Key Information to Include in Your Company Car Policy
Your policy should start with the purpose of the document and the areas it will cover, such as employee eligibility and the different choices available. This section should cover where the policy fits with other process documents (e.g. Expenses Policy and Health and Safety at Work Policies).
Version control is always a helpful feature to deal with any queries which may arise from drivers.
Employee Eligibility and Vehicle Allocation
This section should clearly identify which employees are eligible for company cars. Often, this falls into two categories – “Job Need” and “Status or Perk” drivers.
Job need drivers will be eligible for a vehicle due to the job role or function they perform. Generally, this involves significant mileage, carrying of equipment or personnel.
Status or perk drivers are entitled to a company vehicle as part of their benefits package or related to their position within the company.
The vehicle allocation section should state what vehicles are available. This could involve a grading structure, fixed list or value-based selection amount. Vehicle restrictions may be in place by manufacturer or other criteria; such as no two-seater vehicles, for example.
Other areas common to policies are the availability of optional extras and further selection criteria such as maximum environmental emissions.
This is the section to cover if it possible to trade up or down, or if it is possible to take cash allowance instead.
Where cash or car allowances are available, there should be clear guidance stating the levels of allowance, how the allowance is paid and any minimum requirements for cash allowance funded vehicles. Some organisations choose to have a minimum vehicle specification requirement and have checks in place to ensure this is enforced.
Ensure it is clear that entitlement is dependent on being legally entitled to drive. Highlight that removal of vehicles is possible if a driver recieves a ban for any reason, or has a medical condition that will stop them from driving. The policy should include insurance restrictions such as what the vehicle can be used for and if any family members can also use the vehicle.
The policy should also cover circumstances where individuals are not entitled to a company vehicle and alternatives available, such as hire cars, or using their vehicle (the grey fleet).
Vehicle Choice – Manufacturer and Model
The policy should clearly state what vehicles the employee can pick from.
Company car policies can range from a user chooser list where the employee can pick any vehicle within their budget allowance, to restricted lists where only certain vehicles are available.
The most suitable solution will depend on the size and complexity of the fleet. Larger fleets can attract additional discount terms from manufacturers which can lead them to restrict choice. For smaller fleets where there these discounts are not available there is less rationale to restrict choice.
Turnover of staff may influence the policy strategy. Where there is a higher turnover of staff it can be advisable to have a restricted choice, which will allow for easier reallocation to a new employee should someone leave the company.
Quote, Order and Delivery
This section should cover how employees actually get their company vehicle.
This will cover the process the driver needs to follow in order to obtain a vehicle quote, get an order approved, place the order with the leasing company or dealer and arrange for delivery.
The driver should know who to contact in event of a query and who is authorised to approve quotes on behalf of the organisation.
For new starters, you may want to include temporary vehicles whilst a new vehicle is on order. Alternatively, facilitate the re-allocation of existing spare vehicles within the fleet.
At vehicle delivery, employees should check for damage and ensure they have been made familiar with the controls of the vehicle so they can operate it correctly.
Many organisations have targets to reduce the environmental impact of the fleet.
The policy documentation should state any restrictions such as a CO2 cap.
Information should be provided relating to the selection and operation of electric and plug in vehicles.
Where an organisation operates a car salary sacrifice scheme this should be highlighted and detailed under seperate documentation as generally these schemes operate differently to a company car scheme.
Company Car Tax
Provide employees with enough information to understand the tax implications of taking a company car or cash allowance. The tax implication of taking a vehicle may vary over the life of the agreement so it is important that employees are aware of this at the point of ordering the vehicle.
Your fleet management company usually provide this support, but it is worthwhile including some links to the HMRC website section which covers company car tax and areas such as the provision of fuel for private use.
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.
Make drivers aware of all the key contact numbers and the process they need to follow to service or repair the vehicle.
The policy should cover how employees should fuel the vehicle using fuel cards or a pay and reclaim basis. Coverage should be given to electric vehicles where the process will likely be different to traditionally fuelled vehicles.
Clearly define the process for management of driving offences and fines. Outline the responsibilities for vehicle towing, or if the vehicle is taken abroad.
Ensure you describe the details of the insurance certificate along with a summary of the policy particulars. Specific clauses on allowable use of the vehicle and highlight any exclusions.
Provide contact details for the insurance company in event of an accident or other claim such as theft or vandalism as well as the process they should follow if they are unlucky enough to be involved in a serious incident.
Make employees aware of what to do in the event of an accident. Develop a form which you can print and put in vehicles, providing employees with a script of what to say and do, 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 company insurance covers the vehicle. Provide policy details if known.
- Obtain the 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. Then, 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
Inform employees how you will pay for fuel or mileage.
If you issue a fuel card, the employee needs to know how they can use it, and the process for paying back the private element of the fuel. If the fuel card covers private fuel, inform the employee about the taxation around this provision.
Where employees reclaim business mileage ,they should be made aware of the process and the rates which are paid.
If the fleet has introduced electric vehicles, there should be a clear process of how employees can claim their home electricity charging costs.
Changes in Circumstance
There are many situations where the status of an employee could change over time and impact the company vehicle provision.
Circumstances such as promotion, secondment, maternity or long term sickness must be explained, plus the effect 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.
It is impportant that employees are aware of the potential charges as some organisations choose to pass these onto the drivers where the drivers have mistreated their vehicles.
Health and Safety
The Company Car Policy should include a detailed section relating to specific health and safety requirements. This may 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 the 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)
- Electric vehicle chargepoint installation process.
- Additional Driver Request Form
- Driver Acknowledgement Form
Current Trends Impacting Company Car Policy
Recently it’s been a fluid landscape for HR professionals. Several external changes are influencing company car policy. There has been an impact in demand for the traditional company vehicle, fleet operation risks, plus changes to the view of benefits packages.
The business travel dynamic is changing as mobility options are available to satisfy new social attitudes. Global issues such as clean air and climate change are now rightly at the forefront of businesses. In this blog, we take a look at factors influencing company car policy. Moreover, what you need to consider when making any changes.
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 in place to encourage the use of battery-powered vehicles, including plug-in hybrid vehicles, or more ideally, all-electric cars.
If not in place, consider electric and plug-in electric cars for choice lists. With an ever-expanding choice available electric vehicles are now becoming a real alternative for company car drivers. With low company car tax, they will also be a popular choice. Hence, make sure any supporting infrastructure and policies are in place to support these drivers.
Review all diesel cars on choice lists to include the most CO2 efficient RDE2 engine models.
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.
There are many things to consider when including electric vehicles onto a company car list.
Impact of Electrification
There are some basic questions you must ask before moving to electric vehicles and this needs to be included in your company car policy documentation.
- Is the vehicle fit for purpose?
- Can the employee continue to do their job?
- Does the vehicle have a suitable operational range?
- Does the operating cycle support periodic recharging?
- Is the boot capacity suitable?
- 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 their usual place of work?
- How will the company charge the employee for workplace charging?
For more information regarding electric vehicles please follow this link.
Car CO2 Emissions
Impact of emissions scandals
Following the Volkswagen emissions scandal, there has been a global review of vehicle emissions testing.
The new standard for car CO2 emissions (Worldwide Harmonised Light Vehicle Test Procedure – WLTP) is now impacting the company car market. As a result, many vehicle models’ official CO2 emissions increased by over 5% compared with the older NEDC emissions test assessment.
Does the company car policy now fit with what vehicles are now available in the market? For example, 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?
Vehicle Salary Sacrifice Schemes
In April 2017, there were changes in tax legislation via the introduction of the OPrA policy. As a result, only very low CO2 emitting cars (<75g/km) were available to take advantage of the salary sacrifice tax benefits.
Employee Benefit Implications
Review existing schemes to see if they still benefit your employees at a cost acceptable to the business. For example, if you want to provide an employee car salary sacrifice scheme, consider ultra-low emissions or look to utilise other structured schemes, such as a staff personal contract hire (PCH) scheme.
The impact of Covid-19 on the Fleet sector
The impact of Covid-19 has been widespread and has been particularly severe on the global automotive industry. For instance, many manufacturer factories have been closed. UK dealers effectively shut down, and all automotive related suppliers were required to adhere to social distancing measures. It has been and will continue to be a challenging period with significant changes necessary for businesses to resume their normal activities. The wider business community has also been hit with a prolonged recession forecast by most economic commentators.
Many Covid-19 impacts are temporary, and the industry will return to its’ previous position over time. However, we do not know what the “new normal” will be. Nor, how this will impact the company car industry.
Currently, flexible working is in use. But, how many of these policies will remain in place following the removal of restrictions? Flexible working may be the new normal or at least have a significantly more significant impact than pre-crisis. Moreover, policy areas will influence the contracted mileage for vehicle leases (which will likely reduce) and holding periods (lower mileage means vehicle leasing can be longer without impacting operational use). The vehicle volume requirement may also decrease 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. As a result, expect to see some deals on offer as the market emerges from Covid-19 restrictions.
There will be an impact on pricing for company cars. Potential downturns in the economy will likely negatively affect second-hand car values, increasing the lease price on some vehicles. Although vehicle price is likely to be offset through additional discounts from the manufacturer, the effect will differ across different models but not in all cases. Therefore, 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.
Fleet operation will also need to change. There are new fleet operation risks following Covid-19. You can view the extensive list of government advice to address risk here.
These do not just impact company car users. For example, employees are likely to use their vehicles more often in response to the challenges of travelling on public transport. This has broader implications for organisations. Therefore, any specific Covid-19 communications should cover all employees rather than just company vehicle users.
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 maintain the vehicle benefit level from your company car scheme, plus cover any new risks.
Please contact us if you would like some assistance with your fleet strategy or specific advice on your company car policy.