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Salary Sacrifice: Benefits for employees and employers

posted on 15/06/2023
  • Overview
  • What is Salary Sacrifice?
  • What are the benefits?
  • How do you set up a scheme?

In a world where flexibility and cost-effectiveness are more important than ever, Salary Sacrifice schemes are gaining popularity among businesses.

This blog post aims to break down what Salary Sacrifice is, how it works, and its benefits for both employees and employers.

What is Salary Sacrifice?

A Salary Sacrifice car scheme is an additional perk that you, as an employer, can provide to your employees It's a flexible and low-cost method of giving your employees tax-efficient access to new cars, without the financial commitment of outright ownership.

How does a scheme work?

Here's a simple breakdown of how a Salary Sacrifice scheme works:

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Setting up the scheme

Once you decide to implement a Salary Sacrifice scheme, a qualifying employee can select a new car from a wide range of options available on a dedicated website. This is usually a simple, user-friendly process, and they can compare lease quotes and add any additional extras as required. Once they have made their selection, they submit it for approval.

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Deductions from salary

After the vehicle has been approved and the lease contract is in place, you, the employer, deduct a pre-agreed fixed amount from the employee's salary each month. This arrangement continues for the duration of their vehicle contract. Importantly, this deduction is made before income tax and National Insurance are deducted.

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Benefit-in-Kind tax

The employee will pay a benefit-in-kind (BIK) tax for their new car. This tax is calculated based on the car's value and CO2 emissions. By choosing a low-emission car or a fully electric vehicle, the employee can minimise their BIK tax, effectively stretching their salary further than with a traditional car loan or hire purchase agreement where payments are deducted after tax and NI

What are the benefits of Salary Sacrifice?

Find out how easy it is to set up a scheme

Implementing Salary Sacrifice with Alphabet

Alphabet makes setting up a Salary Sacrifice scheme simple with expert guidance, a wide range of vehicles, and exceptional fleet management services.

If you're ready to explore how this scheme can enhance your fleet strategy, boost employee satisfaction, and potentially save your business money, call our expert team on 01252 976 010 to discuss next steps.

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