Although electric car manufacturing and sales have hit turbulence in Europe, fleet operators and employees have come to see that EVs are now an established element among financial wellbeing benefits, writes Alison Argall of Tusker
“Having the security of a fixed monthly amount with all expenses covered, including maintenance and breakdowns, is bringing me considerable peace of mind.” So says one of the employees we talked to at a leading digital transformation company, where we found that salary sacrifice electric vehicles (EVs) are now an essential part of their financial planning. Not only are they significantly reducing individuals’ commuting costs, they are also contributing to a more sustainable environment.
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Inclusive financial wellbeing in employee benefits has long been an important conversation for employers, but not everyone recognises that EVs, far from being an elite benefit, are able to support staff on most pay bands. Indeed, salary sacrifice EV schemes are available to most employees, provided they earn over the National Living Wage after reductions. As the cars are accessed through an employer, employees don’t need to find deposits or worry about unexpected costs.
Post-Budget, it’s also ideal that the government is continuing to support the adoption of EVs through salary sacrifice. Data released earlier this year by the British Vehicle Rental and Leasing Association showed that salary sacrifice car schemes encourage employee adoption of EVs. It found that take up of salary sacrifice car schemes rose by 47% in the final three months of 2023 compared with the same period in 2022, with 84% of employees opting for an EV. However, when motorists don’t have access to the tax advantages of a salary sacrifice scheme, the picture is different.
Tusker’s EV Driver Survey 2024 showed, too, that 62% of employees who plan to get an EV as their next car said one of the main incentives is the potential to make savings through a salary sacrifice scheme, with 60% also citing that cheaper running costs are a key consideration in choosing an EV.
Making EVs accessible through salary sacrifice
When it comes to cars, the upfront amount required can be one of the main barriers to EV adoption. Indeed, 54% of potential car buyers who are not yet driving electric cited a high initial purchase amount as a deterrent. However, salary sacrifice car schemes offered by employers have really turned the tide. Under these schemes, employees drive an electric vehicle without an upfront payment, and instead have a fixed monthly amount that covers not just the car itself but also insurance, servicing, and maintenance.
The benefits go beyond just savings. For employees, especially those on lower pay bands, the opportunity to drive a new car without a hefty deposit or unpredictable running expenses is invaluable.
Employers do need to consider that HMRC rules state that individuals cannot sacrifice their salary below the National Minimum Wage.
The real-life impact
Employee experiences reflect the tangible benefits too. Another employee highlights how salary sacrifice EV schemes can help alleviate financial stress. Previously struggling with the unpredictability of personal car ownership, they switched to a company/salary sacrifice EV and it was a game-changer. The assurance that there would be no hidden amounts, even in the event of a job change or unexpected life event, was a significant factor in their decision.
There are several elements to unpack here. Flexibility is particularly valuable for lower-income employees, who may be more vulnerable to financial shocks. By offering options like pre-loved cars and longer-term agreements, lower monthly amounts make EVs accessible to a wider range of employees. These initiatives ensure that sustainable benefits are not just reserved for higher earners but are genuinely inclusive.
For many employees, one of the biggest benefits of salary sacrifice car schemes is the predictability offered. Unlike traditional car ownership, where unforeseen repair amounts can derail a household budget, these schemes bundle all associated amounts into one fixed monthly amount. This allows employees to plan their finances with more confidence, knowing that they won’t be hit with surprise car costs, not even depreciation costs as cars are returned at the end of the agreement.
Lifestyle protections mean that should an employee leave their role, get made redundant, go on maternity/paternity leave, or long-term sick leave, there are no financial penalties for either the employer or the employee – here too, they simply hand the car back.
The savings extend even further when comparing fuel expenses. According to Zap-Map’s calculator, the difference between driving a Citroen e-C4 (electric) versus a Citroen C4 (petrol) over 10,000 miles annually can result in savings of around £1,248, based on current electricity and petrol prices. These savings can make a significant impact on household budgets.
Marrying financial wellbeing and ESG goals
As employers look for ways to support their teams’ financial health, EV salary sacrifice schemes are becoming an increasingly popular option. Beyond the immediate financial benefits for employees, they also align with broader corporate sustainability goals. By encouraging the use of low-emission vehicles, companies can support their environmental, social, and governance (ESG) objectives while simultaneously enhancing their employee value proposition.
For many employees, one of the biggest benefits of salary sacrifice car schemes is the predictability offered.”
Additional incentives exist for organisations, too. Salary sacrifice schemes are tax efficient, so both employers and employees can benefit from reduced National Insurance contributions. Companies can choose to reinvest these savings in further enhancing their benefits packages or supporting other ESG initiatives, creating a win-win scenario for both parties.
Although incorporating electric vehicles into financial wellbeing strategies may have seemed unconventional a few years ago, the evidence now points to it being a highly effective benefit. By offering EV salary sacrifice schemes, employers are providing their workforce with more than just cars; they are offering stability, predictability, and significant savings. These schemes can be life-changing for employees, particularly those who are cost-conscious or on lower pay scales.
With new workforce changes coming into effect, providing inclusive and meaningful benefits like EV schemes can be crucial in attracting and retaining talent. For the companies that have already embraced this approach, the results speak for themselves. The ability to support employees’ financial wellbeing while advancing sustainability objectives is proving to be a winning formula that is setting a new standard for the future of employee benefits.
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