Are company cars a necessary evil, or are they an untapped resource that can help to attract and retain staff? Peter Crabtree explores the issues
As we emerge from a recession and many businesses face a challenge to find and retain the best talent, forward-thinking HR executives are looking at a well-structured company car scheme to add value for both their organisation and their employees.
Factors that have attracted such interest include:
- deploying a revenue-generating asset such as a company car more efficiently by providing it to higher business mileage drivers
- taking the opportunity to reduce the risk and cost of running a traditional company car fleet
- similarly, reducing or eliminating so-called ‘grey fleet’ risk – the corporate risk created by drivers using personal vehicles for some level of business mileage;
- enhancing the appeal of an overall benefits package to potential as well as existing staff by introducing a car salary sacrifice scheme, as well as by generating net pay benefits for cash allowance drivers; and
- boosting a sustainability agenda by structuring a scheme to encourage more staff to drive ‘greener’ vehicles.
Because of the wide range of vehicle purpose, use and contract arrangements, running a vehicle fleet is an increasingly complex challenge –one size does not fit all.
Profiling a company’s ‘essential user’ is a first step. As a rule of thumb, any driver covering more than 10,000 business miles per annum should be considered an essential user.
This category of driver is best served by Corporate Contract Hire: the assets are revenue generating, therefore the business should take responsibility for this type of fleet asset.
Keeping the revenue-generating driver on the road is critical and this is an objective a specialised fleet management partner can support by pro-actively managing both driver usage and vehicle asset.
A fleet management specialist can also: maximise sourcing discounts; help with vehicle re-allocation; and reduce the cost of terminating vehicles early. Working with a specialist partner such as sgfleet to undertake a review will enable a company to explore all avenues for fleet optimisation.
While salary sacrifice may not be the best solution for funding essential users’ cars, companies are finding that salary sacrifice can enhance their employee benefits.
It also reduces ‘grey fleet’ risk, as a salary-packaged car is guaranteed to be properly maintained and insured.
Another key stakeholder to consider is the cash allowance driver. Is fuel reimbursement for business mileage the best solution? While a cash allowance-only policy reduces the administrative burden, costs and risks can escalate.
The arrangement also fails to provide a company with any say in what type of vehicle is used for business purposes. While a traditional company car fleet allows the business to manage fleet risk and environmental impact, a cash allowance driver set-up creates additional grey fleet risk. It may be more cost effective to direct high business-mileage cash-allowance drivers to a company car set-up.
Another consideration is the ‘perk car’. In the UK, up to half of company cars are actually perk cars. Generally, this category of driver has a greater choice of vehicle, which in turn puts more cost on to the business as discount opportunities are not maximised.
This can be addressed by a salary sacrifice solution such as sgfleet’s Novalease. With a novated leasing structure, no scheme risk is placed on the business. If an employee leaves, he or she retains the car: the risk and cost of vehicle re-allocation is removed. The Novalease solution effectively turns car salary sacrifice on its head: sgfleet is the only UK provider to offer a structure whereby the provider contracts directly with the employee.
It creates a unique opportunity for everyone in an organisation to have access to a ‘company car’ (subject to minimum wage criteria).
Working with a fleet management provider that can offer a total outsourced solution is becoming increasingly popular. Who looks after your fleet – an expert, or someone who needs the help of a professional fleet management company?
The total fleet solution approach created by sgfleet, combining corporate contract hire with Novalease, can reduce fleet risk and cost and at the same time enhance the appeal of a company’s benefits package to potential hires and existing employees. In the emerging battle for talent, this is a powerful recruiting tool and at the same time optimising the use of existing fleets.