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Salary Sacrifice: Benefits for employees and employers

In a world where flexibility and cost-effectiveness are more important than ever, Salary Sacrifice schemes are gaining popularity among businesses.

 

This blog post aims to break down what Salary Sacrifice is, how it works, and its benefits for both employees and employers.

What is Salary Sacrifice?

A Salary Sacrifice car scheme is an additional perk that you, as an employer, can provide to your employees It's a flexible and low-cost method of giving your employees tax-efficient access to new cars, without the financial commitment of outright ownership.
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Here's a simple breakdown of how a Salary Sacrifice scheme works:

How does a scheme work?

Once you decide to implement a Salary Sacrifice scheme, a qualifying employee can select a new car from a wide range of options available on a dedicated website. This is usually a simple, user-friendly process, and they can compare lease quotes and add any additional extras as required. Once they have made their selection, they submit it for approval.

After the vehicle has been approved and the lease contract is in place, you, the employer, deduct a pre-agreed fixed amount from the employee's salary each month. This arrangement continues for the duration of their vehicle contract. Importantly, this deduction is made before income tax and National Insurance are deducted.

The employee will pay a benefit-in-kind (BIK) tax for their new car. This tax is calculated based on the car's value and CO2 emissions. By choosing a low-emission car or a fully electric vehicle, the employee can minimise their BIK tax, effectively stretching their salary further than with a traditional car loan or hire purchase agreement where payments are deducted after tax and NI

For your business

What are the benefits of Salary Sacrifice?

Cost-efficiencies

Salary Sacrifice could reduce the cost of car allowances, while the lower tax levels paid by participating employees can lessen your Class 1 National Insurance Contributions.

Improved staff recruitment and retention

By offering an attractive perk to employees, you can boost satisfaction and improve recruitment and retention.

Enhanced sustainability

By incentivising your employees to select low and zero-emission cars, you contribute to environmental sustainability, enhancing your company's reputation.

Safer, smarter vehicles

Salary Sacrifice-taking employees will be driving new, properly maintained vehicles, reducing he risks of grey fleet vehicles and minimising maintenance-related downtime.

For your employees

What are the benefits of Salary Sacrifice?

Greater buying power on a new car

Because of the significant potential tax savings, employees can afford models (including EVs) which might otherwise be out of reach.

No big outlays

With no up-front costs, and fixed monthly payments, a Salary Sacrifice makes budgeting for a new vehicle easy.

Hassle-free in-life services

Servicing, maintenance, repairs, accident management, breakdown cover…all are included as standard, saving employees money and keeping them moving.

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Find out how easy it is to set up a scheme

Implementing Salary Sacrifice with Alphabet

Alphabet makes setting up a Salary Sacrifice scheme simple with expert guidance, a wide range of vehicles, and exceptional fleet management services.

Our experienced team offers essential support in setting up and managing your Salary Sacrifice scheme. From the initial stages of implementation to ongoing management, Alphabet is committed to providing a smooth, hassle-free experience. We also offer formatted payroll reports to simplify deductions, making the administrative side of things easier for your team.

Alphabet provides access to a comprehensive array of vehicles, currently available in the UK. Using Alphabet's dedicated website, your employees can compare lease quotes, add any additional extras, and submit them for approval.

Alphabet’s Salary Sacrifice scheme goes beyond the provision of vehicles. It includes services like breakdown cover, servicing, maintenance, repair, and Accident Management. For additional peace of mind, there's even an optional add-on for Driver Licence Checking.

Get in touch

Got questions? We’ve got answers

If you're ready to explore how this scheme can enhance your fleet strategy, boost employee satisfaction, and potentially save your business money, call our expert team to discuss next steps.

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