Employee eligibility for Salary Sacrifice
See whether you're eligible for a Salary Sacrifice car.
With Salary Sacrifice car schemes increasing in popularity with employees and employers across the country, it might be worth finding out whether you have access and are eligible before you purchase or lease your next vehicle through traditional methods. Salary Sacrificing a new vehicle, especially electric vehicles (EVs), can be up to 60% cheaper than traditional leasing.
However, not all employees are eligible. There are specific rules implemented around Salary Sacrifice that help protect employees, especially around how it affects your net salary. However, most of the time, eligibility comes down to whether an employer has set up a Salary Sacrifice scheme with a provider. This is where we step in, as Salary Sacrifice specialists - we're here to help you understand the ins and outs of Salary Sacrifice.
We'll outline all of the necessary criteria that employees need to take into consideration when thinking about signing up to a Salary Sacrifice scheme.
Am I eligible?
To be eligible for a Salary Sacrifice car scheme, you need to meet several basic requirements. However, it may affect other benefits like sick pay or maternity pay. Always check with your employer’s HR or payroll team to ensure you meet the eligibility criteria and understand the implications for your pay and benefits.
Salary Rules
Firstly, it's important that an employee's gross salary doesn't reduce to below the national minimum wage. Employers should mitigate this by implementing rules on what vehicles specific employees can lease through the scheme. With the Citygate Leasing Salary Sacrifice scheme, this is automatically done for the employee, giving them a selection of vehicles that mean their salary after sacrificing doesn't go below the threshold.
It's also important that employees have adequate take home pay to cover their living expenses. Salary Sacrificing a car is more cost-effective, but as this is a contract that runs between 2-4 years, it's good for the employee to factor in their living costs (such as mortgage payments/rent, food and clothing, school fees, etc.) to ensure that their vehicle is affordable for them. It's also good practice to factor in any anticipated changes to their lifestyle which could affect their ability to cover costs in the future.
Employer Participation
Employees can only use Salary Sacrifice to lease their vehicle if their employee has already signed up to a scheme. Thankfully, it's extremely simple to do this. After their initial consultation with our account managers, they can be set up within 24 hours. It's also free to do, so it's a no brainer if you haven't got an existing scheme!
Employee Participation
It's important to highlight that employees must agree to the terms of the scheme voluntarily, and that they cannot be forced into entering into a Salary Sacrifice scheme. Whilst it's certainly an attractive offer, Salary Sacrifice isn't for everybody - therefore it's important that your employer provides you with clear, transparent information about the scheme, including potential advantages—such as tax and National Insurance savings—as well as any potential drawbacks, such as reduced pension contributions or lower entitlements to statutory benefits.
Scheme terms and conditions
Some employers will put restrictions onto their scheme in order to limit their risk, for insurance purposes or for internal grading purposes. Some employers may want to only offer specific make and models, offer the scheme to only employees that have served a specific amount of time at the company, or have passed their probationary period. This is usually due to high costs of lease termination, which is paid by the employer if an employee leaves the business.
For insurance purposes, scheme grading may be introduced so that younger employees only have access to lower powered or low value vehicles, whereas senior employees may have access to all cars available. As insurance is included in the price of a Salary Sacrifice lease, implementing eligibility terms helps keep costs of insurance down, especially pooled or business car insurance.
What to consider
We love how easy it is to set up a Salary Sacrifice scheme, but it's important to factor a few things in prior to signing up. As the car is tied to the job, think carefully about scheme terms and early termination policies. You should also remember that a reduction to taxable salary could affect other benefits such as pension contributions, maternity/paternity, redundancy and sick pay.
