Arval UK is reporting growth of 280% for vehicles operated under its Ignition salary sacrifice scheme over the past 12 months.

The vehicle leasing company has also seen a 129% increase in the number of individual companies taking part in the employee benefit scheme.

Furthermore, the top 15 cars sourced through the funding option by employees have all been electric vehicles (EVs), with nine out of 10 cars operated under Ignition now EVs compared to four of 10 just two years ago.

Key to this “rapid expansion” of salary sacrifice for cars, says Arval UK consultant Richard Cox, was the introduction of zero and very low-rate benefit-in-kind (BIK) taxation rates on EVs from April 2020.

The BIK rate for pure EVs currently stands at 1% and will stay low, at 2%, up to April 2025.

“The latest, most advanced and environmentally-friendly cars can be offered to employees at extremely attractive monthly rates, supported by more choice in the electric car marketplace which means that there’s an option for every budget and lifestyle need,” said Cox.

“We are finding that salary sacrifice fits not just the needs of people who would like a company car and do not currently qualify for one, but also employees who have taken a cash allowance option and are looking for alternative car provision.”

According to the 2021 Arval Mobility Observatory Barometer, low tax rates on EVs has resulted in an increase – now 53% compared to 39% in 2020 - in employers offering salary sacrifice to non-company car drivers. 

“The level of interest being shown across companies with which we are working is ever-growing,” continued Cox. “These schemes provide a range of genuine advantages to employers and employees, with no real downsides or compromises.

“They also, of course, show exactly how rapidly EV adoption can occur in the right conditions, which is something that we believe is extremely important from a corporate point of view and as we all work towards the 2030 electrification deadline.”

Covid-19 has also played its part in the resurgence of salary sacrifice, according to Arval UK, with the reluctance of employees using public transport and a desire for companies to enhance employee benefits in an increasingly competitive recruitment market proving key.

“There remains an ongoing reluctance among some employees to use buses and trains for commuting and business trips, with an accompanying desire to switch into environmentally friendly cars,” said Cox. “Salary sacrifice is ideal for people who find themselves in that position.

“In this way, a mobility role is being established for EV-based salary sacrifice as a key element in a wave of new benefits initiatives that are designed to bring innovative options and ideas into play for employees, with only a very limited investment required by their employer.”