Our Fleet Product and Policy Manager, Mike Coulton, examines how salary sacrifice can help businesses transition drivers into EVs, reduce carbon footprint and save money.
2021 has seen a greater focus on sustainability and environment than ever before, culminating in COP26 attracting a global audience to observe leaders navigating a path towards a more sustainable future.
Electric vehicles historically have been disregarded for fleets as the models were limited and the range of a single charge inadequate. Now, with more manufacturers bringing impressive EV models to market and company car tax on EVs just 2%, businesses can utilise employee benefits such as salary sacrifice schemes not only to attract talent, but to have a positive impact on the environment.
In this feature, Mike Coulton, Fleet Product and Policy Manager at Volkswagen Financial Services Fleet, will examine how this employee benefit can help businesses transition their drivers into electric vehicles, whilst reducing their carbon footprint and saving money.
What incentives are there for employers to introduce electric company car schemes, whether financial or otherwise?
There are huge financial benefits for both the employer and employee to introduce an electric company car scheme, particularly if offered through a salary sacrifice scheme.
The benefit-in-kind (BIK) tax for electric vehicles (EVs) is currently 1%, and from April 2022 to April 2025, this rises to just 2%, which is a powerful incentive for employees to switch to electric when compared with petrol and diesel cars where you could be looking at a BIK rate of over 30%.
Offering employees’ electric vehicles through a salary sacrifice scheme could also offer significant Class 1A National Insurance (NI) savings businesses could typically save around £80 to £100 per employee per month on each zero-emission vehicle on the scheme. The employee also benefits from lower NI contributions, which is why it is such an attractive option.
In addition to encouraging zero-emission vehicles, businesses can offset their carbon emissions through a salary sacrifice car scheme, so it certainly offers a myriad of benefits.
What are the other reasons why employers might want to introduce such schemes, such as meeting sustainability initiatives or as a means of attracting or retaining staff?
Sustainability is increasingly at the forefront for many businesses. In the wake of COP26, many companies will be looking to devise a clear and deliverable plan on moving to a low-carbon future in line with the UK’s 2050 net-zero target. Company car fleets and even the ‘grey fleet’ – where employees use their personal car to commute or for business purposes – can be a huge contributor to emissions.
Luckily for businesses, they’re also one of the easiest things to change to reduce emission levels. Offering electric vehicles or ULEVs (ultra-low-emission vehicles) through salary sacrifice to employees who may not qualify for a company car, but who are creating emissions by driving to the workplace, can be a quick win for businesses looking to tackle their carbon footprint.
However, it’s not just about sustainability credentials; these financial and sustainability benefits have a knock-on effect when attracting and retaining talent.
Not only can employees save money when it comes to tax and running costs with an EV, which is an appealing option in itself, but the chance to lower their emissions is a benefit. People are becoming more aware of their impact on the environment as individuals, and an electric vehicle is one way for them to tackle this. As a potential employer, if you can offer this desirable package benefit to candidates, it can be a way to attract (and retain) top talent.
How can they make these attractive to staff? What advantages are there for staff to take out electric vehicles over a petrol or diesel car?
As well as the tax benefits, employees will also find the running costs are significantly less, particularly if they charge the car at home overnight or at work if the business installs EV charging points – another great way to encourage ULEV adoption.
Some of the barriers with electric vehicles are perceived cost, range and charging infrastructure. However, many of these can be easily addressed, with ranges going over 300 miles in models such as the Volkswagen ID.4 or the Hyundai Ioniq5.
We can carry out ‘Salary Sacrifice roadshows’ for businesses to help highlight the benefits to staff and online tools such as our ‘EV-4-Me?’ that can advise employees on whether an electric vehicle fits their journey needs.