Five things every employer should know before setting up a salary sacrifice car scheme

Salary sacrifice car schemes can be excellent value for employers and employees alike. But they’re not something you should set up without understanding what’s involved. Here are five things worth knowing before you start.

The saving is real — but it scales with take-up

The employer benefit from salary sacrifice comes from reduced National Insurance. With employer NI at 15%, every pound of gross salary that’s sacrificed saves the business 15p. Across a workforce where meaningful numbers participate, that adds up significantly.

But the saving is proportional to participation. A scheme with five users saves the business a modest amount. A scheme where 15% of the workforce participates can generate a five-figure annual NI saving for a mid-sized employer.

Take-up depends almost entirely on how well the scheme is communicated and how straightforward it is to use. Many businesses set up a scheme and see low participation simply because employees don’t understand it well enough to engage with it confidently. That’s a fixable problem — but it requires investment in education, not just a scheme brochure… And that’s where Odigo Verve comes in!

Electric vehicles change the maths dramatically

The appeal of salary sacrifice as an employee proposition is closely tied to the Benefit in Kind (BiK) rate. The lower the BiK, the less tax the employee pays on the car — and the more attractive the net monthly cost.

For electric vehicles in 2026/27, the BiK rate is just 4%. For comparison, a petrol car with a typical CO2 figure sits at 25–30%. The difference in employee tax liability between an EV and a petrol car on salary sacrifice is enormous — and it’s what makes the EV salary sacrifice proposition genuinely compelling rather than simply convenient.

Schemes focused purely on petrol and diesel vehicles are a different calculation. If you’re designing a scheme now, electric vehicles should be the centre of it.

Scheme design matters more than most employers realise

The structure of a salary sacrifice scheme has real implications for the business. A few things that need careful consideration:

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  The salary floor. Employees can’t sacrifice below the National Minimum Wage, so you need a floor built into your scheme that prevents this automatically.
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  Contract documentation. Salary sacrifice is a formal amendment to the employment contract. It needs to be properly documented to avoid complications around redundancy pay, mortgage applications, or TUPE transfers.
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  Funder selection. The salary sacrifice funder provides the vehicle lease. Fee structures, vehicle choice, driver support, and what happens when a driver leaves mid-contract all vary significantly between providers.

Getting the design right at the outset is considerably easier than fixing it later.

Employee communication is the difference between a good scheme and a great one

The businesses that see the best results from salary sacrifice are those that treat employee communication as seriously as they treat the commercial structure.

Employees who don’t understand how salary sacrifice works won’t participate. Employees who are nervous about electric vehicles won’t choose them, even if the numbers clearly favour it. Employees who feel the scheme is designed for senior management rather than the whole workforce will resent rather than value it.

Effective communication involves explaining how the scheme works in plain terms, helping employees understand the EV landscape if they’re unfamiliar with it, and providing enough support that they feel confident making a decision — rather than overwhelmed by one.

This is the work that tends to fall between the gaps when businesses set up schemes directly through a funder, because funders are focused on the vehicle transaction rather than the employee education. It is the biggest differentiator with Odigo Verve as we put education and support as the primary focus so you get the most from your scheme.

Independent advice is worth more than you might expect

The salary sacrifice market involves funders, leasing companies, vehicle manufacturers, and scheme operators — all of whom have their own commercial interests. That’s not a criticism; it’s just the reality of how any market works.

What it means in practice is that the advice you get from within that supply chain is always going to be shaped by what each party has to offer. A funder will design a scheme around their products. A leasing company will steer you toward their vehicles. A scheme operator will recommend the structure that works for their platform.

An independent adviser — one with no affiliation to any manufacturer, funder or leasing company — can look across the whole picture:

• Whether a scheme is right for your business
• Which funder offers the most flexibility
• How to structure the employee proposition
• Whether the costs are competitive.

That’s the role Odigo Verve plays. We work for the employer and the employee first. If you’re thinking about setting up a scheme, or reviewing an existing one, let’s have a conversation.