With the publication of the Department for Education's latest guidance on Electric Vehicle Salary Sacrifice (EVSS) schemes, academy trusts and colleges now have clear expectations on how these schemes should be implemented and managed.
The guidance reinforces something we've always believed at Lease Electric, when designed correctly, an EV Salary Sacrifice Scheme should deliver significant employee benefits without creating financial risk or unnecessary administration for the employer.
This guide summarises the key points every academy trust and college should understand before introducing an EV Salary Sacrifice Scheme.
Why has the DfE issued this guidance?
Academy trusts and colleges are publicly funded organisations and must comply with the financial governance requirements set out within the:
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Academy Trust Handbook (ATH)
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College Financial Handbook (CFH)
The new guidance explains how these organisations can introduce an EV Salary Sacrifice Scheme while ensuring robust financial governance, appropriate risk management and compliance with HMRC requirements.
Before introducing an EV Salary Sacrifice Scheme
Before selecting a provider, trusts and colleges should ensure they have completed appropriate due diligence.
The Department for Education recommends organisations:
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Follow their own procurement procedures.
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Ensure they have sufficient resources to administer the scheme.
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Comply with all HMRC Salary Sacrifice requirements.
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Seek appropriate legal, HR and audit advice.
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Fully assess any financial risks.
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Clearly document decision-making and governance.
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Ensure employees receive clear information about tax and pension implications before joining the scheme.
At Lease Electric, we support organisations throughout this process, helping employers understand both the operational and governance requirements before implementation.
When is DfE approval required?
One of the most important updates within the guidance relates to Department for Education approval.
Approval is not required where:
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the scheme creates no financial cost or liability for the trust or college should an employee leave or fail to meet their contractual obligations, or
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any potential liability has been comprehensively mitigated.
However, DfE approval is required where these conditions cannot be met.
Additionally:
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Academy Trusts operating under a Notice to Improve (NtI) must obtain DfE approval before entering any EV Salary Sacrifice Scheme.
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Colleges operating under an NtI must follow the specific conditions outlined within their notice.
Choosing the right provider
The DfE expects trusts and colleges to carry out their own due diligence when selecting an EV Salary Sacrifice provider.
The guidance recommends selecting a provider that:
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Offers genuine value for money.
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Minimises employer administration.
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Clearly allocates employee responsibilities.
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Provides appropriate contractual protections.
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Supports compliance with HMRC requirements.
Many organisations also choose to review suppliers available through Government Commercial Agency (GCA) frameworks where appropriate.
Employee responsibilities
Although the lease sits under the employer's master hire agreement, employees should remain responsible for their individual vehicle.
Employee agreements should clearly explain responsibility for:
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the vehicle throughout the lease;
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maintenance and condition;
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damage charges;
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excess mileage;
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early termination costs where applicable.
The DfE also confirms that salary sacrifice deductions must be made through payroll via a formal contractual agreement between employer and employee.
Minimising employer administration
A well-designed EV Salary Sacrifice Scheme should minimise the administrative burden on schools and colleges.
The DfE recommends that providers manage as much of the employee communication and lease administration as possible, reducing the workload for HR and payroll teams.
At Lease Electric, our dedicated Customer Success Team supports both employers and employees throughout the life of the scheme, providing a single point of contact from initial enquiry through to vehicle delivery and beyond.
Managing financial risk
A key theme throughout the DfE guidance is ensuring that trusts and colleges are protected from financial exposure.
Recommended risk mitigations include:
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retaining a proportion of National Insurance and employer pension savings to create a contingency fund (or using suitable insurance products where available);
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limiting participation if appropriate;
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allowing employees to lease only one vehicle;
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clearly documenting employee liabilities;
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reviewing the scheme annually to ensure continued value for money;
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maintaining an ongoing register of risks and mitigations.
These measures help ensure that any potential liabilities remain appropriately managed.
Employee eligibility
The guidance recommends that employers establish clear eligibility criteria before employees can join the scheme.
Typically, participating employees should:
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remain above National Minimum Wage after salary sacrifice;
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have successfully completed probation;
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be paid through PAYE;
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hold a valid UK driving licence;
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not be subject to ongoing disciplinary or capability procedures.
Employers should continue to monitor eligibility throughout the scheme.
Pension considerations
Salary sacrifice affects pensionable pay and employees should fully understand the implications before entering into an agreement.
For example:
If an employee earns £3,000 per month and sacrifices £300 towards an electric vehicle, pension contributions may only be calculated on £2,700, depending on the pension scheme rules.
This can reduce both employee and employer pension contributions over the life of the agreement.
For this reason, the DfE recommends that employees receive clear information about the financial implications and, where appropriate, obtain independent financial advice before proceeding.
Existing schemes
Organisations already operating an EV Salary Sacrifice Scheme should review their current arrangements against the new DfE guidance.
Where a scheme does not fully comply, trusts and colleges should work towards adopting a compliant solution at the earliest practical opportunity, whilst honouring any existing contractual commitments.
How Lease Electric can help
At Lease Electric, we deliver EV Salary Sacrifice Schemes that are designed to minimise employer administration, protect against financial risk and provide an exceptional employee experience.
Our dedicated team supports employers through every stage of implementation, including procurement, onboarding, employee communications, payroll reporting and ongoing scheme management.
If you're considering introducing an EV Salary Sacrifice Scheme or reviewing an existing one in light of the Department for Education's latest guidance, contact the Lease Electric team today to discuss how we can support your organisation with a compliant, fully managed EV Salary Sacrifice Scheme.