With job mobility at its highest rate in a decade (9.5%)1 and 50 per cent of employers in the market for staff reporting difficulties2, new research reveals that novated leases could be a largely untapped tool in the talent war.
The finding was derived from an independent survey of 204 Australian business directors and decision-makers commissioned by Metro, one of Australia’s leading providers of asset finance. The full survey results can be found here: Businesses realise the benefits of novated leases for employee retention, as growth surges at Metro – Metro Finance.
Low awareness of novated leases among businesses
Firstly, Metro sought to understand what proportion of businesses know what a novated lease is. In the survey, Metro asked respondents the question, presenting them with three possible answers – of which only one was correct.
A whopping 60 per cent of respondents had little or no knowledge of novated leases, confusing it with other car financing options. Four in 10 (42) per cent of respondents believe it is a company car lease, where the company is responsible for making payments, even though it assigns the car to an employee. At the end of the lease term, the company can choose to pay the balance and own the car outright, or switch to a new car. Eighteen (18) believe it is a long-term business car rental, with the driver responsible for making the rental payments. There is no end to the lease term, and the payments cannot be used as ‘down payments’ on the car.
Just 40 per cent chose the correct answer – that a novated lease is where an individual leases a vehicle through a ‘salary sacrifice’ arrangement with their employer. The lease payments and vehicle running costs are made with an employee’s pre-tax pay. At the end of the lease term, the employee can choose to pay the balance and own the car outright, or switch to a new car.
70% of SMEs believe novated leases could help win the talent war
Once Metro gave respondents the correct definition of a novated lease, it asked them if they thought offering employees or new candidates novated leases through a salary sacrifice arrangement would help attract new talent and retain their existing employees – particularly in the current tight labour market.
Seven in 10 (70%) of respondents believed novated leases could help them attract appropriate job applicants and retain them. Forty-four (44) per cent believe the arrangement would help retain existing employees, while a quarter (26%) believe that novated leases would help attract new candidates.
West Australian businesses have the greatest confidence in novated leases, with 81 per cent indicating they would help attract and retain staff. Victorian businesses are least likely to see the benefit, with 44 per cent saying the same.
Reviewing the survey results, CEO of Metro Finance, Phillip Crossman, says: “While pay packages are the most common way to leverage talent, this measure obviously has its limitations. Novated leasing is an attractive and cost-effective
“Government-backed electric vehicle subsidies have helped get the EV movement off the ground, and now governments are getting serious about increasing charging stations to deal with the consumer barrier of range ‘anxiety’. The strategy is well placed and demonstrates the important role of subsidies in encouraging the uptake of electric vehicles and the provision of related charging infrastructure. We expect the novated lease industry to continue its growth with this support which underpins the important role of the salary packager in promoting this initiative.”
Metro settles approximately 2000 vehicle loans each month, including novated leases. In 2023, novated leases averaged more than a quarter (27%) of all Metro car loan settlements.
