Businesses are lagging behind employee demand and expectation when it comes to salary sacrifice electric car schemes, Volkswagen Finance Services (VWFS) Fleet has found.

Half of UK employees want salary sacrifice as an option to access EVs

A survey of 2,000 employed adults has revealed that just one-third (32%) of UK businesses currently offer a salary sacrifice car scheme, yet nearly half (48%) of employees would like it as a workplace benefit.

The cost-effective and tax-efficient solution offers drivers a cheaper way to access EVs and one in three workers (33%) view it as the most attractive eco-friendly workplace benefit, alongside more opportunities to work remotely (48%).

“A salary sacrifice car scheme – where an employee ‘sacrifices’ part of their gross (pre-tax) salary for a new vehicle – is a highly valued financial benefit for prospective and existing workers,” explained Dan Wright, product manager at VWFS Fleet.

“At minimal cost to the employer, salary sacrifice offers employees affordable access to a brand-new vehicle, with no upfront payments, early termination fees or hidden costs. It also includes all extra vehicle costs, including insurance, servicing, maintenance and breakdown cover.”

The research also found that 75% of employees want to drive down the emissions associated with their commute. And many see salary sacrifice as having an important role here – with 67% recognising that it helps to provide affordable access to electric vehicles and 65% understanding how it helps to reduce personal emissions.

“Salary sacrifice schemes have a crucial role in incentivising EV uptake through attractive tax incentives,” expanded Wright. “The Benefit-in-Kind (BiK) associated with EVs is currently just 2%, fixed until April 2025, then rising by just 1% each year until 2028. This remains significantly below the anticipated BiK rate for petrol/diesel vehicles, which could exceed 30% by 2028.”

The VWFS Fleet research reinforces that salary sacrifice is a key way for fleets to drive talent attraction and retention, while boosting sustainability.

“Salary sacrifice provides workers with affordable access to a brand-new electric vehicle, which, for many, is an important transport transition they wish to make, but struggle to afford. However, there is currently a significant lag behind employee demand for salary sacrifice and employer provision,” Wright stressed.

“This presents a crucial opportunity for employers and HR managers to add to their employees’ remuneration package – with minimal cost to the business, but significant effects on talent attraction and retention strategies, as well as wider sustainability goals.”

Latest BVRLA figures show demand for salary sacrifice continues to soar. The recent edition of its quarterly Leasing Outlook report on members’ car lease fleets reveals that the salary sacrifice sector rose 63% YoY in Q1 2024, compared to a 7.5% rise in business contract hire and a 11.3% fall in the personal contract hire fleet.