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 apt term because normally this mode of transport is often poorly managed or even ignored by senior management.
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 doesn’t need contracts or any other financial risk to run, just a payment based on actual use.
The issue is however, 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 employees own private vehicle so the organisation has limited control over the asset being used.
So what do you need to do to manage this area effectively taking into account cost, operational flexibility, administration, risk and environmental factors?
Establish a Grey Fleet Working Group
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 resulting ongoing management.
Human resources can help with the refinement of policies and communicating changes to the wider employee base.
Establish a 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
Whilst some of this information will be readily available other aspects may be much harder to find as a lot of expenses systems are not configured to collect all of this information.
The Cost Of Grey Fleet
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.
Implement Best Practice
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.
In simple terms the journeys should be legally compliant. Basic compliance will require the following:
Up to date road tax
Insurance covering business journeys
Adequate maintenance to keep the vehicle road legal
Valid drivers 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 are able to confirm they meet the required standards through self certification but these records should be kept centrally to cover audit requirements. Where organisations are geographically dispersed then electronic systems are better at fulfilling this requirement.
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. Therefore for trips in excess of 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 refueled 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 particular 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 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.
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.
EVP has extensive experience reviewing grey fleet use within organisations. The results of grey fleet reviews lead to reduced cost, increased compliance, robust and sustainable processes. We offer different levels of service from advising you what to do internally to a fully outsourced solution.
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