Company cars have always formed an important and emotive part of an employee’s benefits package; however, with hikes in taxation, the traditional petrol or diesel company car is not as big of an incentive as it used to be. The benefit in kind (BIK) system and market dynamics were putting pressure on the company car as a benefit. Many said the death knell had sounded. And then plug-in hybrids (PHEV) and electric vehicles (EV) entered the room and threw their hats into the ring, providing a much-needed overhaul to the market and reinventing the company car as a viable and attractive benefit.
With the Government’s ambitious road to zero targets and the ceasing of production of internal combustion engines by 2030, PHEVs but more so EVs, have been hugely incentivised to encourage uptake. Those who previously may have opted out for a cash allowance are now opting back in as a result.
Government incentives have proved popular and beneficial, not only for businesses looking to reduce costs and carbon emissions, but their drivers are also feeling the cost benefits too. This has led to a rise in salary sacrifice schemes over the traditional company car route, allowing us to provide EVs into the non-company car population, as a wider employee benefit solution.
In its simplest sense, a salary sacrifice scheme is essentially, employee forgoes some salary and receives a company car. There are also the benefits of the vehicle being ‘just add energy’ and all services provided in one place, from one supplier, supported by a corporate relationship. There’s less risk for the employee as it’s tied to their employment, there’s no deposit and no credit checks.
When an employee sacrifices their salary, the employer saves National Insurance on that amount. Historically, companies passed this saving back to the employee to reduce the payments, however, due to the cost savings available this is not required to make the scheme attractive to employees. Once the status quo may have been to pass this to the employee, more often than not this is now retained as a saving to the business, and a potentially significant one at that.
Furthermore, it is still a fantastic employee benefit and retention tool. Salary sacrifice gives employees access to a benefit that ties them in for a number of years as well as delivering a benefit which is financially beneficial for both parties, whilst supporting both a company’s and an employee’s green agenda/credentials.
However, an electric vehicle is not right for every business or driver. We still get lots of questions over range anxiety, charging timescales, charge locations, etc. But when we work through these concerns and can demonstrate the benefits of an EV, we often find both businesses and drivers alike are keen to go green.
At JCT600 VLS we have invested substantially in our online technology, Origo, to reflect the fast-paced digital world we live in. Customers and their employees now have access to a new market-leading online quote to order platform for traditional fleet and salary sacrifice schemes, helping educate and inform employees on the benefits of moving to EVs.
The company car was seen by some as a dying incentive as it became more expensive than it was worth as a benefit. PHEVs and EVs with their cost savings and tax efficient incentives have breathed new life into the company car market and the outlook is very positive.
Whilst the automotive industry is experiencing challenges with delays in production and delivery due to post-pandemic supply issues and the atrocities happening in Ukraine, the market is booming with demand far outweighing supply. And a lot of that demand is coming from the corporate space, be that traditional company cars or employee benefit focused salary sacrifice schemes.