Where does the company car sit in a modern staff travel scheme?

company car

Need to know:

  • Employers are increasingly looking at giving more flexibility in their company car schemes, whether that means a choice of vehicle or a cash alternative.
  • Blended mobility options involve looking at a range of travel possibilities in order to create the most efficient choice that meets both operational and employee needs.
  • With a reduction in the benefit-in-kind tax on electric vehicles and a government focus on active travel, greener travel options will become more accessible in the future.

With the government’s plan to reduce the benefit-in-kind (BIK) tax on plug-in vehicles for the 2020/21 tax year from 16% to just 2%, an increase in the promotion of sustainable travel, and the Transport Committee’s current inquiry into active travel, travel policies are continuously changing.

Part of this evolution is the need to become more attractive and accommodating for the shifting priorities of both employer and employee.

Adrian Warren, chair of the Cycle to Work Alliance and director of Cyclescheme, says: “Green travel policies are rising up the agenda, causing a lot of employers to look at their staff travel policies [and consider] how green or how sustainable they actually are.

“Traditionally, they’ve been focused on just the quickest, most cost-effective ways to travel, as opposed to the greenest, most efficient way from a sustainable transport perspective.”

Company cars

An emerging theme regarding the provision of company car schemes is that, because of the rising tax implications, many employers are providing more choice and flexibility.

David Wreford, partner at Mercer, says: “The removal of the scheme altogether isn’t necessarily the right thing to do for all employers, and raises a lot of questions: can [employers] offer more value by giving [employees] choice and flexibility, or access to cash? If so, how much?

“The important question that organisations have to deal with is operational need: what is it that organisations are trying to achieve when they offer a benefit of this nature?”

Many in the industry feared that the changes to car salary sacrifice schemes announced in 2016’s Autumn Statement would see the popularity of company car initiatives decline, but that has not been the case.

Instead, providers are responding to the tax changes, says Adam Mason, professional services director at Benefex: “Interestingly, most of the car leasing providers have put themselves in the space of focusing on the most environmentally-friendly vehicles. If there are emission levels below a certain level, there are significant savings for the employer and employee.”

While it may be a slightly cheaper option, employers that offer a cash alternative give up control over the vehicles staff are driving; employees may choose to buy less environmentally-friendly vehicles, which can undermine corporate social responsibility (CSR).

Therefore, it is important to communicate to employees using a cash scheme about the range of electric and hybrid models available, and why these are an attractive alternative to petrol and diesel options.

Matt Dale, head of consultancy at ALD Automotive, explains: “New vehicles that have come out have a range of 300 miles from a single charge, which will make it work for most people. Then the company car becomes an electric car; it becomes tax efficient for the employee and the employer, [and] it’s good for CSR. That’s being driven by [BIK] tax and the manufacturers producing the vehicles.”

So, is the company car still a viable employee benefit? Dale believes so: “If [the employee] is doing any sort of mileage, can they run a car for the amount of money that the business is going to give them as cash, and make sure it’s safe, fit for purpose, and suits all their requirements? The short answer is probably not.”

Blended mobility

Employers are increasingly looking at blended mobility options, and considering how they can use mobility-as-a-service (MAAS) for staff travel. This business model combines a range of travel options that suit operational need while providing viable transport for employees; for example, short-term car hire, public transport season tickets and bikes-for-work schemes.

“There’s a change coming around the way that [employers] look at mobility and how their staff move around,” says Dale.

If an employer dismisses the use of electric vehicles because their employees drive thousands of miles a year in their car, for example, it should consider whether those employees are moving around in the most efficient way. Instead, it could put a policy in place for using public transport, or invest in software to improve online meeting capability, Dale suggests.

Employers also need to question how important mobility, and specifically in cars, is to their organisation.

“[Employers] are all too often benchmarking, which is fine, but they don’t spend enough time thinking about what the need is,” says Wreford. “What we’re seeing is more sophistication going into that philosophy. It’s not just about total miles per year, it’s also about the frequency with which people are doing that mileage; is it a lot of mileage but very infrequent? If people are required to travel to other urban centres, why wouldn’t they do that on public transport?”

Government initiatives

The Transport Committee’s active travel inquiry is looking into ways of increasing walking and cycling across England as an alternative to motorised transport.

“The inquiry reveals the way that employers can play a role in promoting sustainable active transport choices,” says Warren. “Not only is it a government initiative, but it’s also up to the employers to accommodate for those choices to be made by the employees.”

The government also updated the Cycle to Work Scheme guidance in June 2019 in order to push the use of electric bikes. This guidance will make it easier for employers to provide bicycles, e-bikes and other equipment by removing the £1,000 cap previously in place.

“It’s more than an employee benefit,” says Warren. “It’s part of a travel policy now, and it can be the solution to so many problems that employers have, be that limitation of parking spaces or cost to the employees of rail season tickets. This is the most effective and affordable way of travelling into work, within a certain distance.”

The future is green

So what does the future hold for the company car? Wreford believes the death knell is a way off, and Dale says that the internal combustion engine is still here for a long time to come, but the signs still point to the future being greener, whether on two wheels or four.

“The company car is still here, and it’s here for a long time to come,” says Dale. “If BIK  on company car tax goes the way the government has started for 2020/21 then we will see electric car adoption continue. As new models come to the market over the next two years, there will be more availability, more variety, more range and they will become more and more acceptable.”

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