In today’s competitive job market, offering attractive benefit packages is crucial for retaining top talent. Employee retention strategies are essential for long-term business success, and upgrading employee benefits can significantly increase employee satisfaction and reduce turnover rates.
The average employee turnover rate varies from industry to industry, but the average is 35% according to CIPD, which means you could lose over a third of your employees to another job, retirement or studying.
The cost of high employee turnover
Employees not only have salary expectations these days, they also have ideas around what a benefits package should look like too. A strong benefit for a renumeration package is a company car – this is a perk that could enhance both their personal and professional lives.
As employers, if a job role requires your employees to travel or be on and off site, then you’ll likely need to provide them with a company car as part of their employment. For your employees, this can be seen as an attractive perk which enhances the overall benefits package.
A car benefit makes employees feel valued, which in turn can lead to higher retention rates. It’s especially appealing in today’s economic climate, where the total cost of vehicle ownership and running a car are rising.
Providing car benefits for employee retention
High employee turnover can have a substantial financial impact on your business. The costs associated with turnover can include advertising for new positions, training new hires, and providing necessary equipment – all of which require resource time too, adding further to your costs.
If you have employees leaving with technical or advanced skillsets, there could be an even higher cost to fill those positions. Talented employees often bring unique value to your business, making their loss particularly costly.
Having a employee retention strategy which improves employee compensation and benefits can help mitigate these costs. For example, non-taxable reimbursements such as approved mileage rates – where your employees can claim back 45p per mile for the first 10,000 business miles and 25p for subsequent miles – can be effective in reducing employment costs.
Return on investment (ROI) of car benefits
When considering the ROI of car benefits, it’s important to weigh up the cost of providing these benefits against their impact on turnover rates. Costs can vary depending on the fleet provider you choose, but ultimately, if you keep your employees happy by boosting their benefits package with a company car, then you should see a return on investment with your retention rates.
Looking at CBS employee car benefit schemes specifically, depending on how you choose to deliver those benefits, you can generate business savings for you and your employees – which in turn lowers the cost of providing the benefit.
If you opt for an Employee Car Ownership Scheme (ECOS), you’ll save on Class 1A National Insurance Contributions (NICs), and Benefit-in-Kind (BiK) tax for your employees isn’t payable. Read more about ECOS and how it works.
With our Salary Sacrifice Cars, your employees will benefit from low BiK rates on Electric Vehicles (EVs), while you can both save on tax and NICs. We also have options to avoid you being left with unwanted vehicles from employees who have left the business. Find out more about our approach to car benefits.
Car benefits as part of a comprehensive retention strategy
Keeping your employees happy by making them feel valued for their loyalty to your business can contribute to improving employee retention. Introducing or enhancing your existing car benefit is a good way to boost employee satisfaction.
In today’s economic climate, it’s likely your employees highly value benefits that can help them save money. Car benefit schemes are particularly attractive because they can offer financial savings on vehicle costs, which can be a substantial part of your employees’ expenses.
By integrating car benefits into your overall employee retention plan, you can enhance job satisfaction, loyalty and reduce employee turnover.
We offer multiple ways to deliver your car benefit including:
Employee Car Ownership Schemes (ECOS)
The structure of ECOS transfers the ownership of the car to your employees by selling the vehicle to them using a Credit Sale Agreement (CSA). The car is then no longer classed as a company car, so Benefit-in-Kind tax isn’t payable by your employees, and you don’t owe Class 1A NICs on the benefit either.
You collect the CSA repayment or desired contribution from your employees via payroll to cover the running costs of the car, and then pay a collective invoice from us for your car fleet.
To learn more about ECOS, read our guide: What is an Employee Car Ownership Scheme?
Business Car Leasing
Your company leases a car or a fleet of cars in accordance with the business needs. Business lease cars can be given to your employees as a company car and the appropriate tax for the benefit is applicable, or the car/s can be used as pool vehicles. Either way, a fixed monthly rental is made by the business in exchange for the vehicles.
From a business perspective, you’re in control of the cars you lease and there’s no vehicle risk as you simply hand it back when it’s best for you or when the contract ends. This type of employee car benefit is classed as a company car and therefore the appropriate tax is applicable.
To learn more about Business Car Leasing, read our guide: Business Car Leasing Explained
Salary Sacrifice Cars
Salary sacrifice schemes can be mutually beneficial for both your business and your employees. It’s an attractive benefit when it comes to EVs, as the currently BiK rate for EVs is 2%, and the Government has outlined that it won’t increase above 5% until after 2028.
Salary Sacrifice Cars allow you to offer a no-cost car benefit to some or all of your employees, creating tax-efficient savings on EVs. Remember, to generate savings on salary sacrifice cars, they must have under 75g/km of CO₂ emissions in accordance with the optional remuneration arrangement (OpRA) established in 2017.
Your employees sacrifice a fixed amount from their gross salary in exchange for a company car and as a result they pay less income tax and NICs. A salary sacrifice car scheme is an efficient arrangement that reduces the net monthly cost of a company vehicle for your employees. With their taxable salary amount reduced, you also pay less Class 1 NICs.
This type of employee car benefit is classed as a company car though, and therefore the appropriate tax for the benefit is applicable. For your employees, this is BiK tax, but with the low BiK rate for EVs at present, this is a minimal amount. Class 1A NICs for you as the employer are also payable.
To learn more about Salary Sacrifice Cars, read our guide: What is a Salary Sacrifice Car Scheme?
It’s highly likely you’ll have a varied employee population with different needs. You might be looking for a car benefit solution for your company car entitled drivers only, or you may want to include everyone. You’ll have some employees who are more suited to or prefer traditional fuel cars such as petrol and diesel, perhaps some who are sustainability conscious or use their vehicle primarily for commuting and might be more at home in an EV, and then some employees who sit somewhere in the middle, again either through preference or need, where a hybrid might be the best option.
Whatever the vehicle make, model or fuel type, we’ve got a solution for every business, every driver and every need. This flexibility demonstrates that the company values individual needs and is committed to providing personalised benefits. By incorporating car benefits into your retention strategy, you can create a more attractive and supportive work environment, ultimately leading to reduced turnover and a more motivated workforce.
Are you looking to provide car benefits?
In the employment market, it’s vital you offer potential candidates the best salary and compensation package you can to attract them initially, and then keep them feeling motivated and valued.
There are a number of ways to do this, but to offer a car, which for many people is the second biggest purchase of their life (after a house), as a benefit is an attractive perk that can improve employee retention and reduce turnover costs.
We can help you design a car benefit scheme tailored to you, as we’ve got a solution for every business, every driver and every need. We provide full solution management, so from beginning to end, we’ll take care of everything, including technical and compliance management, leaving you free to focus on driving your business forward.
To find out more about how we can boost your recruitment and retention strategy, get in touch with us today.