salary sacrifice car schemes

The evolving world of salary

sacrifice car schemes

Now and in the future

Speakers

Zenith’s Commercial Director, Employee Benefits

Schemes

Andrew Kirby

Reward Director, Santander

Elliot Rees-Davies

Topics for today

1. What we have learned so far about Salary Sacrifice Car

Schemes

2. Communication methods, how they are evolving and

influences on engagement

3. The future of Salary Sacrifice Cars

4. Santander’s experiences of Salary Sacrifice Car

Schemes

Salary Sacrifice Car Schemes Salary Sacrifice Car Schemes are an ‘all employee benefit’ which

enable employees to drive a brand new car with an all-inclusive

package. The cost of driving the car is covered by a payment

made from their salary before tax, so they save on income tax

and National Insurance.

We have over 6 years worth of data from live Salary Sacrifice Car

Schemes.

Here is what we have learned …

Why adopt a Salary Sacrifice

Car Scheme?

• In place in a lot of large organisations across the UK

• Proven, effective employee benefit

• Easy to implement

• Cost neutral benefits

Impact of life events on decisions Do employees choose salary sacrifice car schemes due to a change of circumstance or as part of a usual replacement?

62% 38%

Usual

replacement

time .

Change of

circumstances

e.g. received a car

allowance, joined a

new company, partner

had a baby

Source: Survey of 607 Zenith Salary Sacrifice Drivers, 2013

Why Salary Sacrifice Cars? The main reasons employees choose salary sacrifice

Source: Survey of 607 Zenith Salary Sacrifice Drivers, 2013

Car Choice

62% 58%

40% 37%

23% 21%

19% 15%

10% 9% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Price

Fuel Economy

Brand

Design

Reliability

Environmentally friendly

Family friendly

Comfort

Safety

Quality finish

High performance

Source: Survey of 607 Zenith Salary Sacrifice Drivers, 2013

Price has the biggest influence over choice of car

Location matters

Average take-

up rest of UK

5.9%

Average take-

up in London.

1.1%

Take-up is a lot lower in London compared to outside the capital

A ‘best’ take-up would be 15%+ - see later

All risks can be mitigated Sacrifice Car Schemes – Average figures across schemes

£1,717

12

26% Early termination rate

Months within contract

termination occurs

Early termination

cost per car

Average percentage of contingency fund used – 74%

Source: Zenith Data, February 2015

Communication methods

How they are evolving and influences on

engagement

Communication is critical

6% 15+% 2-3%

Average take-

up across all

schemes

Well

communicated

scheme

Under

communicated

scheme

Source: Zenith Salary Sacrifice Car Scheme Data

Average take-up

And employees want more comms

85%

Percentage of eligible employees open to more communications

regarding Salary Sacrifice Car Schemes

Source: Survey of 600 Zenith Salary Sacrifice Drivers, 2014

The future of Salary Sacrifice Cars

Trends and projections

Rising motoring and public

transport costs Rising faster than inflation

Tax and insurance rising

much higher than

inflation.

Fuel costs rising

(although have recently

started to fall).

Source: RAC

Higher costs of public

transport makes driving

a car more attractive.

16.7 million people in

England and Wales

travel to work by car or

van. This is 62.7% of

the employed

population aged 16-74.

(Source: RAC)

• 37 per cent of employees want to leave their job in 2015

(Institute of Leadership and Management Survey)

• Employers need to work harder to retain talent

• 62 per cent of employees are engaged did not received a pay

rise in 2014 (surveyed by the Chartered Institute of Personal

Development)

• Attractive and innovative employee benefits form a critical

part of ensuring an engaged workforce

Continued shift in reward thinking And much more competition to retain employees

Increase in low emission vehicles

Orders by fuel type on Zenith’s schemes:

Which attract the greatest savings through Salary Sacrifice

Alternatively fuelled now 12% of all orders!

Diesel

Petrol

Hybrid/electric

Increasing demand for salary sacrifice

Rising cost of insurance and

other motoring

costs

Increasing cost of public

transport

Shift in reward

thinking

More low emission vehicles

Continued attraction of convenient

motoring and cost savings

Increased demand for salary sacrifice car schemes

Salary sacrifice projected to grow

• Salary sacrifice car schemes are one of the fastest growing

flexible benefits with growth expected of 122% (Source: Employee

Benefits/Towers Watson Flexible Benefits Research 2014)

• 22% of employers plan to offer salary sacrifice by flex (Source:

Employee Benefits/Towers Watson Flexible Benefits Research

2014)

• In 2013 ACFO surveyed fleet decision-makers who collectively

operated more than 19,000 company cars and employed more

than 100,000 staff and found that 36% offered a salary sacrifice

car scheme (up from 20% the previous year)

Santander Case Study

Why Salary Sacrifice? Making Santander a more rewarding place to work

Key objectives

Making

Santander a

more rewarding

place to work

Over 1,100

vehicles ordered

so far

Promote

Santander’s Go

Green strategy

Average

emissions just

99g/km

compared to

average UK

emissions of

128.3g/km

Provide a cost

effective ‘all

employee’

Benefit

Savings versus

retail and all-

inclusive price is

as low as £140

per month

Improve driver

safety

Brand, new safe

cars and licence

checks each year

Increase the

competitiveness

of the overall

reward package

First major bank to

roll out salary

sacrifice and very

positive feedback

from long serving

employees and

new recruits

1 2 3 4 5

Scheme Trends

• Prices - most popular price £225 per month

• 33% of employees surveyed were more likely to order a hybrid or electric

car now than 12 months ago

• Renewal rates - 72%

• Based on 1,100 orders and a renewal rate of 72% (provided this rate

continues) approx. 792 employees are effectively committing to stay at

Santander for up to 6 years

• 29% of employees surveyed said that the scheme played a part in their

decision to stay at Santander

It is assisting with retention

1) Audi 2) Ford 3) BMW 4) Kia 5) Mercedes

Top 5 Manufacturers Ordered

Take-up over time

0

200

400

600

800

1,000

1,200

1,400

No

v-1

1

De

c-1

1

Jan

-12

Feb

-12

Mar

-12

Ap

r-1

2

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

De

c-1

2

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

De

c-1

3

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

De

c-1

4

Jan

-15

Feb

-15

Source: Survey of 150 Santander UK All Employee Car Scheme Drivers, February 2015

Communication

- what do employees want?

0

20

40

60

80

100

120

140

160

Have seen/heard

Would like to see/hear

Worked well:

• Emails

• Go Green road shows

• Ride and Drives

• Static car programme

• Intranet banner adverts

• Branded vehicles

outside offices

A Ride and Drive event

At Leicester

Communication challenges and

key learnings

• Employees spread over 100s of sites across the UK

• Within branches employees do not use work emails

• There is no exact product similar to Salary Sacrifice Cars in the retail market –

employees do not always compare like-for-like and appreciate the value

• Educate employees about value – how good a deal they are getting versus high

street

• Educate employees about looking after their cars – service and maintenance,

checking tyres etc.

• Employee data is crucial

• Open up as many communication channels as possible

The future of the scheme

• Aim to continually improve engagement, take-up and renewals rates

• More events throughout 2015 including ride and drives across 2 large sites

plus a Go Green roadshow

• More email offers and competitions – emails have been opened up to a

wider distribution

• Improving processes - Zenith has worked along Santander to improve

payroll functions e.g. take ad hoc recharges from salary such as fines

• Expanding Santander team at Zenith to cater for increased enquiries and

continuously growing fleet

• Significant increase in hybrid and electric cars being ordered

@zenithvehicles