ACFO: Interest in salary sacrifice schemes not as high as marketplace suggests
ACFO (Association of Car Fleet Operators), the UK’s leading fleet operators’ organisation, has warned that whilst marketplace comments would have companies believe that salary sacrifice schemes are the ‘new’ employee benefit for 2010 and on the increase, ACFO’s recent voluntary and anonymous on-line survey shows the truer picture is one of much lower interest.
Results of the survey showed that 24.2% of respondents have never looked at the salary sacrifice option, only 36.6% are thinking about looking at salary sacrifice, 21.7% have ‘no interest’ in salary sacrifice schemes and just 17.1% are currently analysing the salary sacrifice option. Decision-makers responding to the survey operated fleets ranging in size from under 50 vehicles to more than 1,500.
Whilst the accelerating arrival from vehicle manufacturers of low-emission cars twinned with ‘attractive’ corporate and personal tax rates on those vehicles is making company car salary sacrifice a fast-emerging concept within employee recruitment and retention packages, the much touted concept is still in its infancy.
ACFO membership secretary and director Stewart Whyte said: “According to our findings, interest levels in salary sacrifice schemes appear lower than general market comment seems to suggest. Comments from salary sacrifice scheme providers suggest there is a great deal of interest in the concept.”
However, Mr Whyte said: “We know that many ACFO members have seen merit in a salary sacrifice-type arrangement, as an extension to the range of employee benefits on offer. Some have also seen this as a complete alternative to the use of more traditional fleet operating methods. This range is a major feature of the depth of experience across ACFO and the diversity of demand forms across the membership.
“As a result, most providers will, I’m sure, acknowledge that salary sacrifice schemes can be an excellent product under specific fleet operating circumstances but cannot be considered as having universal relevance.”
Salary sacrifice schemes works best when substituting salary for a benefit that is taxable at a much lower rate than the cash value.
Financial experts identify three major areas in which financial savings can be made:
* Employees – can make tax savings by sacrificing salary in return for a benefit-in-kind. In the case of a company car this would see a basic rate taxpayer giving up salary taxed at 31% (income tax and National Insurance contributions) and a higher rate taxpayer giving up salary taxed at 41% and taking a car with emissions below 120 g/km and paying benefit-in-kind tax at these income tax rates on 10% of the P11d value (13% for a diesel car).
* Employers – April 2009 changes in corporation tax mean significant financial savings can typically be made on operating cars emitting 160 g/km or less – additionally 100% first-year capital allowances are available on cars emitting 110 g/km or less. National insurance savings can also be made.
* Environment – there is a direct link between CO2 emissions and fuel consumption so running low-emission cars means lower fuel bills for employers and employees alike.
In addition, with many companies focused on ensuring they operate at-work driving policies and procedures within health and safety legislation and best practice duty of care advice, operating a company car salary sacrifice scheme eliminates ‘grey fleet’ concerns if staff have historically driven their own cars on business.
Mr Whyte added: “While financial experts and vehicle leasing companies are swift to promote the salary sacrifice concept it depends on income levels and staff turnover levels. Businesses that employ staff on low or minimum wages and/or have a high employee turnover rate should not entertain the concept.”
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