Employees want perks that complement their lifestyle rather than just a good-looking salary, workforce trends show. Small businesses can attract and retain talent through novated leases.
Australian employers are facing a competitive talent market, meaning that demand for skilled and qualified workers is high, but the supply of talented workers is low.
Employers seeking to attract and retain high-quality talent must therefore adapt to the changing needs of employees’ expectations by offering modern benefits on top of attractive remuneration.
Novated leases can help do just that, offering huge savings for employees by reducing their taxable income and therefore helping them strengthen and grow their wealth.
Put simply, a novated lease is a form of salary sacrifice that allows drivers to pay for their car and on-road running costs out of their pre-tax income.
It reduces an employee’s taxable income, meaning they are effectively paying for their car with their taxes, saving them tens of thousands of dollars over the course of their lease.
But there are even more benefits for employees and employers alike.
Creates an attractive remuneration package at no additional cost through novated leases
Novated leases give employees a boost to their disposable income and increase the total size of their remuneration package, all from just using their pre-tax income to lease a car.
Given the savings, in a way, novated leasing is like being able to give staff members a significant pay rise without spending a cent.
In competitive markets, this extra boost could be the deciding factor in attracting talent and building a strong team for your business.
This financial and lifestyle benefit can also help employees feel valued and rewarded at work, increasing overall satisfaction.
Promotes holistic and financial wellbeing for employees
Many engagement incentives focus only on physical and mental health. But what about the importance of one’s financial wellbeing?
Because novated leases save employees tens of thousands of dollars, they can make a real difference to an employee’s financial health.
Providing novated leases can also help address the uncertainty and budgetary challenges associated with car ownership.
How do you set up a novated lease?
With the right provider, the process is easy. There should be minimum paperwork, just a one-page novation agreement which states that you agree to make payments on your employee’s behalf while they are employed with you.
Your novated lease provider will then provide the pre-tax and post-tax deductions to enter into your payroll system.
Payments to the novated lease provider can then be set up.
While novated leases are risk-free to employers, there are a few things you should keep in mind:
- Hidden management fees and costs – if an initial quote seems too good to be true, it probably is. Make sure what you see is what you get.
- Personalised pricing and tax incomes – a good provider will help employees understand the impact of leasing on their overall financial health. Once it’s decided that they are a good fit, the provider should align the initial budget with expected usage and spend. Be aware of providers who use cookie-cutter approaches.
- Access to fleet pricing – providers can often give access to fleet pricing, meaning employees save even more through a novated lease.
- Reporting and visibility – as a financial product, high-quality reporting is a must-have for any business offering novated leases. Ensure your provider offers regular reporting, including those that demonstrate a $0 Fringe Benefits Tax liability.
- Onboarding and account experience – because novated leases are a complex financial product, you want to work with a provider aligned with the values of your business, ensuring a seamless customer journey over the long-term.
Contributed by Alex Davis, Co-Founder and Sales Director at leaselab