Fleet Manager FAQs – Navigating salary sacrifice car schemes with confidence

Managing a modern fleet has lots of complexities – evolving tax rules, the shift to electric vehicles (EVs), increasing employee expectations, as well as the need to balance cost efficiency with compliance and sustainability. 

While partnering with salary sacrifice providers like Tusker helps alleviate many of these pressures, it’s natural for fleet managers to still have questions and seek a clearer understanding of how salary sacrifice works before adopting the solution.

This article will address a few of the most common FAQs fleet managers have, including critical topics like novations, Benefit-in-Kind (BiK) taxes, early termination and affordability. 

1. How do salary sacrifice schemes actually work?

In short, salary sacrifice schemes allow employees to exchange a fixed portion of their gross salary for a non-cash benefit. In this case, a brand-new car or pre-loved alternative – while other salary sacrifice schemes support pensions, technology, bicycles and childcare. 

What’s so great about these schemes is their pre-tax nature, with amounts being taken from pay before tax and National Insurance (NI) contributions, creating significant cost savings for employees when compared to their purchase outside of work. 

But the perks don’t end with the employee – salary sacrifice offers an innovative way to improve employee benefits, supporting talent attraction and retention, while providing considerable savings for businesses through Employer NI deductions. 

On top of this, partners like Tusker support the scheme’s management and admin, while bundling everything into one fixed monthly employee cost – including insurance, maintenance, servicing, tyres and road tax. This reduces workload for HR and fleet managers, while supporting employees’ financial planning and resilience.

2. What is a novation and how does it affect fleet management?

Novation is a critical concept within salary sacrifice if an employee is leaving to work for another employer and would like to take their existing car with them. It is essentially a legal process where an existing contract is replaced by a new one, transferring the obligations from one party to another, releasing the original party from future liabilities. In this case, it refers to the legal transfer of a lease agreement from an employer to the new employer, where the new employer agrees to the transfer of the Agreement and the car.

Allowing a car to be novated to a new employer if an employee leaves gives employers added peace of mind, as it means they are not left responsible for a vehicle they can no longer manage or place.

Even better, with partners like Tusker, risk is massively alleviated from both employers and employees due to built-in protections within the agreement (which we will discuss further in the next question)

3. What happens if an employee leaves? Are early termination fees a risk?

One of the biggest perceived risks of salary sacrifice, particularly for long-term schemes like cars, is the possibility of termination fees if an employee leaves before the agreement ends. This should be a highly important consideration when choosing a provider, as protection against costly terminations widely differ.

Tusker’s ‘Lifestyle Protection’ provides a safety blanket for you and your employees – protecting against a range of life events, including redundancy, resignation, long-term sickness and paternity leave. Typically this is available 3 months into the scheme, allowing for protection against unforeseen events that arise.

We know that life isn’t always as predictable as a long-term car scheme, therefore Lifestyle Protection ensures the benefit is low-risk, meaning employees and employers can enjoy all the wins without worrying about heavy costs down the line.

4. How will rising Benefit-in-Kind (BiK) tax impact schemes?

BiK tax is essentially taxation an employee has to pay on non-cash perks, such as salary sacrifice cars, as they are considered part of an employee’s total compensation. The rate of BiK also impacts employers by dictating the benefits taxable value, which changes how much NI contributions employers have to pay.

Aside from the sustainability wins, low BiK rates are one of the best perks for employers adopting electric fleets – typically receiving very low rates to encourage employers to meet ESG goals. However, fleet managers may be concerned with headlines showing that BiK is going up.

But there’s no need to worry – while the tax advantages of overall salary sacrifice remain high, they remain particularly beneficial for electric company vehicles. Right now the rate is just 3%, gradually going up to just 10% by 2030. In comparison, the BiK tax on petrol cars already starts at more than 25%. 

 As a result, ultra-low emission salary sacrifice schemes in particular will continue to provide significant cash savings for both employees and employers for a number of years, while helping businesses reduce their carbon output. Additionally, as the government has set out what the small increases in BiK rates will be in the long term, it allows employers to plan accordingly.

5. Is affordability a barrier for employees?

A lot of HR teams will be worried about affordability for employees when considering fleet changes – particularly as inflation and the cost-of-living crisis persists. But what’s so great about salary sacrifice is how much more inclusive it is compared to traditional company cars. 

While traditional schemes typically assign cars to those who drive for work, or have senior roles, salary sacrifice opens workplace driving up to every employee, as long as their salary after the reduction remains above the national living wage. 

Because of the considerable tax advantages these schemes offer, along with models like Tusker’s that provide comprehensive packages at a fixed monthly rate, cars can be much more affordable than they are on the high street. This is particularly useful for EVs, which tend to have higher up-front costs outside of leasing.

Furthermore, many providers offer a range of vehicles that help make vehicles accessible to employees across paygrades. For example, Tusker offers ‘pre-loved’ alternatives, helping employees access sustainable vehicles at a much lower cost.

6. How does a salary sacrifice scheme fit into existing fleet operations?

One of the best elements of choosing a car scheme through Tusker is the smooth integration and dedicated support fleet managers and HR teams receive. The scheme can be adjusted to your specific needs – whether you need a whole new fleet, a complementary scheme to existing ‘job need’ fleets or want to tailor it to employee needs like accessibility and sustainability.

Fleet managers benefit from:

• Dedicated account management for ongoing support
• Fully online systems for easy administration
• Integration with existing benefits platforms or standalone portals
• End-to-end lifecycle management of vehicles

This results in less administrative headaches, an improved employee experience and more time for employers to reflect on strategy and business goals.

7. What should fleet managers look for in providers?

Choosing the right provider is key to a safe and stable scheme. Key things to consider include:

• Is it a fully inclusive package (not just the car)?
• Does the provider have proven and long-term experience managing large-scale schemes?
• Are there strong and comfortable risk protection measures?
• Do they have robust supplier and manufacturer relationships?
• Do they have high-quality employee support systems and communication tools?

These pointers ensure you choose a provider that can boost employee uptake and remove as much risk from fleets as possible. 

Want to learn more about salary sacrifice vehicle schemes and how they can reduce your workload, improve workforce mobility, and enhance the employee experience? Visit Tusker.