By Thom Groot, CEO, The Electric Car Scheme
A recent Scottish Widows survey found that 22% of British employees had never heard of salary sacrifice. That is a striking finding for a mechanism that has been part of the UK’s tax and employment framework for decades, and it points to a big problem.
The good news is that most of the barriers cited in the survey are more perception than reality. Understanding where these myths come from makes them considerably easier to address.
Myth one: Salary sacrifice costs the employer money
The most common objection to implementing salary sacrifice in the workplace is that it costs the organisation / employer money, when the opposite is almost always true. The National Insurance reduction alone is enough to make the scheme cost-neutral in most cases, and for employers who pass (some of) the savings back to employees, it becomes one of the most tangible financial benefits on offer, delivered without touching the pay budget.
Myth two: It is too complicated to set up and administer
The second objection is that it is too complicated to set up and administer. Salary sacrifice providers should handle the operational mechanics, and the HR team’s role is principally one of communication. The complexity is perceived rather than real, and it tends to dissolve quickly once someone works through how the scheme operates in practice.
Myth three: Employees aren’t interested in salary sacrifice schemes
The third myth is that employees are not interested, when the evidence consistently points the other way. A report published by the Department for Energy Security and Net Zero in March found that green salary sacrifice schemes are the single most popular green finance option tested, with 48% of homeowners saying they would be likely to use one if it were available, ranking above green savings accounts, personal loans, and every other product in the survey.
Among those who said they would use it, 90% cited tax efficiency as the primary reason, and among those who said they would not, the most common explanation was simply that they did not know enough about it. Low take-up signals a gap in awareness, not a gap in appetite.
Myth four: Electric cars are niche benefits and not for the masses
Then there is the assumption that electric car and EV charging salary sacrifice are niche benefits, relevant only to a particular type of employee.
With petrol and diesel prices volatile, the benefit-in-kind tax rate for electric vehicles sitting at just 3% against rates of up to 37% for high-emission cars, and the end of new petrol and diesel car sales fixed in the legislative calendar, the transition to electric cars (and hybrids) is a mainstream financial consideration for a far larger part of the workforce than HR teams tend to assume. Employees who have looked at a company car and walked away because of the tax exposure will find the salary sacrifice route a genuinely different proposition.
The argument that now is not the right time is perhaps the most persistent, and the least defensible. Salary sacrifice is at its most valuable precisely when financial pressure is acute, because it delivers an effective pay rise without increasing payroll costs. In a year defined by rising employer National Insurance contributions and squeezed reward budgets, the case for using every available cost-neutral tool is stronger, not weaker.
Myth five: Salary sacrifice impacts mortgage, pension and credit applications
Salary sacrifice reduces the gross salary figure on payslips and P60s, and some lenders use that figure for affordability assessments, though many now accept the pre-sacrifice reference salary (often referenced as “notional salary”). Pension calculations can be affected depending on how a scheme is structured and whether employers choose to reference the notional salary for contribution calculations, or the salary post sacrifice. These are real considerations, and the right response is transparency, encouraging any employee with an active application to take independent financial advice on timing rather than avoiding the subject altogether.
Myth six: Salary sacrifice benefits higher earners
This perception reflects how some older schemes operated rather than how current arrangements work. The tax and National Insurance savings are available across a wide range of salary bands, subject only to the requirement that sacrifice cannot reduce pay below the National Minimum Wage.
From April 2029, National Insurance relief on pension salary sacrifice will be capped at £2,000 per employee annually, and the CIPD’s most recent Labour Market Outlook found that over half of employers already expect higher wage bills as a result. In that environment, the non-cash benefits sitting outside the cap, including electric car and EV charging salary sacrifice, become a more important part of the reward toolkit.
Myth seven: The early termination risk
The final myth rarely gets named directly but consistently arises in our conversations with HR directors. The fear is that if an employee leaves mid-lease, the company faces a significant early termination bill, this is a legitimate concern.
In the event of redundancy, employers could face a fee equivalent to 50% of the remaining lease costs, which in practice could amount to tens of thousands of pounds. The Electric Car Scheme’s own research found that 90% of businesses believe there is significant financial risk in running an electric car salary sacrifice scheme, and that perception has been enough to stop many from starting.
Employer protection products now exist to cover resignation, redundancy, dismissal, long-term sickness, and family-friendly leave from day one, without exclusion periods or excess charges. The risk that held many HR teams back is now, in most cases, a solved problem, and the question is whether HR teams are aware that the landscape has shifted.
In conclusion, most of the barriers that have kept salary sacrifice off the HR agenda are based on assumptions that no longer hold. The scheme saves the business money rather than costing it, the administration falls on providers rather than HR teams, employee demand is there when the benefit is properly explained, and the early termination risk that once gave employers pause is now covered by protection products that did not exist a few years ago.
For HR directors navigating rising payroll costs, tighter reward budgets, and squeezed benefits programmes, salary sacrifice is one of the few tools that costs nothing to offer and delivers meaningful savings across the pay scale.
The starting point is a straightforward audit of what is currently in place, what employees are being told about it, and whether the scheme on offer reflects how far the market has moved.