How does the salary sacrifice car scheme work?

A salary sacrifice car scheme is an arrangement where an employee gives up part of their gross salary in return for a new car. The reduction is taken before tax and National Insurance, which lowers the employee’s taxable income. As a result, the employee typically pays less tax, and in many cases the employer also benefits from lower National Insurance contributions.

Large organisations often want a clear, simple view of how the scheme operates from start to finish.

1. Employee chooses a car

Employees can select from a wide range of new vehicles. Organisations often set eligibility rules, cost caps or policy guidance to manage risk and ensure fairness across the workforce. While electric vehicles are a common choice, a full range of vehicle types is usually available.

2. Salary adjustment is made through payroll

Once the vehicle is chosen, an agreed amount is deducted from the employee’s gross salary each month. Because the deduction is taken before tax and National Insurance are applied, the employee usually pays less of both.

3. Benefit in Kind (BIK) is applied

As the car is treated as a benefit, the employee pays Benefit in Kind tax. BIK varies based on vehicle type, emissions and HMRC guidance.

Large organisations often provide clear internal resources to help employees understand how this works.

4. The scheme package is provided

A typical salary sacrifice car package includes:

• Servicing
• Maintenance
• Breakdown cover
• Tyres
• Fully comprehensive insurance
• Roadside assistance

These inclusions keep costs predictable for staff and reduce administration for the employer, as most management sits with the provider. If you want to see how these savings apply to your own salary, try our salary sacrifice car scheme calculator.

As part of the Access Engage employee benefits platform, our salary sacrifice car scheme is administered by Tusker, a leading UK provider of car benefit solutions. Tusker’s car benefit scheme model helps large organisations offer a compelling car scheme without taking on heavy administration. Tusker have 16+ years of experience with administering these schemes.

In our webinar, Tusker explained how they support Access customers, manage risk and make it simple for employees to get into a new car.

During the session, Donna Harris, Partnership Manager at Tusker, summarised why the relationship works so effectively:

“This is all Tusker do. We specialise in this benefit alone and we have been for over 16 years.”

With more than 400 team members now dedicated to delivering and supporting the scheme, their expertise helps large organisations offer the car benefit without taking on heavy administration.

To help employees move quickly through the process, Tusker follow three clear steps, all fully integrated with the Access benefits platform.

1. Tusker funds and supplies the vehicle

Tusker purchases the car and leases it to the employer, meaning businesses do not need to manage loans, credit arrangements or vehicle procurement. As explained in the webinar:

“Tusker funds the vehicle and we actually lease it to the employer.”

This structure keeps the process straightforward and ensures employees do not undergo credit checks or pay deposits.

2. The employee completes a simple back‑to‑back agreement

The employee signs an agreement that mirrors the lease terms, taking on the normal responsibilities of using the vehicle. This agreement is the basis for the salary adjustment that enables the tax and National Insurance savings. As Donna put it:

“The employer then gets their employee to sign a binding back‑to‑back agreement… Because the employee has signed up to that, their gross salary is reduced, meaning they can take advantage of tax and NI savings.”

3. The car is delivered and fully supported

Once approved, employees receive their vehicle along with a fully managed motoring package. This includes servicing, tyres, insurance, breakdown support and accident management.

James Main from Access highlighted why this makes such a strong employee benefit:

“The all‑inclusive motoring was what sold me… insurance, servicing, tyres, everything. I got the car within four weeks as well.”

For many large employers, the combination of predictable monthly costs and comprehensive support significantly reduces the questions HR teams would otherwise face.

Many employees value the scheme because it provides:

• Lower tax and National Insurance contributions, due to deductions being made before statutory calculations
• Predictable monthly costs, supported by an all‑inclusive package
• Access to new vehicles, which can improve safety and reliability
• Simple management, as ordering, administration and support are handled externally

For larger organisations with diverse workforces, these benefits are particularly valuable because many employees need dependable ways to travel to the workplace, client sites or field locations.

Read our blog to discover how UK employers are using salary sacrifice to make National Insurance savings.

From an employer perspective, a salary sacrifice scheme can deliver significant value at scale.

Financial advantages

Because the employee’s taxable salary is reduced, the organisation often saves on employer National Insurance contributions. While savings per employee may seem modest, the impact grows considerably when hundreds or thousands of employees participate.

This makes salary sacrifice schemes particularly cost‑effective for large organisations.

Improved employee experience

Providing accessible benefits is increasingly important in competitive hiring markets. A car scheme can strengthen your benefits package and help position your organisation as forward‑thinking and supportive.

Low administrative burden

Most of the administration, including ordering, maintenance scheduling and support, is managed by your employee benefits provider. This reduces workload for HR and Payroll teams, even at high participation rates.

Many large organisations find that salary sacrifice car schemes deliver a good return when adoption is strong. They help:

• Reduce the overall cost of providing benefits
• Support employee retention
• Complement broader mobility or workforce strategies
• Offer a benefit with clear, quantifiable value

Employees benefit from access to new vehicles at competitive monthly rates, and employers benefit from National Insurance savings and improved staff satisfaction.

Before launching the scheme, HR and Reward teams should review a series of operational and policy considerations.

Eligibility and workforce segmentation

Organisations may set clear rules around who can participate. This includes deciding whether the scheme is open to part‑time staff, new starters, or employees on fixed term contracts.

Payroll, contracts and risk management

Large organisations must ensure their payroll systems can support salary sacrifice adjustments. Clear communication is also needed to explain how early termination charges work if an employee leaves.

Choosing a provider

Consider providers with experience supporting enterprises with complex workforces. Look for strong administrative support, employee communication resources and predictable cost structures.

A salary sacrifice car scheme is a practical and cost‑effective way for large businesses to strengthen their employee benefits package. It creates predictable, manageable costs for employees and measurable National Insurance savings for employers. When implemented through a dedicated employee benefits provider, the scheme can be introduced with minimal administrative pressure and strong employee uptake.