How to set up an EV salary sacrifice scheme

A 5-step guide to getting started with an all-electric scheme for your organisation

Why is now the time to go with an all-electric car scheme?

In our guide What is electric car salary sacrifice? we touched on the Government’s plan to ban new petrol and diesel vehicle sales from 2030. This has sparked a surge of interest and electric car sales—with vehicles like the Tesla Model 3 topping the UK auto market.

Add to this potential electric car benefit-in-kind (BIK) tax, Income Tax and National Insurance savings—and the fact that 91% of EV drivers who spoke to Zap Map in a recent survey said they’d never go back to petrol or diesel. You could argue, there’s no better time to plug in an all-electric scheme.

Putting an electric car salary sacrifice scheme into action—our tips

At bp pulse, we are all about energising the future of electric transportation. Our senior team felt it was important to lead our people, and the wider business world, by example. This made it a natural choice to develop the car element of our salary sacrifice benefits scheme to be all-electric.

There’s a wealth of info out there about setting up a scheme. However, when it came to doing our own research, we found that, with all the legislation and HMRC rule changes over the past few years, it can be confusing to establish how up to date advice about electric cars is—petrol and diesel motors too.

To assist, we’ve put together our five-step guide to setting up a scheme in your business. We’ve worked closely with Patricia Fielding, bp pulse Head of People, who heads up the day-to-day running of our electric car salary sacrifice scheme, so you can benefit from our real-world experience.

Step 1: Assess your business

Average earnings, staff turnover and carbon footprint objectives are all factors that need careful consideration before you move ahead. It's vital your employees' earnings do not fall below the minimum wage after the reduction in gross salary. State benefits, like statutory sick pay, maternity/paternity pay and state pension will be affected if they do.

Consider whether a large enough proportion of your permanent staff has a compatible salary to make your scheme worthwhile. If your staff turnover is high, assess whether it may cost you more in early termination fees than the amount you're saving in Class 1A NIC. Or you could explore leasing partners who offer early termination protection.

If your people are using their own petrol or diesel vehicles for business mileage, offering them electric vehicles can help to lower your carbon footprint. Or, if you run a car allowance scheme, replacing this with all-electric salary sacrifice will help to stop older cars from adding to your footprint. Your employees will also be responsible for payments, saving you money.

Considerations:

• Compatible average employee salary

• Low staff turnover or leasing partner offering early termination protection

• Lower carbon footprint needed

Step 2: Weigh up the pros and cons

Once you've established your business is in a good position to get set up, start shaping your scheme by weighing up the benefits, risks and savings. Below, we've shared what we feel are the top four reasons an electric car salary sacrifice scheme might benefit your people—and your business:

• Your people can access a great perk for less money and, because your leasing partner is likely to run your scheme, costs may be minimal

• A scheme can help your staff to feel valued—and might prove helpful in attracting new talent to your organisation

• Your employees will have the opportunity to save on Income Tax and National Insurance payments, while you can save on Class 1A NIC

• A scheme can help your staff to afford a brand new electric vehicle

For scheme participants, further savings can come from a lack of deposit or upfront costs to pay. Insurance, servicing and maintenance, breakdown and recovery, tyre replacement and accident management are also all generally included, and it may be possible for two or more drivers to be added to the insurance.

You can see there is a world of advantages. However it's also important to think about the risks to your people if they take part in the scheme. The reduced gross salary is likely to affect:

• Credit car, load and mortgage applications and limits

• Redundancy entitlements

• Income protection insurance benefits

You should particularly bear this in mind if your employees are already salary sacrificing pension contributions, childcare vouchers, etc. One sticking point may be that drivers won't gain any no claims bonus while in the scheme, as they are effectively on company car insurance.

Step 3: Choose your EV salary sacrifice leasing partner

There are many leasing providers who now specialise in electric car salary sacrifice. There are six important considerations to put to the potential partners you’ve short-listed:

• Explore whether they offer a good choice of popular electric models. Check lead times aren't a barrier to people getting their first choice

• Ask for example breakdowns of the all-inclusive monthly cost. Check prices are not being ramped up and that they offer a good volume discount

• Establish how much of the scheme they'll set up and manage for you. Many will take care of admin and advise on HMRC and staff contracts

• Confirm the servicing and maintenance package is with an EV specialist. With no motor, this should only include servicing, tyres and minimal parts

• Check they provide a good level of support to their customers. Your account manager should guide you through the full roll-out process

• Ask about their policy for passing on NIC contributions to employees. You may need to ask to keep some back if they do this automatically

Bear in mind that the bigger the uptake of your scheme, the bigger the potential volume discounts from your partner. So, it's worth doing the legwork to find out who's interested and what they're interested in. You may find your people care about what's included in the monthly costs. They could get things like servicing, breakdown cover and tyres all for low BIK tax, rather than after being taxed at their normal rate.

Once you've taken the guesswork out through a survey or focus group(s) the next stage is to do a thorough comparison of leasing contenders. While a partner worth their salt will be on hand to advise, you'll need to make sure you've got the processes in place to complete P11D forms, report tax and NI changes, and update your employees' contracts.

Step 4: Enhance your scheme with charging

There's a lot of good news to consider when it comes to mulling over whether to enhance your electric car scheme with charging. For your people, if you offer free charging at work they won't have to pay any tax or NI. Petrol or diesel paid by employers is subject to BIK tax. Or you may wish to simply offer the convenience of workplace charging and set your own tariffs.

They could also be eligible for Office for Zero Emission Vehicles (OZEV) grant of up to £350 towards the cost of buying and installing a home charger, if they choose to install a charger at home. Most charging installers, like bp pulse, will take care of this on their behalf. There are also Vehicle to Grid (V2G) options with some energy deals* where you drivers can sell any used energy from their car battery back to the grid.

*In conjunction with Nissan, Toyota, Mitsubishi and other specific brands.

Step 5: Promote your electric car salary sacrifice scheme

After all your hard work in setting up the scheme, regular communication is key to make sure people are taking full advantage. You will have already scored some brownie points for basing your partner choice on feedback from your people. It's a good idea to target these staff directly once you're ready to go.

Communicating to your wider employees that the scheme has your people's opinions at the heart, and thanking them publicly for their input, should help potential candidates to trust the scheme. Channels to communicate your scheme might include:

• Benefits portal: share your leasing partner's ordering portal

• Intranet page: publish benefits, risks, details and ordering portal

• Roadshows and Town Halls: get the message out across numerous locations

• 1:1 and appraisal meetings: promote to individuals to highlight value

• Staff magazine and bulletins: use interviews, case studies and focused emails

• Payroll communications: present scheme practicalities and financial advice support

You can refer to the benefits and risks we've highlighted in this guide, or your leasing partner may have materials for you to share. It may be beneficial to promote financial advice services, so your people can make the right informed decision for them.