Don’t let salary sacrifice be a financial risk

By Mike Belcher, head of sales at Hitachi Capital Vehicle Solutions

With the opportunity to provide a cost neutral employee benefit, it’s no surprise that salary sacrifice has become an increasingly popular option for many businesses, especially as a way of funding high-value benefits like company cars. As appealing as the scheme may seem however, without a well-developed, forward-thinking approach to management and reporting it can easily turn into a costly mistake.

Once an employee benefit has been given, it generally can’t be taken away again even if circumstances change — leaving the employer out of pocket as it continues to foot the...

...bill. This means it is absolutely vital for a salary sacrifice scheme to plan ahead and be mapped out well in advance, with contingency plans in place to counter any changes for individual employees and the business as a whole.

Salary sacrifice schemes for company cars are often monitored and reported on in the same manner as standard company car fleets. This commonly overlooks the need for forecasting and forward-thinking analysis. Salary sacrifice is still a relatively new method of fleet funding, so there are few schemes that have been around long enough to see long-term cost results.
Long-term employee absences, such as maternity or sick leave, are one of the most common risks for unprepared companies to sleepwalk into. In the case of maternity leave in particular, while the employee’s wages will gradually be phased out to zero, the monthly salary sacrifice contribution towards their car cannot be altered, nor the car itself taken away.

So where an employee was formerly giving up say, £200 of their monthly take home salary towards the car, the employer will find themselves footing the bill instead for the period of maternity leave.

Another risk that must be forecast is the possibility of an... continued on page two >

 

 

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