Company Car Policy forms the bedrock of a good fleet strategy. This document controls who is entitled to a vehicle, the vehicle they can expect to receive and the rules for using the vehicle.  It often also covers what rules surround drivers in receipt of a cash allowance alternative.

What needs to be included and how should your policy be structured?

Company Car Policy Elements

Policy Background

Your policy should start with what is the purpose of the document and the areas it will cover such as eligibilty and choice.  This section should cover where the policy fits in relation to other process documents (e.g. Expenses Policy) and where the contact points are for further queries or points of escalation in relation to the policy.

Contact numbers should be included covering all main fleet service providers so employees have a quick route to the information they may need.

Employee Eligibility and Vehicle Allocation

Define which employees are eligible for company cars.  This often falls into two categories of “Job Need” and “Status” drivers.

Job Need drivers will be eligible for a vehicle as a result of the job role or function they perform.  This may involve significant mileage or carrying of equipment or personnel.

Status drivers are entitled to a company vehicle as part of their benefits package or could be related to their position within the company.

It should be clear that entitlement is dependent on being legally entitled to drive and vehicles can be removed if a driver is banned for any reason or has a medical condition which will stop them from being able to drive.  The policy should state what the vehicle can be used for and if any family members can also use the vehicle.

The vehicle allocation section should state what vehicles are available.  This could involve a grading structure, fixed list or value based selection amount.  Vehicles may be restricted by manufacturer or other criteria such as no two-seater vehicles for example.  Other areas common to policies are availability of optional extras and further selection criteria such as maximum environmental emissions.

Flexibility in terms of trading up or down plus any option to take the cash allowance should also be covered in detail within this section of the policy.

Company Car Tax

Employees should be provided with enough information to understand the tax implications of taking a company car or cash allowance.  Normally this support will be provided by the fleet management company but it is worthwhile including some links to the HMRC website section which covers company car tax.  This can be found at www.gov.uk/update-company-car-details.

Quote, Order and Delivery

Details should cover how employees actually get their company vehicle.  This may be a selection from a fixed list or using a quote platform provided by the fleet management company.  For new starters you may want to include temporary vehicles whilst a new vehicle is on order or facilitate the re-allocation of existing spare vehicles within the fleet.

When the vehicle is delivered employees should check the for damage and ensure they have been made familiar with the controls of the vehicle so they can operate it correctly.

Running The Vehicle

Employees should be made aware that they are responsible for ensuring your company car is maintained in a safe and roadworthy condition at all times.  It is their responsibility to ensure the car is serviced in line with the manufacturer’s recommendations and regular vehicle checks are carried out in respect of brakes, tyres, fluids and lights.  Drivers should be made aware of all the key contact numbers and the process they need to follow to service or repair the vehicle.

The process for management of driving offences and fines should be clearly defined as should the use of the vehicle abroad and towing.

Insurance

Details of the insurance certificate along with a summary of the policy particulars should be described.  Specific clauses on allowable use of the vehicle and any exclusions should be highlighted.

Provide contact details for the insurance company in event of an accident or other claim such as theft or vandalism.

Accidents

Employees should be made aware of what they should do in event of an accident.  A form should be provided which can be printed and put in the vehicles which gives employees a script of what they should say plus the process they should go through to remedy the situation for example:

  • Stop the vehicle in a safe position
  • If anyone is injured, call an ambulance and the police
  • Provide name and address and confirm that the vehicle is covered by company insurance. Provide policy details if known.
  • Obtain name, address, registration number and insurance policy details of any other driver involved. If they do not have their insurance policy details to hand ask the name of their insurer or, failing this, their broker or company name if a company vehicle.
  • Note names and addresses of any independent witnesses.
  • Make a note and rough diagram of what has happened. If you have a camera, take pictures of the scene.
  • Do not discuss who was at fault for the incident or admit liability.

Fuel and Mileage

Employees should be informed how fuel or mileage will be paid for.  If a fuel card is issued the employee needs to know how they can use it and the process for paying back the private element of the fuel.  If the fuelcard covers private fuel then the employee should be informed about the taxation around this provision which is often very punative.

Where employees reclaim business mileage they should be made aware of the process and the rates which are paid.

Changes in Circumstance

There are many situations where the status of an employee could change over time and impact on the company vehicle provision.  These different circumstances such as promotion, secondment, maternity or long term sickness should be explained and the impact on the employee made clear.

Returning the Vehicle

Vehicle return conditions and processes will include end of contract damage assessments, key for key exchanges or returning the vehicle due to redundancy or leaving the company.

Health and Safety

The Company Car Policy should include a detailed section relating to specific health and safety requirements.  This could include:

  • Drivers Health – eyesight or other reportable conditions which would stop the driver from legally being able to use the vehicle
  • General Vehicle Upkeep – keeping the vehicle clean and serviceable at all times
  • Mobile Phone – policy and re-enforcement of rules on appropriate use of mobile phones
  • Smoking – prohibited in company vehicles by law
  • Safe Driving – covering areas such as speed, braking distances, road conditions and being wary of other road users
  • Excessive Travel and Fatigue – never drive tired and take breaks frequently
  • Drink and Drug Use
  • Breakdown – what the employee should do if broken down.  Include the number of the breakdown service.
  • Driver Training – any services which might be available to the driver voluntarily or suggested in the event of a serious incident

Company Car Policy Appendix

The policy appendix should include items such as:

  • Company Car Order Form
  • Salary Deduction Form (If Appropriate)
  • Additional Driver Request Form
  • Driver Acknowledgement Form

Current Trends Impacting Company Car Policy

It’s been a fluid landscape for HR professionals recently with a number of external changes influencing company car policy.  The changes have impacted on both demand for the traditional company vehicle, the risks associated with fleet operations as well as changes to the view of benefits packages.

The business travel dynamic is changing as the mobility options are developed to satisfy new social attitudes, global issues such as clean air and climate change.  In this blog we take a look at those factors influencing company car policy what you need to consider when making any changes

COVID-19

Changes Caused By Covid-19 on The Fleet Sector

The impact of Covid-19 has been widespread and has been particularly severe on the global automotive industry. Many manufacturer factories have been closed. UK dealers effectively closed temporarily and all automotive related suppliers required to adhere to social distancing measures.  It has been and will continue to be a challenging period with big changes required for businesses to be able to continue their normal activities.  The wider business community has also been hit with a prolonged recession forecast by most economic commentators.

The Impact of Covid-19 on Fleet

Many of the Covid-19 impacts are temporary and the industry will return to its’ previous position over time. However, the main consideration is what will the “new normal” be in the workplace and how will this impact the usage of company vehicles, and the types of vehicles required?

With flexible working being required where possible in the short term, how many of these policies will remain in place once the lockdown is relaxed?  Flexible working may be the new normal or at least have a significantly bigger impact than pre-crisis.  Policy areas this will influence will be the contracted mileage for vehicle leases (which will likely reduce) and also holding periods (lower mileage means the vehicle can be leased for longer without impacting operational use).  The numbers of vehicles required may also reduce as employees and businesses see less of a requirement for the company vehicle.

Manufacturers and dealers will have some significant cash pressures and will look to increase sales as soon as possible.  Expect to see some great deals on offer as the market emerges from lock down.

Pricing for company cars will also be impacted.  Predicted downturns in the economy will likely have a negative effect on predicted second hand car values which could increase the lease price on some vehicles.  This impact should be offset through additional discounts from the manufacturer but the impact will be different across different models but not in all cases.  This means the volatility of pricing may impact the effectiveness of those policies operating fixed vehicle lists.  Where possible, it is advisable to move to a flexible total cost of ownership (TCO) approach.

How fleets are operated will also need to change.  The risks associated with operating vehicles are extended as a result of Covid19.  There is an extensive list of advice provided by the government to address these risks and how to operate safely.  The advice can be found here.

These do not just impact on company car users.  Employees are likely to use their own vehicles more often in response to the challenges of traveling on public transport.  This has broader implications for organisations as a whole so any specific Covid19 communications should cover all employees rather than just company vehicle users.

Company Car Benefit-in-Kind Taxation

Changes to the fiscal framework

Changes include the introduction of 15 new company car tax bandings, 11 of which will be for ultra-low emitting cars.

From April 2020, the appropriate percentages for zero emission cars will drop from 16% to 2%, while those for cars with CO2 emissions between 1g/km and 50g/km will vary between 2% and 14% depending on the number of zero-emission miles the vehicle can travel.

Impact of the fiscal changes

Changes are designed to provide incentives for vehicles which can drive more regularly on battery power such as plug in hybrid vehicles (PHEV) and in particular all electric (BEV) cars.

If not in place, electric and plug-in electric cars should be considered for choice lists.  With an ever expanding choice available electric vehicles are now becoming a real alternative for company car drivers.  With very low company car tax they will also be a very popular choice so make sure any supporting infrastructure and policies are in place to support these drivers.

Review of all diesel cars on choice lists, to ensure the most CO2 efficient RDE2 engine models are included.

Electrification of the Fleet

Developments in Electrified Products

Closely linked to the company car benefit-in-kind changes, there is an increasing demand for electric and plug-in electric company cars from employees.

Whilst the headline figures appear to be positive, there are considerations when implementing these vehicles onto a choice list.

Impact of Electrification

Is the vehicle fit for purpose? Can the employee continue to do their job.  Assessments need to be made; does the vehicle have a suitable operational range, does the operational cycle support periodic recharging and is the boot capacity suitable?

With either electric only, or a mix of petrol and electric power, how do we reimburse the employee for business mileage?

How do we need to support employees charging vehicles? What capacity does the employee have to charge the vehicle at home or at their normal place of work?  How will the company charge the employee for workplace charging?

Car CO2 Emissions

Impact of emissions scandals

Following the Volkswagen emissions scandal, there has been a global review of how vehicle emissions are tested.

The new standard for car CO2 emissions (Worldwide Harmonised Light Vehicle Test Procedure – WLTP) is now impacting the company car market, with many vehicle models official CO2 emissions increasing by over 5% compared with the assessment under the older NEDC emissions test.

Considerations

Does the company car policy now fit with what vehicles are now available in the market?  Have key vehicles have fallen off choice lists or are they still available within existing budget bands?  Do the bands need to be adjusted to reflect the increased costs of provision?

What has been the impact on the employee’s car benefit-in-kind from these changes?

Brexit

Uncertainty as to how the fleet sector will be impacted

With continued uncertainty over the exact terms of our departure from the EU, the impact on the company car choice is still unsure.

Any unstructured exit could increase trade tariffs in vehicles imported from Europe.  This is likely to increase the cost of cars being imported from Europe whilst non-European car manufacturers could benefit from a reduction in tariffs.

Impact

Companies should undertake a review of car choice and policy as soon as the exit terms are known.  Major cost changes should be incorporated and the refreshed list of vehicle manufacturers included on the choice list.

In the event of a no-deal scenario, it is likely that the supply of electric vehicles from European manufacturers will be restricted.  Manufacturers have EU wide quotas which they need to fill and the UK will no longer contribute towards these targets.  Electric vehicles from outside the EU will then become more important to fill in the gaps in demand.

Vehicle Salary Sacrifice Schemes

Changes

Changes in tax legislation in April 2017, via the OPrA policy introduction, have resulted in the majority of tax benefits of using salary sacrifice for cars being removed except for very low CO2 emitting cars (sub 75g/km).

Employee Benefit Implications

Review existing schemes to see if they still offer a benefit to your employees at a cost acceptable to the business.  If you want to provide an all employee car salary sacrifice scheme then consider an ultra-low emissions or look to utilise other structured schemes, such as a staff personal contract hire (PCH) scheme.

With so many recent and upcoming changes, it is an ideal time to review your fleet strategy.  EVP Solutions recommend regular reviews of car choice and relevant policies.  This will help to ensure the vehicle benefit level is being maintained from your company car scheme and any new risks are covered.

If you would like some assistance with your fleet strategy or specific advice on your company car policy then please

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