Employee benefits focus on electric car salary sacrifice as ESG moves up the HR agenda

Employee benefits have recently focused on areas such as hybrid and home working, as well as employee wellbeing.

Given the tribulations of the Covid lockdowns and the changes these engendered to working practices, these are fully understandable.

But as the workplace adjusts to working post-pandemic,  HR professionals are taking into consideration the new pressures facing business operations, particularly around the Environmental, Social and Governance (ESG) agenda.

This has pushed electric car salary sacrifice schemes firmly into the spotlight.

These schemes provide the opportunity for all employees – subject to qualifying criteria – to drive an electric car at a cost that is below what they would have to pay personally for the same car.

Apart from being a really valued employee benefit, it offers the opportunity for companies to actively demonstrate decarbonisation policies in place.

Writing in Employee Benefits, Richard Morgan, Principal, employee benefits at Aon, comments: “We are seeing pressure from employees and potential recruits in forcing employers to rethink the whole proposition around ESG.

“There is a repositioning of some existing benefits to make them more prominent from an ESG perspective, for example, cycle-to-work schemes, while new ESG-focused benefits are also emerging, the most significant one being electric vehicles offered on a salary sacrifice basis.”

This surge in interest for electric car salary sacrifice is reflected in the latest figures from industry body, the British Vehicle Rental & Leasing Association (BVRLA).

According to its latest Leasing Outlook, published October 2023, salary sacrifice as a funding method has grown by a staggering 54.6% year-on-year, representing more than 55,000 cars. The rate of growth is expected to continue.

Growing number of companies offering EV Salary Sacrifice

Xtrac choose salary sacrifice as employee benefit 

Kirsty Knight is HR Director at Xtrac, a motorsport and high-performance automotive transmission specialist. Kirsty certainly sees electric car salary sacrifice as an integral part of the company’s ESG strategy.

“We see it as an excellent addition to our already extremely competitive and industry leading employee value proposition and it also supports our ESG credentials which are at the core of our business,” explains Kirsty.

“We have been very pleased with the progress and uptake so far and, to accommodate more employees onto the scheme, we have installed an additional 20 electric car charging points for staff to be able to charge their cars at work.”

The UK business has 440 staff and, says Kirsty, the availability to lease an electric car at reasonable cost has been welcomed positively.

One often overlooked aspect of electric car salary sacrifice is that employees do not have to pay any advance rental payments and it does not impact their own personal credit lines: the agreement rests with the employer.

“I really think this enhances the employee benefit,” says Andy Bruce, CEO of Fleet Alliance. “We sometimes get kickback from employees saying that they have seen lease rates for the electric car they are choosing at a lower rental, while forgetting that salary sacrifice includes everything the driver might need: the car, insurance, full maintenance including tyre replacement all without having to find an advanced rental of up to nine months. The only thing the driver has to supply is the electricity. When compared like-with-like, electric car salary sacrifice costs less than leasing the same car personally. It’s a substantial advantage and a great employee benefit.”

Triton Construction choose salary sacrifice as employee benefit

Triton Construction, a West Yorkshire building company based in Liversedge, is another business that saw salary sacrifice as a method to decarbonise its business.

The Employee Owned Trust business was already running a company car fleet, but decided that it could move further on ESG by switching to salary sacrifice that would benefit all of the 70 employee-owners.

Nevertheless, the construction industry has traditionally suffered from a transitory employee base and Managing Director Paul Clarkson was concerned about salary sacrifice contract termination on staff that left the business.

However, by including Early Termination Insurance (ETI) into the lease, this overcame any residual resistance to the introduction of salary sacrifice across the business.

“By building ETI into the monthly rates, we’ve been able to offer employees peace of mind that, if they leave the business, they will not be left with a hefty bill for the remainder of the lease,” he says. “This should encourage uptake as it was originally a stumbling block in our initial discussions with employees.”

To further encourage staff take up of electric cars, Triton Construction has also installed six EV chargers at its HQ so that employees can charge their cars while at work.

ESG a key driver in employee benefit choices

Increasingly ESG will continue to influence the range of employee benefits that companies are offering as employees look more closely at how aligned a company’s sustainability strategy is.

According to Benefex’s 2023 Evolution Report, 45% of employees are looking for a sustainability commitment when choosing a new employer.

Among the benefits the Reward & Employee Benefits Association (REBA) suggests that can promote sustainability and improve wellbeing are electric vehicle (EV) salary sacrifice schemes or an EV grant scheme, EV charging, cycle to work and public transport loans.

“We believe that EV salary sacrifice schemes are integral to companies that are serious about their ESG agenda,” adds Andy Bruce. “It provides an excellent employee benefit while reducing the carbon footprint of a business. We expect to see significant further growth in this form of car provision in the future.”