Regaining Control of Your Employee Car Benefit
How dealers can use an ECO Scheme to provide a sustainable equivalent to a pay increase and boost bottom-line profitabilityTags: Automotive ECOS
A Solution for Every Driver
The decline in new car sales is a concern for many across the industry. According to the Society of Motor Manufacturers and Traders (SMMT), the UK new car market declined by 2.9% year to date in 2019. With motor retail groups experiencing downwards pressure on profits, their employees are now also starting to feel the pain of these challenging conditions.
The latest BDO Motor Salary report shows that once management pay is excluded, there has been an average decrease of 3% in dealer pay, with a significant drop in commissions and incentives the main reason for the reduction.This is causing mounting pressure on dealers to enhance other rewards to keep their best people, particularly in key skill sets.
Providing an employee with a company car is a benefit that has stood the test of time within the motor retail sector. However, due to company car tax changes the landscape has shifted significantly, with continued increases in taxation escalating costs for both employers and their employees to a point where the benefit has for many become unsustainable.
Those franchise dealers looking to the future are seeking alternative employee car benefit solutions which allow them to provide a sustainable equivalent to a pay increase, regain control of employee benefits and vehicle selection and boost bottom-line profitability.
Discover a scheme that works for your business and your employees
Employee Car Ownership Schemes allow dealers to regain control and determine the level of benefit they provide for their employees
ECO Schemes are unique in that they can be tailored to meet the requirements of each dealer group, ensuring that scheme design is aligned to business objectives. Below, we examine how dealers can meet the future requirements of their business whilst maximising the benefit for their employees:
Protect employees from the rising cost of company car tax
A structured ECO Scheme provides a car benefit to an employee in a way which means that company car provisions do not apply. This removes the restrictions of company car tax and National Insurance and all costs are fixed over the term of the agreement.
Boost staff retention in key skill sets and job roles
Providing that it is structured compliantly and tax efficiently, an ECO Scheme can offer an enhanced employee benefit at a lower cost than alternative solutions. Company car drivers can enjoy significant savings in comparison to their existing arrangement and the scheme can be made available to roles such as Master Technicians, enhancing the overall rewards package and crucially boosting retention within key skill sets.
Optimise profitability whilst enhancing the benefit to employees
A dealer can significantly reduce write down costs and deliver material savings on Class 1A National Insurance whilst controlling repayments to enhance the employee benefit at no additional cost to the business.
Control used car stock and meet demonstrator requirements
In a company car environment vehicles are all too often selected based on CO2 emissions, employee affordability and current availability. By enhancing both planning and control over all aspects of the solution, ECO Schemes offer dealers the potential to make savings on their employee benefit and demonstrator fleet, while also delivering the most profitable and desirable used car stock.
Reduce administrative burden
Company car reporting, fuel card schemes and other solutions can be resource-intensive and time consuming. A correctly structured and operated ECO Scheme can add value, deliver control and flexibility to employers whilst removing the limitations and burden of a traditional car benefit.
Creating a tiered benefit to deliver a solution for every driver
As ECO Schemes allow the employer to control the level of benefit the employee receives, the benefit can be tiered to complement the management structure of the business or opened out to the wider workforce; generating incremental registrations and creating an additional savings stream.
The dealer determines the solution for each individual employee, creating a bespoke benefit; for senior management whose employment package includes a company vehicle right through to those employees who would not normally be entitled to a car benefit.
Utilising your car scheme as a versatile business planning and budgeting tool can help you save money and keep key employees feeling valued and motivated.
ECOS Savings Growth – Control and share the Benefit
Over recent years, the cost of providing and driving a company car has risen sharply as a result of scheduled increases to benefit in kind rates and WLTP. This has significantly increased the savings that can be enjoyed by utilising an Employee Car Ownership Scheme.
The unrivalled savings available within an ECO Scheme create an opportunity for Dealers to utilise this to boost bottom-line profitability, whilst providing a competitive and desirable employee reward.
Using a CBS ECOS, dealers have the flexibility to choose whether to allow the employee to enjoy the full savings of an ECO Scheme, or to redistribute some of the savings and maximise the benefit for the employer. Employees continue to be shielded from increases in company car tax and enjoy a substantial reduction in cost in comparison to their previous arrangement.
In the example below, the employee and employer save almost £6,000 per annum in comparison to a traditional company car arrangement.
As illustrated, not only does an ECO Scheme remove the requirement for employer National Insurance Contributions, further savings can also be enjoyed by way of the employee’s car contribution. At the same time, the employee remains £2,000 better off per annum when compared to company car tax, a welcome enhancement to the employees existing benefits package. Using the flexibility of a CBS scheme, the employer can control and determine the distribution of financial savings.
If the employer did this for every company car driver within the business, the savings generated could be substantial. This could be tailored by department, job role, or managerial tier, offering additional enhancements to the standard benefit where necessary.
Many dealers will be looking ahead and anticipating a challenging period for the industry. Optimising savings whilst being more efficient with the delivery of staff benefits, thus retaining the best employees rather than having to recruit replacements, is critical to success.
Why Car Benefit Solutions
- With 17 years of experience in the design, implementation, and management of Employee Car Ownership Schemes, Car Benefit Solutions (CBS) are recognised as the experts in the creation of cost efficient car schemes.
- CBS offer comprehensive full service solutions unparalleled by any other provider, with ongoing support at no additional cost.
- A team of over 150 experts, including 25 field based employees, are dedicated to implementing and operating CBS schemes. Our people are on hand to support, train and advise employers to achieve the maximum value from their CBS ECOS with complete peace of mind.
We can design a bespoke scheme that delivers cost efficient savings to your business and your employees. Contact CBS today to discuss how we can make a CBS ECOS work for you.
You can download a PDF of this white paper here