Employee retention isn’t easy, 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.
Vacancies across the board are down for 22 consecutive months, as reported by the Office of National Statistics, however, the level is still much higher than pre-COVID.
So, knowing that up to a third of your workforce could be on the lookout for a new job, and that there’s plenty of jobs out there for consideration, talent acquisition remains a constant challenge.
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.
Offering flexible car benefits – which can include traditional fuel and electric cars – to attract the best talent and provide a solution for everyone is a great employee retention strategy. Let’s take a look at how our solutions for an employee car benefit scheme could help your business improve employee retention.
Why Offer a Car Benefit?
Depending on the way you choose to deliver your company car fleet, you could enjoy a number of benefits. These could include:
- Generating business savings.
- Freeing up capital to spend elsewhere.
- Reduce vehicle risk for your business.
- Tailored mileage, contract terms, service and maintenance.
- Being in full control of your car fleet policy.
- Freedom to choose fleet vehicles that suit the need of your business.
From a tax-efficiency perspective, if you offer salary sacrifice cars, you can generate savings through low Benefit-in-Kind (BiK) rates on Electric Vehicles (EVs), leading to savings on tax and National Insurance Contributions (NICs). Or if you have an Employee Car Ownership Scheme, you remove BiK tax for your employees and Class 1A NICs for the business.
With both of these options, you can be in charge of how much your employees sacrifice, or the amount they contribute for their car benefit – and this can differ depending on the seniority of the employees of if you want to reward a particular group of employees. Whereas for a car allowance, this is a fixed payment that must be enough for employees to source and maintain their own vehicle.
A company car provides reliability for your employees for both business and personal travel, giving everyone peace of mind and the ability to commute freely without any restrictions. Having access to a car benefit can also remove stress, improve employee satisfaction and overall wellbeing. Looking after your employees, shows you’re invested in them and could help you stand out as an employer of choice to new talent.
What Are My Car Benefit Options?
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?
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?
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
Tailoring Your Car Benefit to Employee Needs
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 or prefer traditional fuel cars such as petrol and diesel, perhaps some who are sustainability conscious or use their vehicle primarily for commuting might be more at home in an Electric Vehicle, and then some employees who sit someone in the middle, again either through preference or need, where a hybrid might be the best option.
A CBS car scheme can offer all of the above and more. With our portfolio of delivery methods for a company car, our solutions go further than a traditional car benefit. Whatever the vehicle make, model or fuel type, we’ve got a solution for every business, every driver and every need.
Integration with Your Recruitment Efforts
If you offer a car benefit as part of your employee recruitment strategy, then part of your talent management should be to highlight the company car benefit on job postings and advertisements to attract top tier candidates.
You could also mention the car benefit in more detail during the interview process. Discussing the whole remuneration package, not just salary, is a chance for you to showcases the full advantages of working for your business.
When you successfully take on new employees, it’s a good idea to make the onboarding experience as positive as possible. One way to enhance this could be explaining how the car benefit works, when the employees is eligible, and maybe even discussing specific cars available. Starting off well by getting your employees excited about their car benefit, could be key to a healthy employee retention rate.
The Long-Term Impact of a Car Benefit
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 a car benefit is a good way to boost employee satisfaction.
When employees feel content in their job and the compensation they receive, it could increase productivity and morale among the team. Personal recommendations from your employees to potential candidates is another way to strengthen your recruitment strategy, and build long-term brand ambassadors.
Let CBS Take the Wheel
In the employment market, talent acquisition is a skill for recruitment and retention strategies. Not only is it important to identify the right people for your business needs, it vital you offer them 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.
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.