Are There Any Disadvantages to Offering Novated Leasing as an Employer?

For employers exploring novated leasing, the good news is that offering this benefit comes with very few drawbacks. However, in the spirit of transparency, it’s worth running through the drawbacks we've heard from clients over the years. Here’s an honest look at the practical considerations.

1. Payroll Administration

This is the disadvantage most often mentioned - and it is valid. Managing a novated lease program does mean making changes to your payroll process. This includes the facilitation of salary deductions, and ensuring accurate reporting for tax purposes.

It can usually be a one-time setup task though, and different providers will work with your staff to varying degrees to help. With modern payroll software and provider support, the process can usually be made seamless from setup.

At Clear Lease, we offer maximum support. We work with everyone from very small businesses who outsource payroll, to large enterprises with payroll departments. That means we offer full policy and implementation support with your existing process to make setup clean and easy. We also provide tax reporting and continually review to ensure you avoid any mistakes and tax bills.

We also know that sometimes questions come up, or ongoing support is required - and we aim for one minute response time to keep everything running efficiently.

2. Feeling Unequipped for Employee Questions

Naturally, employees may have questions about novated leasing or misunderstand the offering. Some of our employers have said they are worried about the time spent educating employees.

Another valid concern, but a good provider will actually be proactive about this - and handle employee education and communication for you, and give you the tools you need to do so if you wish to promote it internally. At Clear Lease, we deliver onboarding materials, brochures, and give your employees easy access to 1-1 meetings, all with transparency as top of mind. We'll even sponsor a team lunch to come and give your staff the full picture, and provide direct communications with your team to understand and appreciate the program.

3. Perceived Risk of Employee Turnover

Some employers are concerned about the impact of an employee leaving while on a novated lease, and what that means for their liability.

Thankfully, this one is just a misconception - the liability of the lease actually falls with the employee. If an employee departs, the lease simply transitions to their new employer or becomes their personal responsibility. There’s no financial liability for the business.

4. Opportunity Costs?

Employers sometimes question if novated leasing is worth implementing when there are other benefits to consider.

There are certainly other employee benefits you can setup that require little to no effort, like arranging a 15% healthcare discount for your employees.

Unless you are a not-for-profit organisation, novated leasing is the single incentive that will make the most significant impact to your employees take-home-pay, often giving them what will feel like a 10-20% pay rise while actually saving your business in payroll tax. You trade off a little more effort, for a much larger impact.

5. Why the Pros Far Outweigh the Cons

Here’s why employers across Australia are embracing novated leasing:

• Payroll Tax Savings: Salary packaging can lower your payroll tax liability, potentially turning a minor administrative task into a cost-positive move.
• Employee Attraction & Retention: Novated leasing is a highly valued perk, if you're trying to attract talent - that one perk will feel like a 10-20% pay rise for them, and may be the competitive edge you need.
• Minimal Effort with Provider Support: With the right partner, the administrative load is negligible, and the program practically runs itself.

A Transparent Takeaway

While there are minor administrative considerations when offering novated leasing, the benefits—for both employers and employees—far outweigh the challenges. With modern tools and dedicated provider support, the process is easier than ever, leaving you with happier, more motivated staff and potential financial gains for your business.

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