Top five tips for implementing car salary sacrifice

This article has been supplied by SG Fleet.

Guy Roberts
SG Fleet logo

For employers that are thinking of implementing a car salary sacrifice scheme in their organisation, here are five top tips for getting it right.

1 Be clear on your objectives 

This may sound simple, but many organisations move straight into the provider selection process without first being clear about their own objectives.

These objectives should include: maximising the choice of cars for employees; offering an open selection on contract term and mileage to improve take-up and maximise value; maximising the number of eligible employees to promote inclusiveness; not undertaking any scheme risks; and finally, minimising ongoing scheme administration.

2 Understand the risks, but do not accept them

The biggest barriers employers will encounter are known as scheme risks. Deal with these and the rest is simple. So what are scheme risks?

Firstly, there is early termination. What happens if an employee leaves mid-lease? In many scheme designs the lease will need to be terminated resulting in an extra cost. Employers will often try to recover the termination cost from the outgoing employee, which can be quite difficult.

Then there are consumer credit risks. Is a car salary sacrifice scheme consumer credit? Just like bikes-for-work schemes, car salary sacrifice is consumer credit. But unlike bikes-for-work schemes, the Financial Conduct Authority has not issued an exemption. Pretending car salary sacrifice is not consumer credit just isn’t a risk worth taking.

Finally, there is the issue of corporate credit. An organisation’s credit facilities are a valuable asset necessary to run the business. Finance teams may not want to use these up on voluntary benefits.

With proper provider selection and scheme design, employers do not have to experience any of these problems. The right provider and scheme structure will not create any of these scheme risks.

3 Choose the right scheme structure

Car salary sacrifice can be provided in one of two ways: corporate contract hire or novated leasing. In corporate contract hire, all lease obligations sit with the employer. This is fine for business-need cars, however this structure can result in a number of issues for the employer, such as early termination costs, utilising corporate credit facilities and increased administration from managing staff lists and ad-hoc recharges for fines and accident excesses.

The alternative is novated leasing, which is specifically designed for car salary sacrifice schemes. Quite simply, if the employee leaves, the car will go with that employee. All employers need to manage is the payroll deduction. With novated leasing, the provider will manage everything else directly with the employee.

4 Launch the scheme to maximise employee engagement

Most employees will not have sacrificed salary for a car before, so employee engagement is critical. Internet sites are, of course, a great tool but they are not everything. People like to talk to people. An employer’s chosen provider should be able to provide an online calculator, employee helpline, staff presentations and personal consultations.

5 So simple, there is no need for tip number five

If employers follow the first four tips and choose the right scheme structure, the scheme can be implemented and managed quickly and easily. This will maximise the benefit to employees, with no scheme risk and minimal administration for the organisation.

Corporate contract hire versus novated leasing

  Novated Leasing Corporate Contract Hire

No early termination risk to employer



No lease obligations risk to employer


Consumer Credit Act requirements recognised and complied with


No employer scheme risks or liability


No requirement for early termination insurance and/or contingency funding


No utilisation of corporate credit


Freedom of vehicle choice and term of contract


Guy Roberts is director at SG Fleet