Salary Sacrificing Comes into its Own During Challenging Economic Times
Looking for a great way to incentivise your top performing staff without adding to your bottom line? Giving your existing employees the ability to salary package a vehicle is a fantastic way to motivate and retain talented staff without having to give expensive pay rises. It’s also a great incentive to attract new talent to the business.
“These are important pluses in an economic environment in which most businesses are looking to reduce business costs, but at the same time are wondering what they can do to make sure they keep their best staff and attract quality new staff,” says Andy Mulcaster, CEO, SG Fleet Australia Pty Limited.
Great business benefits
Under a salary sacrificing arrangement, an employee leases a vehicle, the costs for which the employer agrees to pay from the staff member’s before-tax income.
Allowing staff to salary sacrifice a vehicle has a host of benefits, especially cost and administrative advantages, compared to buying a car outright or giving an employee a car allowance.
If the employee leaves the business, financial responsibility for the car remains with them, which reduces risk to the company. It also means the company doesn’t have unused cars sitting idle, another cost benefit to the business.
And because sgfleet looks after everything to do with the running of the vehicle, including servicing and ongoing maintenance, minimal resources at the company level are needed to manage vehicle fleets.
sgfleet’s “tied to payroll” payment process also makes life easy for finance and payroll departments. This process eliminates the need for payroll to reconcile employee deductions against supplier payments and also removes the requirement for the employer to maintain an internal holding account for staff that are salary packaging.
Better yet, businesses that offer salary sacrificing are able to spend more time focusing on their core business and generating revenue gains.
Attractive staff incentives
One of the greatest benefits of salary sacrificing from the employee’s perspective is tax incentives. Under a salary sacrificing arrangement, because finance and running costs for the vehicle are paid out of pre-tax earnings, the employee’s taxable income is reduced and so is the amount of tax paid.
Any fringe benefits tax payable on the car is also usually passed to the employee, reducing business costs for the employer. The employee also saves a significant amount of money due to the goods and services tax (GST) being off set by input tax credits. This applies to both the purchase of the vehicle and the ongoing running costs, as long as the lease is novated.
“Aside from tax benefits, employees also really appreciate the convenience salary sacrificing offers,” says Mr Mulcaster.
When it comes time to service the car, sgfleet checks the service history and the need for servicing, and ensures mechanics are charging the agreed discounted prices for parts and labour.
“Trying to offer incentives to employees in difficult economic conditions can be tough,” says Mr Mulcaster. “This is why giving staff the opportunity to salary sacrifice a car makes so much sense if you want to recognise the efforts of staff – without breaking the bank,” he says.
The huge range of benefits salary sacrificing a car delivers, including outsourcing of vehicle management and reduced business risk, means more and more businesses are using it as a key business tool.
To find out more about how offering salary sacrificing for vehicles can help benefit your business call 1300 786 680.
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