There’s no getting away from the fact electric vehicles will soon become a requirement rather than a luxury. As we have already heard, the governments intentions are to end the sale of new petrol and diesel cars and vans by 2030 with all vehicles with zero emissions just five years later.

To help achieve this companies including advo are helping employees buy electric vehicles and paying for this via salary sacrifice schemes which can be a very cost-effective way of making these car payments.

Salary Sacrifice and Payroll

What do you need to know about the savings and pitfalls of a salary sacrifice through the payroll for employers and employees?

Employees – salary sacrifice amounts reduce employee’s taxable/NIable pay which means there are savings to be made on tax, NI and student loans on these amounts. The monthly amount being sacrificed will actually cost less in NET pay due to the savings on these payments making this option a more affordable way to buy an electric vehicle.

These salary sacrifice deductions can however have an impact on employee statutory benefits such as maternity pay, as these benefits use the taxable pay to work out entitlement to such benefits. Example – maternity pay uses taxable pay to calculate the 90% element and taxable pay is reduced if you have been making salary sacrifice payments in the payroll.

Employers- employers will save the employers NI on these amounts as again it can reduce the employees taxable/Niable pay. It will offer unique benefits to your staff and help your employees purchase safe reliable electric vehicles and save them money on these payments by utilising salary sacrifices schemes. Electric vehicle salary sacrifices can also be more cost efficient than supply company cars that need to be reported via P11D’s.

Care must be taken that no deductions are reducing employee wages below national minimum wage after the sacrifice is taken. This will mean employers will need to carefully administer these schemes, checking earning criteria in the month and making sure no NMW breaches occur as they can be costly to companies.

Want to know more? Just reach out to us and we will be happy to help.