Salary Sacrifice Car Scheme: Your Employer Questions Answered (FAQs)
You’ve decided that an electric vehicle salary sacrifice scheme might be worth exploring for your business. It’s come up in team meetings, and you’re getting a barrage of questions from your Finance Director, HR team, and your employees. There’s a short list of “what if?” questions building in your inbox that you need to answer as part of your own due diligence.
In this article, we’re answering the most common questions that employers have about salary sacrifice car schemes. We’re going straight to the point with clear answers that give you the facts to decide whether it’s right for your company.
Still evaluating the business case? See our employers’ pros and cons guide.
Cost and Financial Questions
Does offering a salary sacrifice scheme cost my business anything?
No, loveelectric’s salary sacrifice scheme is free to set up and cost-neutral to run. There are no management fees, setup costs, or ongoing admin charges for your business.
The main task that your business will be responsible for is meeting your P11D obligation, in compliance with HMRC regulations. The P11D must be submitted to HMRC at the end of the tax year, through HMRC’s PAYE Online service or your payroll software if you have more than 500 employees.
What about the Class 1A National Insurance on the car’s Benefit-in-Kind?
Employers pay 15% Class 1A National Insurance on each car’s Benefit-in-Kind value annually. This cost is not unique to salary sacrifice, as employers will also pay Class 1A NIC on traditional company cars.
loveelectric’s fee structure is designed so that our salary sacrifice scheme remains cost-neutral for employers. The current 4% BiK rate for 2026/27 on a £35,000 electric vehicle would set the Class 1A NIC at £210 per/year. You can learn more about your tax obligations with salary sacrifice with our employer’s compliance guide.
Employee Eligibility and Credit Checks
Is there a credit check for employees?
No, employees are not subject to any credit checks when they opt in to a salary sacrifice scheme. The sacrifice amount cannot reduce the employee’s salary below the National Minimum Wage threshold; otherwise, there are no other financial checks in place for determining employee eligibility.
So, what does the credit check actually involve?
The financial assessment for salary sacrifice is conducted on the company and its Director(s), rather than individual employees. During the application process, the business will be required to provide its financial accounts to demonstrate that it has the ability to open a line of credit with loveelectric’s leasing partners.
These credit checks are standard practice for any business lease arrangement, including traditional company cars.
Which employees are eligible?
Any PAYE employee whose post-sacrifice salary remains above the National Minimum Wage is eligible to lease an electric car through salary sacrifice. Both full-time and part-time employees are eligible to join the scheme, subject to their post-sacrifice salary remaining above the NMW.
Employers can easily check eligibility by calculating:
Annual salary (post-sacrifice) ÷ contracted hours = hourly rate
If this hourly rate is above the current NMW rate of £12.71 for over 21s, then the employee will be eligible for the salary sacrifice scheme.
Can lower-paid employees join?
Yes, employees at all pay thresholds within your company can join the salary sacrifice scheme if the National Minimum Wage threshold is met. However, employees on a lower salary will have access to fewer electric vehicles, typically cheaper models, as their salary sacrifice amount will be restricted to keep them above the NMW floor.
Not all of your employees will be able to access every car in our range. We recommend communicating this early on in the employee rollout to manage expectations amongst your staff.
What Happens When Employees Leave?
We recommend downloading our brochure for a full outline of what's covered.
What happens to the car if an employee resigns?
If an employee leaves, our Zero Risk Guarantee ensures you get maximum support. Our salary sacrifice scheme is structured to give you a variety of options to suit your company’s situation and preferences.
- The lease can be transferred with the employee to their new employer if the company has a compatible scheme.
- The lease can be reassigned to another eligible employee within your company, so long as they are making the necessary salary sacrifice for the same vehicle.
- The vehicle is novated
Read more about our Zero Risk Guarantee and how it supports businesses.
What about redundancy, maternity leave, or long-term sickness?
Redundancy, maternity leave and long-term sickness for employees enrolled in a salary sacrifice scheme are all covered by the loveelectric Zero Risk Guarantee.
Our team will provide dedicated support to navigate each of these scenarios to find the best outcome for your company. The Zero Risk Guarantee applies from day one of the car’s lease, so the support kicks in automatically.
Can the lease transfer to a new employee?
Yes, internal lease transfer to another eligible employee is possible. This route typically offers the fastest resolution, and loveelectric will manage the transfer process on your behalf.
What if the replacement employee doesn’t want the same car?
If the replacement employee doesn’t want the same car, you can offer the car to another eligible employee within your business for an internal lease transfer.
Setup and Operational Questions
How long does it take to set the scheme up?
Most salary sacrifice schemes can be set up in as little as 7 days once the employer agreement is signed. This timeline will depend on receiving approval from the leasing partner. After signing the agreement and confirming employee eligibility, loveelectric will handle the rest of the setup and employee onboarding process.
Is there a minimum company size?
There is no minimum company size requirement for joining a salary sacrifice scheme. Any PAYE employer is eligible, so long as their employees will have a post-sacrifice salary that is above the National Minimum Wage threshold.
At loveelectric, we generally require companies to have spent at least 2 years trading and they must be able to demonstrate profitability. Our salary sacrifice eligibility checker can confirm your suitability in under a minute.
What admin is involved on an ongoing basis?
The admin involved in salary sacrifice is minimal for businesses. On a monthly basis, a payroll deduction adjustment will need to be made; however, most payroll software handles this natively.
Annually, your company will need to complete a P11D submission to HMRC by 6th July for the previous tax year. loveelectric provides the vehicle’s P11D values directly to you at the year-end to streamline this process.
Can we pause or end the scheme?
You can stop actively promoting the scheme and stop new employees signing up, but a lease must run the full course of its contract to avoid any early termination charges.
Employee Communication and Rollout Questions
How do we communicate the scheme to employees?
loveelectric makes your marketing easy by providing communication resources, including employee explainers, onboarding support, and FAQs. You will get the highest signups when your salary sacrifice scheme is launched with an effective communications strategy, explaining eligibility, the application process, and financial savings to your employees.
Read our guide on how to set up an EV salary sacrifice scheme for a full rollout guide.
What if uptake is lower than expected?
Low uptake is a genuine concern for companies, but electric vehicles are the most popular salary sacrifice scheme in the UK. These salary sacrifice schemes can offer significant financial savings for your employees, helping to save on their income tax while also giving them access to their choice of electric vehicle with up to a 60% saving.
We provide worked examples by salary bracket for employee communications. These make it easy to demonstrate exactly how much your employees can save to optimise your uptake rate.
Here from one of our clients about the surprising uptake they saw:
Does salary sacrifice affect pension contributions?
Yes, salary sacrifice can affect pension contributions as these are calculated based on the employee’s gross salary. Reducing the gross salary can typically reduce pension contributions.
However, employers can use a “notional salary” approach to mitigate the impact of this. We recommend checking with your company’s pension provider before rolling out the scheme and flagging the potential impact clearly to your employees.
Check If Your Company is Eligible For Salary Sacrifice
An electric vehicle is one of the most popular salary sacrifice schemes in the UK, with a net-zero cost for employers. At loveelectric, our salary sacrifice scheme was built from the ground up, putting businesses and their employees first.
Still have a question about salary sacrifice that we haven’t covered here? Our team works with employers of all sizes – speak to us about your specific situation.
