A benefit for employers too: Car salary sacrifice cuts company risk

We know that car salary sacrifice is a valuable benefit for employees. But now, a growing number of companies are starting to view these schemes more strategically, as a powerful tool for reducing business risk.

From managing grey fleet exposure to improving compliance, car salary sacrifice can help organisations address several key risks.

Reduces ‘grey fleet’ risk

While employers often focus on the risks associated with company cars, one of the biggest concerns for many fleet managers is actually ‘grey fleet’ – where employees use their own vehicles for work travel.

This can create significant compliance challenges, particularly where employees are driving to meetings or to non-standard workplaces.

This is a risk as employees may not have the appropriate insurance in place for work journeys, their cars may not be appropriately maintained, and they may not be following company policies.

If an accident occurs, this can create both financial and legal risks for the employee and the employer.

Managing grey fleet risk has become an increasingly important consideration for organisations looking to improve oversight of business travel and reduce legal risks.

Salary sacrifice schemes provide employees with access to vehicles that are fully maintained, insured and regularly checked for compliance.

Rather than relying on employees to use their own cars for business travel, employers can offer a solution that gives greater visibility and control over cars being used for work purposes.

Keeps vehicles off company books

Through a salary sacrifice scheme, organisations can offer employees access to electric cars without taking on the associated costs and responsibilities themselves.

One of the key advantages of working with a salary sacrifice provider is the reduction of financial risk. When a company owns vehicles, it holds the risk that those cars will depreciate, ending up worth less than expected when they are eventually sold.

With a third-party provider, that risk sits with them.

The risk of losing value can be particularly significant for electric vehicles (EVs), where the value of the vehicle can fluctuate due to external factors like technological advances.

Legislation such as the Electric Car Grant, which offers up to £3,750 off new cars under £37k, will have an impact on the value of the car, which can be brought in or changed at any time – this can have the added benefit of lowering the monthly salary sacrifice amount for employees.

Another important consideration for employers is managing the risk associated with employee absence or turnover. Fleet managers and those responsible for the balance sheet can understandably be concerned about being left with the cost of a car if an employee goes on long-term sick leave or leaves the business before the end of the agreement.

This is where built-in lifestyle protection, which can provide cover in specific circumstances such as resignation, redundancy or illness, comes in.

Lifestyle protection helps reduce the risk for employers of being responsible for a vehicle that may still have years remaining on its agreement, reassuring both HR and fleet teams.

A good example of this approach is Tusker’s partnership with Leicester City Council, which has not only reduced turnover rates, but also allowed savings to be incorporated into the council’s financial forecasts.

Cory Laywood, service centre manager at Leicester City Council, said: “Employees love the scheme… and from an employer’s perspective, the fact that there’s no cost to you and the admin is really easy makes it a little bit of a no-brainer.”

Bundling salary sacrifice packages frees up team time

Providers know that cars require a lot of management – from insurance admin to regulatory reporting, to vehicle taxation. Each of these areas carries both cost and compliance risks – by taking on a salary sacrifice scheme, it transfers these responsibilities to the provider.

Established providers often offer bundled packages as part of the scheme, managing the vehicle agreement, insurance, servicing, maintenance, breakdown cover and road tax – consolidating all the services needed into a single package.

This allows employers to offer access to cars without the administrative burden, or needing to recruit an in-house management team.

Bundling packages can also reduce operational risk. Instead of managing separate contracts for the car, insurance, maintenance, and support, the company deals with a single supplier.

Centralising these services reduces complexity and helps ensure vehicles receive the maintenance they need.

As a result, salary sacrifice schemes provide an easy way for employers to support the move to EVs across their workforce.

A structured scheme provides access to experts

By working with a specialist provider, organisations gain access to expertise that would otherwise require significant internal resources.

Scheme providers work directly with employees and manage all subscriptions and administration, even supporting businesses with communicating the scheme to staff and helping them sign up.

This gives HR, finance and fleet teams time back to focus on day to day operations.

Encouraging employees to access new or pre-loved cars through a salary sacrifice scheme can help organisations improve oversight of vehicles being used for work, reducing the risks associated with older or poorly maintained personal vehicles.

Finally, compliance is another important aspect to consider. Salary sacrifice arrangements must follow HMRC’s salary sacrifice rules and benefit-in-kind (BiK) regulations.

It’s important to engage with finance and payroll colleagues when considering implementing a salary sacrifice scheme so they’re aware of their obligations, as failure to comply can lead to payroll, tax and reporting issues.

Specialist providers can design schemes to meet with regulations, and offer employers support to help manage compliance to reduce the likelihood of errors.

The best schemes are the ones that reflect what employees actually want and need, while also supporting the goals of the business. When employers take the time to get that balance right, they can offer benefits that make a real difference to employees’ everyday lives, helping to create a happier, more engaged workforce.

Kit Wisdom is managing director at Tusker