What is The Grey Fleet?
The Grey Fleet is a term used to describe employee owned vehicles which are being used for business travel.
Describing this area of the fleet as “grey” is a very appropriate term because normally this mode of transport is often poorly managed or even ignored by senior management.
However, the grey fleet can be a useful solution to support business travel requirements as it can be used on an ad hoc basis and paid for through mileage claimed back through the expenses process. It does not need contracts or any other financial risk to run, just a payment based on actual use.
However, the issue is the legislation surrounding driving at work still applies to this section of drivers in much the same way as it would to company car drivers. Grey fleet is an employee’s own private vehicle, so the organisation has limited control over the asset being used.
A report by the BVRLA in July 2016 (Getting to Grips with the Grey Fleet) provides some useful statistics about the scale of grey fleet use in the UK. They estimate that there are 12.5 billion miles in the public and private sectors each year at a cost of £5.8bn. In addition grey fleet vehicles tend to be older and have higher emmissions than the equivalent company run vehicle.
So, given the cost and scale of the grey fleet what do you need to do to manage it effectively?
Grey Fleet Management Services
We offer two grey fleet management services:
Grey Fleet Audit
We complete a full audit of how the grey fleet is managed including the curret costs, policies, processes, and procedures. The audit will identify any risks or gaps with a management action plan detailing remedial actions which need to be implemented to ensure enhanced levels of compliance.
Grey Fleet Managed Service
Our Grey Fleet Managed Service starts with the audit of existing practices followed by the implementation of any recommended changes. The service then manages the grey fleet ensuring drivers act in a safe and complaint manner through self-certification of documents and policies relating to their vehicle use. At all times you will have up to date reports which demonstrate robust governance processes in the event of any incident.
Both of our services will support your organisation get clarity on the size, risk and impact of the grey fleet.
If you would like to hear more about our grey fleet services please get in touch using the link below:
Best Practice Advice
Organisations should have policies and procedures in place to effectively manage the grey fleet. Managers should be trained so they are consistent in the approach to grey fleet across the organisation and aware of its risks.
The legislation relevant to driving at work is the Health and Safety at Work Act (1974) and The Management of Health and Safety at Work Regulations (1999).
To get traction for addressing the issue of the grey fleet it is important to get representatives from across the organisation to buy into what you are trying to achieve. This group will help address the overall strategy and act as ambassadors within the business to drive the required changes.
The working group should have senior management engagement to support the group and give the necessary approvals. A main board Director should act as the overall sponsor for the project and assume responsibility for the ongoing management. Human resources can help with the refinement of policies and communicating changes to the wider employee base.
The working group should establish the strategy supporting the grey fleet management. In addition to the reduction of risk there may be other objectives linked to cost saving, reduced environmental impact or employee wellbeing.
Policies and Process Baseline
It is important to identify exactly how much grey fleet is being utilised within your business, as well as the systems and processes which underpin its use.
Is there a policy document which sets out when and how employees can use their own vehicle for business use? Do employees know what they are able to reclaim back from the business? Regular home to office commuting mileage should be deducted from any mileage claim to ensure compliance with HMRC regulations. Drivers who have other employees in the vehicle for a journey can also claim additional passenger payments of 5p per mile.
To establish the cost of the grey fleet requires an examination of the relevant expenses records. From these records you should establish:
- The numbers of journeys
- The mileage for each journey
- The purpose for completing the journey
- The cost of each journey
- The vehicle used for the journey
- The individual who completed the journey
- Were there any passengers carried
- Common start points or end destinations
Whilst some of this information will be readily available other data could be harder to find as a lot of expenses systems are not configured to collect all this information.
How much does the Grey Fleet cost?
Private vehicles are usually paid mileage at the government advisory fuel rates. Here it is useful to distinguish what the rates are designed to compensate the driver for.
The government Approved Mileage Allowance Payments (AMAP) rates are currently set at 45p per mile, for the first 10,000 miles of a tax year and 25p thereafter. This payment covers both the depreciation and maintenance the vehicle incurs as well as the fuel cost. AMAP rates should therefore only be used to pay for those grey fleet drivers not in receipt of a cash allowance (as the cash allowance itself is supposed to cover the provision of any vehicle).
Some public sector organisations have legacy arrangements where in some cases drivers are being paid well in excess of the AMAP rate. These should be reviewed as in many cases this leads to dysfunctional behaviours and fictitious trips so the employee can profit from the mileage.
Cash allowance drivers should be re-imbursed at the advisory fuel rates which vary according to engine size and fuel type.
Grey Fleet Compliance
In simple terms the journeys should be legally compliant. Basic compliance will require the following:
- Valid MOT certificate
- Up to date road tax
- Insurance covering business journeys for the assigned vehicle
- Appropriate vehicle maintenance
- Confirmation that the vehicle meets the minimum standards required by the organisation
- Valid driver’s licence for the class of vehicle being driven
- No health or eyesight issues which would affect the ability to drive safely
The organisation should have the means to demonstrate that the journeys have been legally compliant through accurate records keeping and effective audit trails. Drivers can confirm they meet the required standards through an annual self-certification process, but these records should be kept centrally to cover audit requirements. The person responsible for managing the data collection should also be qualified or trained to review the documentation to ensure its validity. Where organisations are geographically dispersed then electronic systems are better at fulfilling this requirement.
Periodic or random spot checks should form part of the policy so the drivers are aware that their documentation could be reviewed at any time.
Drivers should be made aware of the consequences for non-compliance. This can range from witholding mileage payments to employee sanctions but any action should be commensurate with the risk to the organisation.
Drivers could be encouraged to conduct a vehicle check on a periodic basis. This could include checks on:
- Tyres to check for damage, correct inflation and ensuring a legal even tread depth
- Lights and indicators functioning correctly
- Adequate fluids for vehicle screen wash, oil and coolant
- Brakes and brake pressure
- Windscreen which is free of cracks or chips which need repair
Drivers should be given access to instructions in case they are unclear as to how to perform the checks effectively.
Many organisations wish to go beyond the basic legal compliance required to reduce the risks associated with grey fleet use. There are a wide range of technology enables solutions to manage the drivers details such as driver licence checking and checking the details of the vehicles directly with the DVLA. These tools come at a cost but take a lot of the administrative processes away from the organisation.
This verified third party information can be used to automatically collate the information on drivers and vehicles giving the organisation a clear picture of the risks posed by the grey fleet. Where vehicle details are collected it is also possible to provide the carbon footprint for the organisation to form part of ESOS reporting requirements.
Grey Fleet Alternatives
There are a number of steps organisations can take to reduce the volume or the impact of the grey fleet. Any solutions should meet the following criteria:
- The solution should address what the employee needs
- The solution should address what the employer needs
- Services or solutions can be implemented in a smooth and efficient manner
- Benefits of the solutions can be measured for effectiveness
- Any financial or operational risks need to be considered before implementation.
Business Travel Policy
A clear and effective business travel policy can help steer employees through use of a decision tree to viable alternatives to the grey fleet. The policy should clearly state the objectives of the organisation and tailor travel plans accordingly.
For those drivers in receipt of a company car allowance then organisations may want to put in restrictions on the vehicles which can be used to mirror company run vehicles. This may include restricting the age, emissions or bodystyle of the vehicle. Mileage should also be paid at the advisory fuel rates rather than the AMAP levels.
For grey fleet drivers (not in receipt of the cash allowance) there is a point at which it is often more cost effective to hire a vehicle instead of using the grey fleet. Depending on the daily hire rates you have with your supplier, the breakeven point is approximately 70 miles for a round trip. For trips more than 70 miles, it is more cost effective for the driver to hire a vehicle.
Organisations should have a robust process to manage the provision of hired vehicles. Bookings should be authorised by line managers and the types of vehicles which can be hired should form part of the policy. Vehicles should always be refuelled before return to the hirer to avoid expensive recharges. Any damage incurred during the hire should be reported to the internal administrator to liaise with the hire company.
Payment for hired vehicles can be conducted via pay and reclaim process through expenses or having a corporate payment solution set up with a preferred supplier.
Where organisations have a regular requirement to travel out of certain locations it may be beneficial to have pool vehicles on site which drivers can utilise. It is important to make sure this utilisation is sufficient to warrant getting permanent vehicles rather than regular hired vehicles. To make this assessment information should be analysed regarding the costs of travel from certain locations and the frequency of travel. A comparison can then be made of these costs against a fully insured leased or purchased vehicle.
When considering one or more pool vehicles, consideration needs to be made regarding how it will work from an operational standpoint. Firstly, the vehicles will need to be booked. There are a number of options for this ranging from a paper-based system, simple calendar to more advanced online or application based booking tools.
Then the vehicle needs to be collected from its stored location. Keys need to be collected and a condition check made of the vehicle to pick up any damage or maintenance defects which would preclude the vehicle from being used. Drivers should also be offered a quick orientation of the vehicle if they have not driven a similar vehicle before. The vehicle should be allocated a fuel card so the driver can re-fuel if required. This needs a robust process to prevent any additional use of the fuel card beyond its permitted use.
When the vehicle is handed back a walk around check should take place to check for damage and record the mileage for the vehicle.
Pool cars also need to be adequately maintained so there should be a responsible individual within the business to make sure this happens at the appropriate time.
For individuals with heavy grey fleet use (10k+ miles per annum) may well be more cost effective to be offered a company car. Checks should be made that the driver will continue to be a heavy mileage driver and there will be no impending changes to job role or operational area.
Salary sacrifice schemes target all the employee base. The employee will sacrifice some salary in return for a vehicle. This is particularly suited to low emission vehicles as the employees are taxed as if the vehicle is a company car. Low emission vehicles attract lower tax than petrol or diesel vehicles.
Car sharing is a great method of reducing grey fleet where multiple staff members attend the same meeting or event. Not only will car sharing reduce the cost of travel but can also help reduce driving fatigue through sharing the driving. There are an increasing number of websites and apps can help with the arranging car sharing as can internal notice boards or distribution lists.