Legal support for electric car salary sacrifice scheme

Overview of the scheme

A client approached Birkett Long to assist in implementing a salary sacrifice scheme that would offer electric vehicles (EVs) to its employees. The scheme was designed for employees who opted in, allowing them to lease electric cars through a salary sacrifice arrangement. The vehicles would be provided by a third-party provider, with employees required to sign contractual agreements with both the provider and the client. These agreements introduced various obligations that had to be carefully reviewed to ensure they did not inadvertently create issues for the employer-employee relationship or cause any commercial detriment to the client.

Objectives of the scheme

The main goal for the client was to establish a clear and legally sound framework for the scheme. 

It was crucial to ensure that the legal obligations of employees opting into the scheme were fully understood and that the client, as the employer, met its responsibilities. Another significant concern was ensuring that the obligations created by the third-party electric vehicle provider did not interfere with the employer’s relationship with its employees. The salary sacrifice structure needed to be carefully reviewed to ensure that employees’ wages did not drop below the National Minimum Wage, as this could lead to legal issues. It was the employer’s responsibility to ensure that wage deductions were compliant with the law, maintaining fair pay for all employees.

From a commercial perspective, the client also wanted to understand the terms of the agreement with the third parties involved and how that would affect them and their liability if their employees breached the terms of the salary sacrifice scheme.  A breach of the contract could result in financial losses to our client, so it was important that this was understood from the outset. 

The role of Birkett Long

Karen Morovic, a senior associate solicitor in Birket Long’s BLHR and employment team, provided crucial legal advice and support to the client throughout the implementation of the electric car scheme. The legal team’s role involved reviewing the contractual documentation provided by the third-party car provider. The focus was on identifying any potential issues or obligations that could negatively impact the legal obligations of the client to its employees. The team ensured that the documentation from the third party was fully aligned with the client’s legal duties, helping to mitigate risks and ensure compliance with employment law. 

Birkett Long offers support across various legal teams, and to review the commercial elements of the electric car scheme, Karen Morovic was able to draw on the expertise of the firm’s Business Team. Chloe Vertigen, a commercial contracts and data protection solicitor, supported the client with a review of the terms and provided a summary of the key terms, their effect and risks, and steps the client could take to mitigate risks. 

Legal and regulatory considerations

Several legal and regulatory considerations were vital to the success of this project. The most critical of these was ensuring that the salary sacrifice scheme did not cause employees’ wages to fall below the National Minimum Wage, as this could lead to violations of employment law. Additionally, it was necessary to review the third-party documentation to make sure that the obligations imposed on employees by the car provider did not conflict with the client’s responsibilities. The legal team’s careful scrutiny of these factors ensured that the scheme was fully compliant and aligned with both employment law and the client’s objectives.

The business impact

The successful implementation of the salary sacrifice scheme provided significant business benefits. It allowed the organisation to offer an attractive employee benefit that not only improved staff morale but also contributed positively to the environment by encouraging the use of electric vehicles. This initiative helped the company reduce its carbon emissions, supporting its sustainability goals and enhancing its reputation as an employer that cares about the environment and its employees.

Client Perspective

The client was very satisfied with the legal support provided by Birkett Long. The comprehensive review of the third-party documentation gave the client confidence that its legal obligations were clear and reasonable, which ultimately helped ensure the scheme’s success. The legal team’s involvement provided peace of mind that all aspects of the salary sacrifice scheme were compliant with relevant laws and regulations, allowing the client to offer this new benefit to employees without concern. The client also appreciated the proactive approach in addressing potential legal risks and ensuring that both the employer’s and employees’ rights were protected.

In conclusion, Birkett Long’s thorough legal advice played a vital role in the smooth implementation of the electric car salary sacrifice scheme, ensuring that it was both legally compliant and beneficial to the client, their employees, and the environment.