Salary sacrifice isn’t just a tax perk—it’s fast becoming a strategic lever for growth, retention, and sustainability. What used to be a niche benefit is now transforming how forward-thinking SMEs compete in a tight talent market, cut rising National Insurance costs, and hit green targets without draining cash flow. While many still assume it’s too complex, too costly, or only for big corporations, the truth is this: Salary sacrifice might be the smartest financial move your business hasn’t made yet.
Not familiar with salary sacrifice? You’re not alone - but it’s something worth understanding. At its core, salary sacrifice is an arrangement where an employee agrees to give up part of their gross salary in exchange for a non-cash benefit - most commonly, a leased electric vehicle. Because the benefit is deducted before tax, it reduces the employee’s taxable income, which can significantly lower both Income Tax and National Insurance contributions. But the savings don’t stop there: employers also pay less in National Insurance, making it a cost-effective win on both sides.
You might think salary sacrifice isn’t a good fit for SMEs or may have some reservations about it - but we’re here to tell you that’s not necessarily the case.
If you’ve written off salary sacrifice as too complex or not worth the effort, it might be time to take another look. Far from being a one-size-fits-all benefit, it can be tailored to suit businesses of any size, including SMEs, and offers tangible financial advantages for both employers and employees. This guide breaks down how it works, dispels common myths, and shows you how to turn a tax-efficient benefit into a strategic asset for your business.
Why Now’s the Time to Rethink Benefits
77% of SMEs are planning a major overhaul of their employee benefits - are you one of them?
With rising costs and growing expectations, traditional perks are losing their impact. Businesses are under pressure to offer benefits that are not only meaningful but financially smart—for both the company and its employees.
One concern we hear often is: will employees actually take it up? The data says yes. Over 80,000 UK employees are already driving electric vehicles through salary sacrifice schemes - and that number is only going up.
Why the surge in demand? Because EV salary sacrifice makes driving a brand-new electric car significantly more affordable - no deposit, no credit checks, and far lower monthly costs compared to traditional leasing. For many, it’s a unique opportunity to upgrade their vehicle in a way that would otherwise be out of reach.
Think It’s Too Much Work? It Doesn’t Have to Be
A lot of businesses assume that setting up a salary sacrifice scheme is complex or time-consuming. The reality? Many providers offer fully managed solutions with user-friendly portals that let you track and manage all employee vehicles in one place.
- No set-up fees
- 5-star rated, fully managed service
- Savings for both the business and your employees
With salary sacrifice, there’s no upfront deposit, and the monthly cost includes everything: vehicle lease, maintenance, insurance—paid directly from the employee’s gross salary.
What If an Employee Leaves or Goes on Leave?
This is another common concern: what happens to the lease if an employee leaves, takes parental leave, or goes off on long-term sick?
That’s where our industry-leading protection comes in. It’s designed to shield both your business and your employees from unexpected costs due to early termination, offering peace of mind.
Salary Sacrifice Helps Cut Employer Costs
As many employers are aware, National Insurance (NI) contributions are on the rise. From 6 April 2025, employer NI contributions will increase from 13.8% to 15%, meaning a higher cost per employee.
Because salary sacrifice reduces an employee’s gross salary, your NI contributions decrease in line with that lower amount, resulting in direct savings for your business.
Let’s break it down with a simple example:
An employee earning £38,000 chooses to salary sacrifice £5,000 per year (roughly £417/month) for an electric vehicle.
Their adjusted gross salary becomes £33,000.
Normally, the employer would pay £4,636 in NI for that employee. With the reduced salary, this drops to £3,585—a saving of £1,050 per year.
Multiply this across several employees and the savings quickly add up, especially on 2–3 year contracts.
Employers also have the flexibility to:
- Pass some or all of the savings back to employees to reduce their monthly costs, or
- Retain the savings to reinvest in the business.
Attracting and Retaining Talent
Top talent isn’t just looking at salary anymore—they’re looking at the full package. Increasingly, employees expect benefits that make a real difference to their everyday lives—not just surface-level perks.
A survey by the Society for Human Resource Management found that 86% of workers consider employee benefits a key factor when deciding whether to accept or reject a job offer, second only to salary. That tells us everything: if your benefits offering isn’t compelling, you risk losing great candidates to companies that provide more value beyond pay.
Salary sacrifice schemes are one of those benefits. They not only show that you’re committed to supporting your employees’ financial well-being, but also that you’re investing in long-term engagement and loyalty. Offering attractive, modern benefits like this helps set your business apart, and can be the difference between attracting top talent or losing them to a competitor.
Salary sacrifice offers a practical solution for businesses looking to reduce costs while providing meaningful benefits. It’s a straightforward approach that can help you manage rising expenses and offer valuable perks to your employees. If you're considering how it might fit into your business, we’re here to provide the insight you need to make an informed decision.