Fleet News

Salary sacrifice schemes used to cut CO2

Employers are reducing two headline areas of corporate concern – CO2 reduction and occupational road risk management – by introducing car salary sacrifice schemes.

They are also becoming more selective in their choice of salary sacrifice partner as they don’t want to have to establish a contingency fund to cover issues such as long-term employee absences, excess mileage or take out insurance to cover early-termination costs in the event of an employee leaving.

All those issues were in the mind of bosses at professional services firm Grant Thornton, which has now introduced a car salary sacrifice scheme for around 3,500 of its employees.

In selecting SG Fleet as its scheme provider, Grant Thornton has replaced a regime where employees who reached a certain level were entitled to a car allowance and then claimed business mileage.

The organisation also had in place an affinity scheme with a contract hire provider enabling employees to take out a personal lease.

“We’re expecting a considerable amount of interest in the new scheme over the next 12 months,” said Martin Todd, head of reward and policy at Grant Thornton.

“The scheme was introduced as a more flexible and cost-effective option for those eligible employees interested in a new car; and as part of the wider benefits packages enjoyed by our employees. This was developed in conjunction with our own in-house employee benefits consultancy team, which also works with clients on these schemes and other benefits.”

Grant Thornton opted to introduce its salary sacrifice scheme with vehicle choice capped at 130g/km of CO2. It aims to cut its carbon footprint, as well as reduce its ‘grey’ fleet exposure and the associated concerns around duty of care, according to David Fernandes, managing director of SG Fleet UK.

The firm has not run a ‘traditional’ company car fleet for several years and perceived some car salary sacrifice schemes offered as “just corporate contract hire”, with contingency funds/early termination insurances bundled in.

Similarly, Grant Thornton did not want to be the provider of consumer credit to its employees, said Fernandes.

SG Fleet’s salary sacrifice scheme manages both issues, including recognising salary sacrifice as consumer credit, but without employer involvement.

Todd said: “From our perspective, SG Fleet has taken two of the thorniest issues for organisations like professional services away.”

It is anticipated that around 10% of Grant Thornton’s UK employees will take up the scheme over the next three to four years.

Car salary sacrifice schemes are in their relative infancy and to date the product has been largely marketed as an employee benefit targeted at those employees who would not generally be entitled to a company car.

SG Fleet has bought its NovaLease salary sacrifice product to the UK from Australia where it has around 25,000 vehicles on schemes.

Since launching in the UK, it has established a fleet of 2,500 vehicles of which around 500 are on salary sacrifice schemes.

Currently, six SG Fleet clients operate a salary sacrifice programme running alongside a traditional company car scheme. Fernandes anticipates adding a further three or four organisations to that list in 2013.

He believes there is a growing trend for employers to have in place a single or dual-badge company car scheme with employee choice boosted by a salary sacrifice scheme that removes concerns around contingency funds and consumer credit, without relying on complex employee car ownership schemes, which HM Revenue & Customs (HMRC) may not be comfortable with.

“Of all the trends we see in the fleet sector, the big one is for employers to have a standard company car scheme and if an employee does not like the choice available they can opt out and take salary sacrifice for the vehicle that meets their requirements,” said Fernandes.

“It creates the best of both worlds for employers, employees and HMRC alike. But the key is for organisations to make the salary sacrifice scheme effective for them as Grant Thornton has done.”

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