Electric Vehicles Salary Sacrifice Scheme
North Lanarkshire Council · 13 September 2023
Back to Finance and Resources Committee — 13 September 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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North Lanarkshire Council Report Finance and Resources Committee Does this report require to be approved? ☒ Yes ☐ No Ref FW/PM Date 13/09/23 Electric Vehicles Salary Sacrifice Scheme From Fiona Whittaker, Chief Officer (People Resources) E-mail WhittakerF@northlan.gov.uk Telephone 07973 729532 Executive Summary The purpose of this report is to provide Committee with the final plan to introduce an electric car scheme through our salary sacrifice employee benefits programme. This follows a report to Finance and Resources Committee in March 2022, where the Committee agreed in principle to move forward with the procurement and development of a full scheme, subject to a further report outlining the procurement and contractual process involved. Since the approvement of the scheme in principle, work has been underway to secure a contract to provide an Electric Vehicles scheme and this report details how the contract has been awarded via our existing employee benefits contract arrangements and the timescales for the full implementation of the Council’s first electric vehicle salary sacrifice scheme. Recommendations It is recommended that the Finance and Resources Committee: (1) Endorse and approve the variation to our existing call-off contract award for employee benefits to include the electric car scheme, awarded via Edenred (through Crown Commercial Services RM6133) to bring all employee benefits together under one contract for an Online Employee Benefits Platform to include Employee Discounts, Childcare Vouchers, Cycle to Work and a Green Car Scheme. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (23) Build a workforce for the future capable of delivering on our priorities and shared ambition
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1. Background 1.1 Committee will recall that a report was submitted to Finance and Resources Committee in March 2022 detailing plans to enhance our employee benefits offering to include an electric car scheme for employees and seeking a mandate to proceed with the development of a full scheme. 1.2 The Council is committed to maintaining an employee benefits package which is valued and supports us to attract, retain and engage our staff. It is also important that our employee benefits package is aligned to our ambition and priorities, workforce policies and management practices. 1.3 Our employee benefits package is therefore underpinned by the following principles: it is fair and inclusive by having a range of options to accommodate the diversity of the workforce, it support staff to have a good work life balance, it provides choice to staff based on their needs and personal circumstances, it is attractive and supports the attraction and retention of staff and finally it is both easy to understand and easy to access. 1.4 Taking this into account whilst also ensuring we align with national policy drivers and the Climate Plan (ACT2030), it was proposed that the employee benefits scheme be enhanced to offer employees the opportunity to participate in an electric car salary sacrifice scheme. 1.5 The report updates Committee on the work that has been undertaken to introduce this scheme, focussing on the procurement process and the full plans and benefits associated with the implementation of the scheme. 2. Report 2.1 Following the report to committee in March 2022, extensive work has been undertaken by the Talent and OD team (TOD), Procurement and Legal to identify the most suitable procurement process to implement the electric vehicle salary sacrifice scheme. 2.2 A number of options were identified for route to market including direct award from a 3rd party framework, open tender and varying our current employee benefits call-off contract to include electric vehicles. 2.3 The Council currently has in place a call-off contract with Edenred (through Crown Commercial Services) for the provision of our online Employee Benefits Platform, Childcare Vouchers and Employee Discount schemes. This contract has run successfully for many years with employees realising many benefits from both schemes. In addition to this, the Council also provides a call-off contract to Halfords to provide our Cycle to Work scheme. The contract with Halfords expired on 31 March 2023. 2.4 After evaluating the options above and conducting research to identify a suitable provider of an Electric Vehicle Scheme, it was agreed with our Legal and Procurement teams that the most efficient route to market was to progress with a contract variation to our existing Employee Benefits Platform, Childcare Voucher and Employee Discount schemes call- off contract. This variation would extend the contract to include a Green Car Scheme and incorporate the Cycle to Work Scheme. This approach brings all benefits under one contract. 2.5 On the expiry of the existing call-off contract we would propose to undertake a re- procurement exercise to consolidate all of our required Employee Benefit Schemes into a single contract for a 3-to-4-year period. The contract can be re-tendered together at the expiry date.
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Proposed Benefits 2.6 Introducing an Electric Car Salary Sacrifice Scheme enables the Council to support the reduction of transport CO2 emissions and to provide employees with a brand new fully maintained and insured green energy car at a lower cost than they could normally achieve in the retail market. 2.7 The scheme enhances our financial well-being support for employees to help maximise their income and it develops our reward package in line with good practice across local authorities to support employee engagement and retention by ensuring that financial wellness is an integral part of our overall well-being offer. 2.8 The scheme also allows the Council to realise significant savings from reduced payments for National Insurance and pension contributions. Projected Council savings are detailed in the table below based on a 1% annual employee uptake of EV and ULEV cars. There are currently around 10,000 employees who are eligible to participate in the scheme and we expect uptake to be very positive within the first year. Table 1 – Projected Council savings – 1% annual employee uptake on EV and ULEV cars Car Year 1 employee participants Year2 employee participants Year 3 employee participants NLC cumulative savings EV- 80% uptake 81 163 244 £1,019,078 ULEV – 20% uptake 20 41 61 £188,765 Total 101 204 305 £1,207,841 2.9 Appendix 1 provides a further modelling based on a 0.3% uptake. This low uptake still outlines overall predicted savings in the next three years of up to £363k with a vehicle split of 80% EV and 20% ULEV. Modelling for 0.3% uptake and an equal split of EV 50% and ULEV 50% still outlines overall predicted savings in the next three years of up to £332k. Considerations linked to the scheme 2.10 Elected Members should note that due to the nature of the scheme, there are some qualifying criteria and consideration for employees to be eligible. Firstly, employees must hold a permanent employment contract and secondly, an employee’s position must have a full-time equivalent salary over £26,000 to allow for salary sacrifice deductions which will not take their net salary below current national minimum wage requirements. On that basis, the total estimated employees eligible to apply for the scheme is c10,500. Following the settlement of any future Local Government pay award, this number will likely increase. 2.11 In addition, participating employees will pay Benefit in Kind (BIK) tax in line with HMRC guidelines. The amount paid is set by the CO2 emissions, electric range of the car and an individual’s tax band. Employees participating in the scheme will also receive lower reimbursement payment for business mileage as it is classed as a company car. The current HMRC advisory fuel rates are 4p for electric, 9-13p diesel and 11-19p petrol. 2.12 The scheme is fully flexible, and employees can choose a car from all leading manufacturers and at the end of the agreement will have the opportunity to purchase the car in full, by settling the final payment on the value of the car. Risks 2.13 As outlined in the previous report, the main risks of the scheme sit with the employee through possible additional charges which include but are not limited to installation of an
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electric charging facility on a private driveway, parking tickets, excess mileage above agreed contract levels, insurance excess of £250 and early termination charges. 2.14 The risks to the Council are mitigated primarily by the provider and provisions are available to provide protection against unplanned costs for an employee terminating their contract early including resignation, redundancy, retirement, loss of licence, death in service, terminal illness, TUPE, maternity, paternity, adoption, career break, dismissal etc. Procurement process and implementation timescales 2.15 The majority of the work which has taken place has revolved around the procurement process. In the initial report to Committee in March 2022, it was proposed that the Council would procure the scheme through the NHS North of England Commercial Procurement Collaborative. This framework is used by other Scottish Local Authorities to provide employee benefits. 2.16 On further investigation of this framework and in line with recommendations from our Legal team, it was agreed that this was not a viable option. There were fundamental concerns around use of the framework in Scotland and no scope to align the terms of the framework to Scots Law. Furthermore, as the framework can be classed as a Speculative Framework this is viewed as unsuitable for use as per the Scottish Public Procurement Policy. 2.17 After extensive discussions with our procurement and legal teams and the framework provider Edenred, and in line with the core terms and conditions of the framework, it was mutually agreed to progress with the variation of the existing call-off contract to incorporate the two additional employee benefits. The Contract Variation and Supplier Agreement documents have now been signed off by all parties. 2.18 Each benefit will be subcontracted by Edenred to their approved subcontractor who will deliver and administer our Green Car Scheme and our Cycle to work scheme via our online Employee Benefits Platform. Tusker Direct Limited will our provider for the Green Car Scheme and Halfords Limited for Cycle to Work. 2.19 Collaborative working groups have been established with subject matter representatives from Procurement, Legal and People Resources along with external representatives from Edenred, Tusker and Halfords to jointly develop the implementation plans for each benefit and to establish the necessary operational processes, reporting arrangements and any further development of the online benefits platform to accommodate the new benefits and to ensure their success when they are made available to council employees. 2.20 It should be noted that there are no direct costs to the Council for this contract and the savings which can be realised from this scheme still apply. As mentioned in 2.7 the projected savings and illustrative employee car costs are contained in Appendix 2 and 3 for information. 2.21 The proposed timeline for the Cycle to Work benefit to be available to council employees is w/c 21 August 2023 with the launch of the Green Car Scheme proposed from early October 2023 which is the earliest opportunity following final approval at Committee on 13 September 2023. 3. Measures of success 3.1 The measures of success for this contract include: • all employee benefits can be accessed via one online platform. • numbers of employees taking benefits from the contract increasing. • savings realised by the Council through reduction payments for National Insurance and pension contributions.
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4. Supporting documentation Appendix 1 – Modelling examples Appendix 2 – Projected Council employer savings per car Appendix 3 - Illustrative employee car costs Appendix 4 – FAQ’s Fiona Whittaker Chief Officer (People Resources)
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5. Impacts 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality- and-fairer-scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☒ If Yes, have all relevant financial impacts been discussed and agreed with Finance? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? There are financial savings lined to the provision of this scheme for employees and a projected positive financial impact to the Council. Operational running costs of the scheme will be covered through existing resources. 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☒ No ☐ If Yes, have all relevant HR impacts been discussed and agreed with People Resources? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? Employees taking a car through this scheme will receive a reduced mileage rate in line with HMRC guidelines 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts been discussed and agreed with Legal and Democratic? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒
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If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for significant technology change, has an assessment been carried out (or is scheduled to be carried out) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? The scheme will form part of the incremental change required to enable a reduction of on-road emissions in North Lanarkshire and make progress towards the challenging ambition of net zero emissions by 2030. 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? A full communications plan is being developed to promote the scheme to employees 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services. 5.11 Children’s rights and wellbeing impact Does the report contain any information regarding any council activity, service delivery, policy, or plan that has an impact on children and young people up to the age of 18, or on a specific group of these? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact and the provision that has been made to ensure there has been appropriate consideration of the relevant Articles from the United Nations Convention on the Rights of the Child (UNCRC). If Yes, has a Children’s Rights and Wellbeing Impact Assessment (CRWIA) been carried out? Yes ☐ No ☐
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Appendix 1 – Modelling Example for 0.3% uptake 80:20 vehicle type split with low 0.3% uptake Car Year one employee participants Year two employee participants Year three employee participants NLC cumulative savings EV – 80% uptake 24 29 73 £305,723 ULEV – 20% uptake 3 12 18 £56,629 TOTAL 30 61 91 £362,352 50:50 vehicle type split with low 0.3% uptake Car Year one employee participants Year two employee participants Year three employee participants NLC cumulative savings EV – 50% uptake 15 30 45 £191,077 ULEV – 50% uptake 15 30 45 £141,573 TOTAL 30 61 91 £332,350
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Appendix 2 – Projected council employer savings per car The projected NLC savings detailed below are broken into two parts – Electric Vehicle (EV) and Ultra Low Emissions Vehicle (ULEV) EV Example (Peugeot e-2008 SUV) Tax year Year 1 Year 2 Year 3 P11D value* £34,825 £34,825 £34,825 CO2 & vehicle scale charge 0g/km = 1% 0g/km = 2% 0g/km = 2% Gross salary reduction £470 £470 £470 Class 1 National Insurance saved on salary reduction £64 £71 £71 Pension contribution saving £90 £90 £90 Class 1A National Insurance payable on benefit in kind tax £4 £9 £8 Monthly net saving £150 £152 £147 Annual net saving £1800 £1824 £1764 *P11D values if the taxable value of the car that HMRC base its calculations on. The taxable value of a car is not the same as its cost ULEV Example (Mercedes A Class 24g/km) Tax year Year 1 Year 2 Year 3 P11D value* £32,925 £32,925 £32,925 CO2 & vehicle scale charge 24g/km = 7% 24g/km = 8% 24g/km = 8% Gross salary reduction £481 £481 £481 Class 1 National Insurance saved on salary reduction £66 £72 £66 Pension contribution saving £92 £92 £92 Class 1A National Insurance payable on benefit in kind tax £27 £33 £30 Monthly net saving £131 £131 £131 Annual net saving £1572 £1572 £1536
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Appendix 3 – Illustrative employee costs The examples below provide a cost comparison of one of the most popular EV and ULEV cars (with other Scottish Local Authorities) available on the scheme and the open market costs. Peugeot 2-2008 SUV 0.0 Electric 50kWh 136 Allure Auto
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Mercedes A250e Hatch 5Dr 1.3PiH 15.6kWh 218 SS AMG Line 8G-DCT
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Appendix 4 Electric car scheme salary sacrifice Frequently asked questions – an introduction
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How do I benefit from a salary sacrifice car scheme? A salary sacrifice car scheme is where employees can sacrifice a fixed amount of their salary each pay day in exchange for a brand new car. This supports a greener, more environmentally friendly lifestyle and cost savings. The fixed amount for a car is taken before your income tax and National Insurance deduction which creates significant savings for you. What other impacts does salary sacrifice car scheme have? Most important to note is that participation in salary sacrifice car scheme reduces both employee and employer pension contributions. If you have any concerns regarding the impact that the car scheme salary sacrifice might have on your pension contributions or benefits, you should consult an independent financial advisor. Participation in scheme also means that if you claim mileage expenses this would be at a lower rate of HM Revenue & Customs advisory fuel rates. This is due to the tax implications of the change in the vehicle ownership that you drive. This is again the reason why if you receive the designated user car allowance payment this would end. Who can participate in our salary sacrifice car scheme? All colleagues on a suitable contract length. In addition colleagues salary must be £27,000 or greater so they still earn over the National Living Wage after the sacrificed salary has been taken. This includes any other deductions on top of a car scheme salary sacrifice such as bought leave, childcare, cycle2work or additional voluntary contributions to your pension. What is included with a salary sacrifice car? Fully comprehensive insurance, vehicle tax, replacement tyres, routine servicing, MOTs, break- down cover and lifestyle protection for ending the agreement early under certain circumstances. What isn’t included in the scheme? The car scheme is designed to offer you a fixed price motoring package out with: fuel/charging, fines, engine oil top-ups outside of servicing, insurance excess, personal number plate transfers, damage due to misuse or excess mileage. Is a deposit required for a salary sacrifice car? No deposit is required. The first amount is deducted from the driver’s salary in the delivery month. Your salary sacrifice deduction amounts and timings will be confirmed with you. What's the process for ordering a car? You’ll be provided with access to an online driver portal where you’ll be able to see the cars available, delivery timescales and costs. Once you submit a car request, our Employee Service Centre will get it all set up and approved with the car scheme provider. 20230808Electric car scheme salary sacrifice
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What’s the delivery timescale after my car order approval? The car scheme provider will place the order with the manufacturer who will give an estimated delivery timescale. You’ll be able to monitor the status of your car and will be contacted once the car is in stock and ready for delivery. An average delivery time for a car that’s being built to your specification is 28 weeks. If you’ve ordered one of the cars that’s already in stock then it’s a much quicker process as it doesn’t need to wait for a production slot or shipping date so can often be delivered in as little as 3 weeks. How many makes and models are there? There is a huge selection with almost all manufacturers offering a full range of electric cars. How long can I keep my car? When ordering your car you can choose the length you want the car (24 to 48 months). This commits you to the agreement for that time period. If during the agreement you decide you simply no longer want the car you will be responsible for an early termination charge. What happens if my circumstances change while I have a car? The car scheme includes a level of lifestyle protection. This provides protection for employees experiencing certain lifestyle events. If you resign from NLC your agreement will end and you will be responsible for an early termination charge if you have had your car less than 4 months. Is there a limit on how much mileage I can do? You’ll select the most suitable annual mileage you think you’ll do as part of the order process. If this changes during the agreement, it can easily be updated after 12 months. What happens at the end of the salary sacrifice car agreement? There are 3 options; order a new car, return the vehicle, or to purchase the car for a open market value set in the last three months of the agreement. Can I get a domestic charger installed? We would encourage anyone thinking of ordering an electric car to check with an approved domestic charger installer if one can be connected at your address. This installation can be up to £1,000 which in most cases you will need to cover yourself. We strongly recommend you get three quotes to ensure value for money. See here for domestic chargers funding information.
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Who is our salary sacrifice car scheme provider? Tusker. They’re a carbon neutral, award winning car leasing company who have been providing car benefit schemes for 15 years. Tusker offer over 1000 cars to choose from all by leading manufacturers via an industry leading intuitive online driver portal that enables you to create instant quotes. 20230808 More FAQs on the scheme specifics coming soon