According to the Lex Autolease 2015 Report on motoring, published in September??, 59% of company car drivers and 20% of employees with privately owned cars say their car is absolutely essential to do their job. Cars remain central to the work life of many employees and while the company car is an essential business requirement, it is also an important and valued personal benefit for many of the UK’s employees.
A well-designed car policy will have a significant impact on staff recruitment, retention and motivation, particularly in organisations where a company car may be one of a few reward options open. Ensuring that company car and other mobility options such as salary sacrifice arrangements are competitive ought to be top priority if talent is to be retained.
Reward packages should be developed to include clear career progression within grades so employees have access to attractive and affordable levels of reward appropriate for their individual career advancement and changes in lifestyle.
During the recession, belts were tightened across the board. For company car schemes, this often meant cost-cutting measures such as extending contract durations and reducing vehicle choice. Now that the UK’s economy is in the early stages of a welcome upturn and the job market is heading in the right direction, many employers are actively recruiting. As the Chartered Institute of Personnel and Development recently confirmed, organisations are competing for valuable skills and employees are looking for the best reward packages when deciding between roles.
The improvement in the labour market could explain why 64% of current company car drivers feel that being offered a company car in their next job is important. A similar proportion (57%) say the monetary value of the car is also important, as is the degree of choice that they have over that car (72%). This is in sharp contrast to employees driving a privately owned car. Only 21% said this would be an important consideration if they were to change jobs.
It seems that once this benefit has been offered, then its value is appreciated and employees do not want to lose it. This may also reflect a practical reliance on their company car, once it has been part of their life for a few years.
The rapid pace of economic change is such that in-depth car policy reviews should be carried out at least annually, if not more often. Benchmarking policies against others in the industry, sector and wider marketplace will also ensure competitiveness, and ought to include cash alternatives.
While cash was considered by many organisations to be a ‘quick fix’ during the recession, in our experience many employers are now unsure about its true value. It is increasingly seen as a ‘salary supplement’ rather than a genuine benefit aligned to progressive career reward strategies.
According to the Report on motoring, most organisations offer employees an alternative to the company car. The most common is a cash alternative (59%), followed by a salary sacrifice scheme (11%). However 28% offer no alternative.
Although a cash alternative certainly has its place in HR policies, employers are now recognising that they need to do more to educate employees about the full cost of ownership of cars and routes to market instead. Progressive organisations wishing to retain and enhance benefits at the same time as addressing higher taxation impacts are also looking to innovative solutions such as employee car ownership or blended solutions designed to align with work patterns.
When the time comes to rethink policies, it is essential to keep the future expectations of both employer and employee front of mind, along with any objectives set out by HR. By working closely with organisations to understand their business needs and goals and considering redesigning existing policies on, for example, a whole life cost basis, schemes can be enhanced without increasing costs. This helps employers keep their policies up to date, competitive and attractive to staff, without greater costs and risk.
John Webb is principal consultant at Lex Autolease
