Business Leasing vs Salary Sacrifice. Which is best for your business?

Salary Sacrifice vs Business Contract Hire: Which is best for your business?

Did you know 70% of employees are more likely to work for a company that contributes to a greener planet?

There are many ways to help your business hit its net-zero goals while keeping costs down - but which option fits your needs best? Let’s dive into the two most popular leasing options: salary sacrifice and business contract hire.

Salary sacrifice is a cost-free employee benefit that allows workers to lease a brand-new electric vehicle by sacrificing a portion of their gross salary. This means they save on Income Tax and National Insurance, cutting up to 40% off the cost of their EV while your business boosts employee satisfaction and retention.

On the other hand, business contract hire (BCH) offers businesses a simple way to lease EVs for a fleet. The leases are held by your company, not individual employees, allowing you to move vehicles around as needed. It’s perfect for businesses transitioning to electric fleets or already operating company car schemes.

The main difference? Salary sacrifice is tied to an individual employee’s lease, while business contract hire is a flexible lease held by the employer. BCH provides more versatility for company use, while salary sacrifice is focused on employees getting their own EV at a lower cost.

Salary sacrifice is a win-win for employees and businesses alike. Workers get a brand-new electric car with no upfront costs, fully inclusive packages (including insurance, maintenance, and breakdown cover), and savings on Income Tax and National Insurance. As a business, you boost recruitment and retention while saving 13.8% on National Insurance contributions.

Plus, with Octopus EVs salary sacrifice scheme, your employees are protected with early termination coverage in case of financial hardship, ensuring you’re not just supporting green travel, but also employee well-being.

Business contract hire, however, allows businesses to lease a fleet of EVs (including vans) with flexibility on mileage and terms. For VAT-registered companies, there’s a bonus: you can reclaim up to 100% VAT on maintenance and, if the vehicle is for business-only use, the entire lease cost. And since all EVs benefit from lower Benefit-in-Kind rates, both schemes keep costs down.

When it comes to costs, salary sacrifice is paid from employees' salaries, making it a straightforward and cost-efficient option for them. Business contract hire, however, is funded by your business, offering more flexibility for fleet management.
We’ve broken down the costs below:

If your employees earn a salary and will use the vehicles for both personal and business purposes, salary sacrifice is a hassle-free way to get your team driving electric. With leases lasting up to four years, your team can be on the road in just 2-4 weeks.

For businesses looking to manage a fleet, business contract hire is the way to go. With flexible terms and no residual risk, it’s ideal for those who primarily take dividends or for businesses with significant fleet requirements.

Definitely - you don’t have to pick just one. Many businesses adopt a hybrid model, offering both salary sacrifice and business contract hire under one credit line. It’s the perfect solution if you want the best of both worlds.