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A GUIDE TO SALARY SMART FOR
EMPLOYERS 25+
Introducing Salary SmartSalary Smart is an arrangement where an employee gives up part of their future earnings or bonus in
exchange for a non-cash benefit.
As the salary is being ‘exchanged’ rather than paid from the gross amount, the employee does not pay
Income Tax or National Insurance Contributions (‘NICs’) on the exchanged amount. In addition, an
employer doesn’t pay NICs on the amount of salary exchanged either. The exchanged amount can then
be used to provide the employee with a benefit, in this case a company car.
Employers have the option to retain the NIC
savings. Typical annual employer savings being
circa £100,000 for every 200 employees
participating in this benefit.
An employer cost neutral or cost saving benefit Each scheme is designed to meet the individual needs of the employer.
An employer has the option of either passing the full employer Class 1A NIC’s savings to the
employee within the monthly salary exchange amount or retaining the savings.
Importantly employer administration is avoided since all processes and reporting is fully automated and
outsourced via our web-based ‘self service’ portal.
“Salary Smart is a tax efficient method for
both employers and employees to reduce
their carbon footprint”
Some customers:-
“Simple, hassle-free motoring”
Enhances employee benefits package
Attractive key employee retention motivator
Insurance includes business travel
Encourages low Co2 cars to support green
credentials
Administration fully outsourced
Generates national Insurance savings
Helps meet duty of care requirements
Employer lease payments cease if employee
leaves
No employer risk for unpaid leave events
Web based solution reducing administration
Cash-flow neutral - monthly to match employee
payroll deduction frequency
Business mileage reimbursement savings for cash
allowance drivers
Employer Key Benefits & Features
An Employer Risk Free Benefit
Eligible Employees
Unlike other benefits such as cycle to work and child care vouchers, an employer is not legally required to offer the benefit to all employees and can exclude certain segments of the employee population where perhaps due to type of role, employee turnover rates are higher than other areas of the organisation.
Risk Event Risk Mitigation
Unpaid Leave Events (Maternity, Paternity, Adoption, Sickness)
‘Credit back’ system on finance rentals (up to 9 months of statutory pay event) upon employee returning to work.
Employee Voluntary Leaver Nil risk - Employer lease payments cease if employee leaves and car is returned.
End of lease contract damage buffer To cover non insurance ‘incidental’ damages (dents, scratches, scuffs, rips, etc.)
Tax year
2013/14
Before
Exchange
After
Exchange
Monthly Earning £2,000 £2,000
Salary Smart n/a -£229
Employee Income
Tax -£243 -£197
Employee NIC’s -£163 -£135
Benefit in Kind n/a -£25
Net earnings after
tax and NI £1,594 £1,414
Net Salary SmartExchange
n/a £180
Employee tax savings. Standard income tax rate employee example:-
Employee is a basic rate tax payer earning £24,000 a year.
Employee agrees to a salary exchange for a new CitroenDS3 Hatchback 1.2 VTi Dsign 3dr Manual.
The Salary Smart amount includes all routine servicing,repairs, tyres, MOT and fully comprehensive insurance.P11d Value of £12,645 with Co2 104g/km.
Higher income tax rate employee example:-
Employee is a higher rate tax payer earning £48,000 a year.
Employee agrees to a Salary Smart exchange for a newCitroen DS3 Hatchback 1.2 VTi Dsign 3dr Manual.
The Salary Smart amount includes all routine servicing,repairs, tyres, MOT and fully comprehensive insurance. P11dValue of £12,645 with Co2 104g/km.
Both the above examples assume that the employee:
Has a personal allowance of £9,440 a year (so they pay tax on any amount earned above the allowance)
Pay NICs on any amount earned over £9,440, this is the ‘primary earnings threshold’ for tax year 2013/14. Please note: This assumes the NIC rate for
employees is 12% (standard rate tax payer) and 2% (higher rate tax payer).
The above are indicative examples only.
Tax year
2013/14
Before
Exchange
After
Exchange
Monthly Earning £4,000 £4,000
Salary Smart n/a -£229
Employee Income
Tax -£752 -£660
Employee NIC’s -£348 -£343
Benefit in Kind n/a -£51
Net earnings after
tax & NI £2,900 £2,717
Net Salary SmartExchange
n/a £183
Brand new cars delivered to employees anywhere in the UK.
Employees benefit from our corporate buying terms.
No deposits or set up fees.
Fixed budgeting – Fully inclusive of sup-ply, servicing, maintenance repairs, tyres, European RAC Cover, road tax, fully comprehensive insurance (incl. spouse, business travel) fixed for the term (usually 2 or 3yrs). Just add fuel!
No credit agreement or finance checks.
A tax efficient way of acquiring a new car as the deduction is from gross salary
VAT Efficient – VAT on the purchase price is fully recovered by Salary Smart.Also, VAT is recovered by the employer on any servicing, maintenance & tyres.
Service Assist - Collection and return service for repair and servicing. Avoids employee inconvenience & downtime of having to take the car to the garage.
Access to over 5,000 car makes, models and specifications to choose from.
Easy to use ‘self service’ web portal supported by dedicated telephone and email support, assisting employees every step of the way.
Employees can choose up to 3 cars.
Up to 2 further named drivers can be included on the insurance policy which can include children as long as they reside at the same address.
Intangible savings in the time, money and hassle often involved in running a car.
Key Employee Benefits.
1. Policy Creation Define and agree scope
Identify & agree policy issues
Identify and agree eligible employ-
ee population
Identify and agree key stakeholders
2. Planning & Design Initial Scheme Design
Review and Feedback
Finalise Scheme Design
Develop requirements and
recommendations
Employer approved sign off
3. Launch Scheme Multi ‘on site’ employee road
shows
Management seminars
Electronic and Postal marketing
Telephone and Email Information
Desk
ey
to 12 weeks
A robust, structured
approach ...
4. Automated Car Order Secure registration
Easy On line ‘self-service’ employee quotations
Fully automated car approval and order process
Fully automated employment contract variation
Informative welcome packs with each car delivery
5. On-Going Dedicated Support ‘One call’ telephone number for servicing, repair, breakdown and tyres
Text servicing reminders
Continual support via telephone or email
Dedicated account manager
to launching a
benefit in 6
A robust, structured
Salary Smart is a
comprehensive outsourced solu-
tion that incorporates everything
an organisation needs to operate
a successful car salary sacrifice scheme.
We have a proven track record of
implementing and managing car
salary sacrifice arrangements
across private, public and not for
profit sectors.
Employer Benefits
Branded Web Portal
Promotes employee loyalty & retention
No employer cost
Administration fully outsourced
Day to day employee helpdesk
Supports carbon footprint
Risk mitigation for leaver events
Risk mitigation for unpaid leave events
Employee self service via web portal
Generates class 1A NIC savings
Frequently asked questions
On what basis is the car provided to the employee? An employer enters into an agreement with our provider who are supplies
and manages cars ordered under a salary sacrifice arrangement. When an
employee has chosen a car, the employer enters into a lease agreement for
the car and will then provide it to the employee under the salary sacrifice arrangement. The car is a “company car” for tax purposes and will be treated
as a benefit in kind.
Are all employees entitled to this benefit? No, unlike other benefits such as cycle to work and child care vouchers the em-
ployer is able to choose segments of the employee base it wishes to offer this
benefit to, defined as ‘eligible’ employees.
What’s the general definition of eligible employees? Usually eligible employees are defined as being:-
Full time
Aged 21 and over
A minimum 2 years employment with their employer
Possess a full driving licence
Are there any employer costs? No, the scheme is designed to be either employer cost neutral or cost saving.
What kind of savings can an employer make? An employee’s pre-tax salary will be lower. This results in a reduction in em-
ployer national insurance contributions.
Typical employer national insurance contribution savings being:-
* A Salary Smart car attracts company car Employer Class 1A NIC on the Benefit in
Kind. However, this amount is recompensed within the employees gross salary exchange
amount when it is calculated.
As a result an employer can chose to reinvest part or all of employer NIC savings resulting
from the employees gross monthly reduction in salary to help maximise take up levels.
How long does it take to launch a salary smart scheme ? With full employer support between 6 and 12 weeks usually.
How user friendly is the self service web portal? The system has been designed to be simple and straightforward to use with the
minimal key strokes.
What cars are available? Salary Smart can supply any make or model from any manufacturer
through its online web portal.
How competitive are the car lease payments? Salary Smart combine corporate buying terms, funding of the net of VAT car price and removal of the car residual element from cash flow to ensure
consistently competitive pricing.
The employee also has the option of an affordability button which enables them
to instantly receive quotations on cars that fall within their affordable price
budget.
Our ability to generate income is solely dependent on packaging an offer that
encourages an employee to order a car.
What’s included in a Salary Smart scheme?The Salary Smart scheme provides employees a fixed hassle-free motor-ing
solution leaving them to budget for only fuel. The scheme includes the
following –
Source, supply and delivery anywhere in UK
All routine servicing, MOT and mechanical repairs at any franchised local
dealership
Unlimited replacement tyres (including mobile fitting service) home or
office), batteries and exhausts
5 Star European Roadside Assistance (incl. European cover & 48hr relief
vehicle)
Accident management including claims handling, repairs and courtesy car
Annual road fund licence for the duration of the term
Annual driving licence checks
Fully Comprehensive Insurance (incl. spouse, business travel,
windscreen /glass replacement (excess applies)
24/7 Driver Helpline (including collection/delivery of vehicle for any ser-
vicing and repairs)
How does the Insurance work? Our web portal calculates postcode driven insurance premiums and is fully
automated through the quote process. Insurance is fully comprehensive for all
drivers with the named driver and one other family member automatically
covered for business use. The costs are fixed for the period of exchange even if
own fault accidents occur, points are acquired (up to the legal limits) or the
employee moves home.
Employers can also choose to use their own fleet insurance if they would prefer
to pass the benefits onto their employees (An excess for accidents & glass
replacement will apply).
Is your insurance mandatory? Yes for a couple of reasons:-
To be compatible with a salary smart arrangement the insurance premium
is fixed for the duration of the period (up to 3 years).
Ensures that duty of care obligations to employees are consistently
complied with.
What can I expect the benefit uptake to be? Take up levels vary depending generally how proactive each employer is in sup-
porting the initial and on going marketing communication. These can be typically
as low as 3% or as high as 15% of the eligible employee base.
Average Employee Salary Smart Ex-change Amount (per month)
£300.00
Total Annual Exchange Amount £3,600
Total No of Employees take up x200
Total Salary Exchanges per annum £720,000
Employer NIC rate 13.8%
Annual employer NIC savings £99,360*
What happens during an unpaid leave event? During periods of maternity, paternity, adoption or long term sick leave an
employer is legally obliged to continue providing all of the contracted employee
benefits. These are typically referred to as major life events.
Salary Smart will continue to invoice the employer for the car on a monthly
basis. Where an employee returns to work after a period of unpaid leave we
will retrospectively credit back the finance rental up to a maximum of 9
months, if processing the salary exchange amount would mean that the
employee’s monthly pay would take them below National Minimum Wage.
What happens in a resignation event? The employers lease rentals cease at the date the employee leaves and the car
is returned.
.
What happens if an employee wants to end an
agreement early? Employees are committing to a salary smart agreement normally over 24 or 36
months. If they decide that they no longer want the car they can obtain an early
termination quotation at any time after commencing the salary exchange
arrangement. The calculation will be based upon 60% of the outstanding
finance lease payments if terminating after 6 months or 70% of the outstanding
finance lease payments within the first 6 months.
This will be collected from the employer on behalf of the employee and the
employer will recharge the equal amount to the employee. The car will also be
required to be returned.
Next steps... To find out more about setting up a Salary Smart scheme you can email us at
Who are Salary Smart?Salary Smart is backed by one of the UK’s largest independent leasing and fleet
management companies that operate nationally with over 500 corporate customers in
the private, public & not for profit sectors.
Growth has been achieved by being at the forefront of car based employee benefits,
developing new ideas, products and services through innovation and shared thinking
with customers. Our aim is to provide successful employee car benefit solutions using
informative easy to understand communication principles.
Working with employers directly and via employee benefit companies and professional
advisors we have experience in designing, implementing & managing car salary exchange
schemes that are tailor made to suit the individual needs of our customers.
Salary SmartYork House Ashby de la Zouch LE65 2U
Tel 01530 229725Email [email protected]
Joining the scheme was simple and easy
Now I don’t need to worry about any unexpected bills
It was really easy and I had my new car delivered within 2 weeks
Fixe
d m
on
thly
amo
un
t co
vers
eve
ryth
ing
The scheme has allowed me to reward loyal staff members
I have a cash allowance & was able to make my money go further
I lo
ve m
y n
ew c
ar -
than
k yo
u !
The insurance included unlimited business mileage
No matter what the problem, I know help is one phone call away
I was
su
rpri
sed
ho
w lo
w t
he
pay
me
nts
wer
e
The w
eb p
ort
al w
as r
eally
eas
y to
use
The staff were really helpful & knowledgeable
I was worried about the risk but CSE took care of that
This
is m
y fi
rst
new
car
- t
han
k yo
u !
I was able to order a car for my partner & insure my son too
We had a high take up rate Si
mp
ly P
erf
ect
!
Helpful staffI g
ot
a gr
eat
dea
l an
d e
very
thin
g is
incl
ud
ed
Such a simple process for the employee
Jan 2014
Salary Smart is part of Auto Replace Limited
