Keeping hold of employees is one of the biggest challenges most businesses face, made more difficult by the myriad reasons that determine whether they stay or go, one of the key ones being salary. The average salary has increased by about 5.8% over the past year, as pay catches up to a period of record price rises and cost of living pressures.
However, a quarter of companies in the UK have said they cannot keep up with pay rise demands. This has made it difficult for many companies to convince their employees that staying is the right option.
All of this is made more important by the fact that, on average, replacing an employee can cost around 37.5% of their salary. On top of that, you still have to find a replacement, which involves a lot of time, money and energy that could have been spent elsewhere. The increasingly competitive nature of keeping talent is becoming a bigger issue than ever in the UK.
Read more: Does salary sacrifice hold the key to overcoming skills shortages?
Unfortunately, but not surprisingly, in the wake of the cost of living crisis, employees are doing all they can to make their salaries go further and many will see a change of scenery as the best way to remedy this.
So if you can’t afford to offer a pay rise, what are the options? This is where salary sacrifice can make a big difference. Salary sacrifice essentially allows employees to pay for things from their pre-tax salary, which, with tax burdens in the UK at post-war highs, can provide big savings. Leasing an electric car is one of the most common things salary sacrifice is used for, as demand for sustainable options increases and the now re-instated 2030 deadline looms.
Depending on the employee’s tax rate, leasing an EV through salary sacrifice can result in some pretty serious savings. How serious, you may ask?
A Tesla Model Y (one of the most popular EVs in the UK) if leased personally, comes to around £895 a month. With salary sacrifice, it could cost just £570, about £12,000 of savings over a typical three-year lease. This is roughly equivalent to a £7,000 pa gross pay increase or £25,000 over the average 40 month lease.
Read more: Why electric car salary sacrifice schemes are increasingly popular
One aspect of using salary sacrifice for EV leasing is that it has previously often only applied to high earners. That is no longer the case.
As the EV market begins to mature, and the range of available used options increases, so has the accessibility of this employee benefit. At an average UK salary of around £35,000, there is now a great range of options available. A good example of this is the Kia E-Niro, unaffordable through salary sacrifice as a new car at the average UK salary but available for just £281 a month used.
Increased choice makes switching to an electric vehicle a no-brainer decision for anyone looking for an affordable and net-zero option. It also opens up the benefit to a much wider group of employees, including those at the beginning of their careers, an increasingly difficult age group in which to inspire loyalty.
These schemes can cost the company nothing, and because of the self-determined time period agreement between the company, the employee and the provider, there is a strong incentive for the employee to stay with the company longer, truly a 'sticky benefit'. In addition, employers save on tax costs because there's no employer national insurance contribution to pay on the portion of sacrificed salary.
Beyond electric vehicles, there are several other forms of free salary sacrifice benefits for employees, such as cycle-to-work schemes, enhanced pension contributions, and even technology schemes for gadgets like laptops and smartphones. These benefits not only enhance the overall compensation package but also promote healthier, more productive lifestyles and financial wellbeing.
Sometimes, doing good costs you. And sometimes, it could save you thousands.
Thom Groot is CEO of The Electric Car Scheme
