Are you looking for ways to recognise your employees’ hard work? If you haven’t tried offering them novated leases, you should consider doing so.
Employers can offer raises or bonuses to employees as incentives for them to reach sales targets and conversion goals. Such motivators are great for boosting productivity, but they come at a large financial cost to companies.
Luckily, there are a variety of alternative ways to boost productivity at little to no cost to your company, and one of them is novated leases.
What Are Novated Leases?
In simplest terms, a novated lease is a three-way agreement between you, your employee, and a car dealership. Your employee takes ownership of a vehicle that is then “novated” to you as his or her employer.
As the employer, you then pay the leasing company for the vehicle and deduct the money from the employee’s gross salary (plus the amount to cover FBT, Fringe Benefits Tax).
Employees gain the benefit of paying for the car, gasoline, and maintenance using their pre-tax salaries. You’ve reduced their taxable income, benefiting them financially.
Novated Leasing Process
Setting up a novated lease for an employee involves a few straightforward steps. You might be required to do some payment automation and basic documentation. But other than that, the employee and finance company will do most of the work.
Here’s a breakdown of what you will need to do:
- The employee selects a vehicle and receives a quote from the dealer.
- A financial consultant will highlight how much the vehicle will cost and the expected financial benefit for the employee by writing up a Salary Package Estimate. Both you and the employee will need to sign this agreement.
- The employee will need to complete a financial application. Once approved, the dealer will order the vehicle.
- All documents, including the financing and novation documents, will be prepared. You, the financer, and the employee will need to sign them. The employee should also include the necessary supporting documents, such as evidence of comprehensive car insurance.
- The finance provider and dealer will then be able to settle the deal. Once finalised, the dealer will advise the employee that his or her vehicle is ready.
- Your novated leasing finance provider will ensure that automatic repayments and accurate reporting are in place.
That’s it. The steps are very simple. They require no financial investment on behalf of the employer, only a small investment of time.
It’s important to encourage your employees to evaluate whether novated leasing is suitable for their situations.
Whether or not novated leases are appropriate for employees varies by individual. Nevertheless, offering novated leasing is a beneficial move for any business.
Benefits for Employers
Offering your employees a novated lease might not directly generate income or boost your sales. But novated leases will generate some impressive indirect benefits. Some of these include the following.
Boosting Staff Morale
Employees who receive benefits from their employers will be happier in the workplace. Being happy will increase their productivity by 12%. This is a substantial increase in efficiency with no financial investment.
Increased Staff Retention
With increased staff morale comes better staff retention. Because employees are happier to work for employers who provide benefits, they will stick with your business for a longer period of time.
Over time, your employees’ confidence in and loyalty to your company will continue to grow. This dedication will reduce the employee training costs you would face because of staff turnover.
Maintaining a Company Fleet vs. Novated Leasing
Novated leasing provides greater benefits compared to purchasing and maintaining a company fleet. The large primary investment and ongoing fees of a company fleet are far higher than the cost of providing a novated lease to employees.
Employees will also be responsible for maintaining their vehicles, which will save your business time and money.
The responsibility of the novated lease is solely that of the employee. If any employees were to leave your business, they would take the novated lease with them.
They would have to continue repayments, pay the residual value, or sell the vehicle. The novated lease will in no way be the responsibility of your company.
No Extra Cost to Employers
The biggest benefit to you as an employer is that you can provide a financial benefit to your employees at no cost to your business. All it takes is a small investment of your time for you to offer your staff a substantial advantage.
With multiple benefits and no financial outlays, novated leasing will benefit your business and the lives of your employees by showing them that they are valued.
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