Investing in new technologies and constantly refining policies and procedures are of utmost importance if you want your business to remain competitive.
But these two are just part of a larger equation. Now, more than ever, it is integral for companies to invest in attracting and retaining top talent. This is especially true if your business is in a competitive industry where finding and keeping top performers is a major challenge.
It’s good to know, though, that there are several strategies that you can implement to achieve the goal of recruiting top performers into your company. One particular strategy that may be under your radar is offering novated lease options for your employees.
What is a novated lease?
A novated lease is an agreement between three parties — a company, an employee, and a car dealer.
In this agreement, the employee gets to own the car of his/her choice.
The employer, on the other hand, has the responsibility of paying for the leasing company. The payments are drawn from the employee’s gross salary.
How does it work?
First, your employee finds a suitable vehicle and provides you with a quote from the dealership.
Next, a consultant will draw up a salary package estimate. This estimate will include both the cost of the new car as well as the financial benefit for your worker who wishes to buy a new car.
Both the employer and employee must agree to the terms of the salary package estimate.
Upon reaching an agreement, the employee needs to file a financial application which will be sent to the dealer.
Next, the employer will need to sign all the related documents, including those for the financing and novation.
Your employee, on the other hand, will need to submit the required documents.
Once the loan provider and dealership reach a settlement, the employee will receive a call from the dealership when the car is ready.
The employer will then need to forward the payments of the car to the finance company.
How can an employee benefit from a novated lease?
One of the more attractive reasons why an employee should buy a car through a novated lease is that he or she can end up saving more. The payments for the car are deducted from an employee’s salary before taxes have been deducted.
If you are an employee, this simply means that you will have lower tax deductions. As a buyer, you will retain the option to choose the vehicle you like. Your agreement with your employer and the car dealer does not, in any way, have an impact on this choice.
Furthermore, the employee fully owns the vehicle.
But what if you switch jobs/companies? Will the agreement become nullified? If you are moving to a different company, the new company can take responsibility for the novation agreement.
How can companies benefit?
One of the chief reasons why employers should offer this option to employers is that this can aid in their efforts to attract and retain top performers.
Apart from competitive salaries, many top performers look at the perks a potential employer can offer. By offering perks like a novated lease, the likelihood of attracting top performers and ensuring the high morale of your staff becomes easier.
Compared to maintaining a company fleet, novated leasing does not add up to your company’s overhead costs. All the expenses related to the upkeep of the vehicle will be the sole responsibility of the employee.
How about employer taxes?
Should you offer novated leasing to your employees, another benefit that you can look forward to are tax benefits.
For one, you can end up paying less taxes. Why? When you deduct payments from your employee’s salary, you are reducing his or her taxable income. In turn, your company can benefit from lower taxes because of the reduction in your compensations and payroll tax liabilities.
Australian companies can also enjoy additional tax benefits, including goods and services tax and fringe benefits tax benefits.
Essentially, offering your employees the opportunity to buy a new car through a novated lease is a win-win situation for you and your employees.
Unsure how to proceed? Consult a car finance expert to learn more about novated lease agreements.
Rob Chaloner is the Founder and Managing Director of Stratton, and is passionate about smarter ways to buy and finance cars. With Stratton, he’s working to help Australian buyers disrupt the traditional car buying, financing and insurance markets through smarter products and online services.