How to Set Up an EV Salary Sacrifice Scheme for Your Employees (2026 Guide)
EV salary sacrifice is one of the most cost-effective employee benefits available right now — and setting it up is significantly simpler than most HR teams expect. Employers save 15% National Insurance on every pound sacrificed, which often fully offsets the cost of running the scheme.
With a net-zero cost, an EV salary sacrifice scheme can support talent retention and boost your environmental credentials. It’s a win-win situation for companies and their employees.
You can get your salary sacrifice scheme live with loveelectric in just a few days. This guide explains eligibility, a step-by-step breakdown of the setup process, the cost structure, and what happens when employee circumstances change.
What is an EV Salary Sacrifice Scheme?
An EV salary sacrifice scheme allows employees to pay part of their gross salary for an electric car. Most schemes offer an all-inclusive package with maintenance, servicing, insurance, and tyres included. This deduction is taken before tax, enabling employees to save on income tax and National Insurance.
Employers also benefit from salary sacrifice schemes by saving 15% on National Insurance contributions for each sacrifice at no net cost to the employer.
Salary sacrifice is not the same as a traditional company car scheme. The car is selected by the employee, and they pay directly for it through payroll. The lease liability sits with the employer and not the employee. Additionally, the admin fee is typically offset by the NIC savings, resulting in a net-zero cost for the employer.
Is Your Business Eligible To Offer Salary Sacrifice?
Most UK employers can offer salary sacrifice schemes, but there are a few key rules set by HMRC.
You’re eligible if:
- You’re a PAYE employer
- Employees remain above the National Minimum Wage (NMW) after sacrifice
- You’re a limited company, PLC, charity, or public sector organisation
You’re not eligible if:
- You’re a sole trader without employees
- Your team is fully self-employed
There are a variety of salary sacrifice benefits available in the UK, including for electric vehicles and pension contributions. Electric vehicles are rated as one of the best employee benefits for UK teams.
Eligibility for salary sacrifice schemes is governed by HMRC rules. As an employer, you can set up a salary sacrifice agreement by changing the terms of your employee’s employment contract. Employers must also put procedures in place to cap salary sacrifice deductions and ensure NMW rates are maintained.
Check out our guide to decide if a salary sacrifice scheme is right for your type of business.
How To Set Up An EV Salary Sacrifice Scheme: Step By Step
Setting up a salary sacrifice scheme is straightforward, and it’s easy to get everything up and running, including payroll integration. Most employers are able to get their employees onboarded within just a few days once the agreement is signed. The process is designed to be as frictionless as possible for both employees and employers.
Step 1 — Choose A Salary Sacrifice Provider
Select a provider that offers a wide range of EVs with strong employer support and bundled insurance and maintenance. Payroll integration and quality of administration support are what set the best salary sacrifice providers apart.
At loveelectric, it takes just 30 minutes to get set up with our salary sacrifice scheme at zero cost to your business. Your employees get to save an average of £290 per month on any EV, and you can meet your company’s environmental commitments without additional costs.
You can give your employees the best pricing on a wide range of EVs, from compact city cars to family-friendly SUVs, through our exclusive offers and partnerships with major leasing companies. Our all-inclusive packages mean that full comprehensive insurance and maintenance are covered in one simple monthly payment.
Employee circumstances can change at any time, and at loveelectric we offer support from Day 1 with our Zero Risk Guarantee.
Step 2 — Review And Sign The Employer Agreement
Review the agreement from your provider to understand your obligations, the scheme rules, and liability structure. In most scenarios, the provider will oversee the vehicle lease, so the employer does not carry any financial risk beyond payroll adjustments. This is one of the most underrated benefits of a salary sacrifice scheme as an alternative to traditional company cars.
You can expect the agreement process to move quickly and for your scheme to go live within the first few days. During this interval, you’ll want to work on step 3.
Step 3 — Configure Your Scheme Parameters
You can get ready for your salary sacrifice scheme to go live by deciding which employees are eligible. Most employers choose to offer these schemes to all permanent staff from day one, as well as using them to attract new talent.
Some companies choose to set salary thresholds or their own eligibility rules. It’s worth considering the positive impact of salary sacrifice on your long-term employee development plans.
75% of employees choose to stay at companies because of great benefits, and 55% are motivated by non-financial perks when looking for new jobs. Electric cars are the most popular salary sacrifice for UK companies – supporting your company’s growth strategy at net-zero cost.
At loveelectric, we handle all the admin for you, making it as streamlined as possible for your HR and finance departments. Most employers keep the scheme open to all permanent employees from day 1 if they decide to join after launch.
Step 4 — Communicate The Benefit To Employees
Clear communication is critical to successful salary sacrifice uptake. Low awareness reduces participation and limits an employer’s NIC savings. At loveelectric, we provide everything you need, with employer comms templates to share key messages with your employees.
Your HR team can also share our blog posts on key stats, like saving up to 60% on a brand-new EV, as an employee-facing resource. We recommend keeping things simple with consistent messaging on average savings, what’s included, and how to check eligibility.
Step 5 — Process The Sacrifice Through Payroll
Once employees have signed onto the scheme, you’ll adjust their gross salary by the agreed sacrifice amount before PAYE calculations. This ensures income tax and National Insurance savings are applied automatically.
Most employers now use payroll software, such as Sage, Xero, and BrightPay, that natively support salary sacrifice. Employers must report the electric car as a Benefit in Kind (BiK) annually to HMRC using a P11D form.
Step 6 — Ongoing Scheme Management
After setup, the admin is relatively low. Your provider will manage renewals and vehicle changes to keep everything streamlined. The time commitment for ongoing management is low, and the main compliance requirement is the annual P11D submission to HMRC.
If employee circumstances change, we’ll support you through our loveelectric Zero Risk Guarantee. We ensure that your business is never left out of pocket – regardless of how the lease is terminated. You’ll get added peace of mind with simplified processes and support to deal with employee resignation, redundancy, and dismissal from day 1.
How Much Does It Cost The Employer?
The loveelectric salary sacrifice scheme is completely cost-neutral for the employer.
Most electric vehicle salary sacrifice schemes have a net-zero cost as the admin fee equals the National Insurance Contribution saving. Employers save 15% on the National Insurance on every pound sacrificed through the scheme.
If an employee sacrifices £500 per/month, the employer saves £75 per/month in NIC. This saving offsets the cost of offering the salary sacrifice scheme, allowing the company to attract and retain talent, while enhancing its environmental credentials.
Let’s see how this works in practice on a larger scale:
Note: this table takes the National Insurance rate as 15% at the time of writing, as it has increased from 13.8% in April 2025. Read more about the April 2025 employer NIC changes – and their impact on salary sacrifice schemes - on our blog.
Offering electric vehicles through a salary sacrifice scheme makes sense for employers and employees across the UK. The company tax benefits make electric vehicles a no-brainer for companies striving towards Net Zero and for those who want to attract the brightest talent.
With more people switching to EVs, salary sacrifice offers the most accessible pathway to going electric for millions of working professionals. You can present your company as a forward-thinking organisation by switching from a traditional company car to a salary sacrifice scheme.
What Are The Risks For Employers?
Circumstances can change, and the main risk for any benefit in kind is if an employee leaves or cannot continue due to illness, maternity, or redundancy. At loveelectric, our Zero Risk Guarantee gives you support from Day 1.
There are three main risks for employers, but these can all be managed with the right provider.
Employee Leaves or Cannot Continue
This risk is the main concern for most employers, especially in circumstances that are out of their control, such as long-term illness. Our Zero Risk Guarantee gives you the support you need to minimise your financial risk and understand what happens to an employee’s car if they leave.
National Minimum Wage (NMW) Compliance
Employers must ensure that their employees’ salaries does not fall below the NMW after sacrifice. It’s the employer’s responsibility to check this for each employee.
Employees’ Understanding of the Scheme
Poor communication can cause confusion or result in a low uptake when you join any salary sacrifice scheme. Our templates and blog posts make it easy to share the benefits of a salary sacrifice scheme with your employees to promote optimal uptake.
Remember, you’ll start to feel the company tax benefits from a salary sacrifice scheme once you have a significant number of your workforce signed up. Don’t stop promoting the scheme after launch. Your employees can join at any time – especially if they’re looking for the most cost-effective way to drive an electric car in the UK.
Frequently Asked Questions For Employers
- How long does it take to set up a salary sacrifice scheme?
It typically takes only a few days for your salary sacrifice scheme to be set up after your employer agreement is signed. The exact timeline will depend on your payroll integration and your company’s internal approval process. We strive to streamline the onboarding process to be as seamless as possible.
- Can small businesses offer salary sacrifice?
Yes, any PAYE employer can offer a salary sacrifice scheme, regardless of the company size. There is no minimum employee requirement, making an electric car salary sacrifice scheme a great way for start-ups to attract talent.
- Does salary sacrifice affect employees' pension contributions?
Salary sacrifice can potentially affect employees’ pension contributions, but it depends on how the scheme is structured. Many employers use a notional salary to avoid negative impacts on their employees’ pensions, but each employee should be advised to check with their pension provider.
- What happens if an employee leaves during the scheme?
Employee circumstances can change at any time. Support is available from Day 1 with our Zero Risk Guarantee, helping employers and employees to navigate early termination scenarios, including maternity leave, long-term sickness, resignation, and redundancy.
- Do we need to report the car to HMRC?
Yes, employers must complete a P11D for each employee with a salary sacrifice car as a Benefit-in-Kind annually. This is the main admin work involved in an electric car salary sacrifice scheme, as almost everything is automated through the company’s payroll.
Ready To Set Up Your EV Salary Sacrifice Scheme?
Setting up a salary sacrifice scheme is faster and simpler than most employers expect. You can speak to our team and get your scheme live within days. With minimal admin, no net cost, and built-in support for your employees, it’s a practical way to offer a high-value benefit with Day 1 support for your employees.
loveelectric is a B Corp-certified salary sacrifice provider with a 102.0 impact score, enhancing your company’s environmental credentials. Explore the full business case for why employers should offer EV salary sacrifice.
