how and where it works, and ideally get introduced to another customer who is using it successfully. Not every fleet provider offers salary sacrifice products and levels of success vary.

I would therefore also advise you to talk to one or more of the fleet managers profiled in Fleet News who uses salary sacrifice – there have been several in the past year or so. They can give you a real hands-on appraisal of why it works for them as well as advising on potential pitfalls.

For example, I know one organisation that was keen on salary sacrifice for cars until they realised that a large proportion of the workforce would not qualify as the deductions involved would take them below the level of the minimum wage. Factors such  as levels of staff turnover have also been cited as a potential limiting factor and I have heard of a number of cases where take-up has been considerably below expectations.

At the end of the day, salary sacrifice will not work for everyone, and in some cases is used in parallel with another funding option – the ‘blended’ approach.  However, as a first step you need to establish if it will work for your organisation.


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Comments

  • Rohit - 21/08/2016 18:29

    We are a small company with about 25 employees and some employees want to explore the salary sacrifice for cars scheme. We have had a few quotes but the difference between the personal lease monthly payments and salary sacrifice net monthly payment is pretty high (even if you add the maintenance and insurance components) -why is that so?

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  • David - 06/11/2016 21:08

    Very good question, I run a the new Audi A4 1.4 TFSI on personal lease at £227/mth inc VAT 3+23 profile 10k mileage per year with maintenance. With salary sacrifice the payments were over £150/month higher. I suspect it is lease companies simply pulling the wool over your eyes, suggesting 40% discount so price must be good. BIK has to be added also. All far too much hassle so I will continue with personal leasing.

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  • Colin - 30/10/2020 10:33

    I'm struggling a littel to understand the costs for a Salary Sacrifice Scheme on my company car. My current car is a straight forward lease that my employer pays. I'm drawn to SSS as I'm looking at a Tesla Model 3 and the monthly cost is low. What I'm struggling to understand is how my employer can pay for the car if it's already been sacrificed from my wages? Can my boss simply top up my wages for example? I've seen a comparison example figures showing my sacrifice and then my employers costs showing the car rental BCH too. Why is my boss paying the rental and my salary being sacrificed also? Can I even get a fully paid company car through the scheme?

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