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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