If you read nothing else, read this…
- Common fears among employers include the perceived administrative burden or exposure to corporate risk through duty-of-care requirements.
- Employers can work closely with providers to understand the risks and costs involved in providing a scheme.
- Employers have a range of options of how to provide company cars.
The Employee Benefits/Alphabet Fleet research 2015, published in July, found that 41% of employers believe that the health and safety, or duty-of-care, requirements increase an employer’s corporate risk.
But are employers’ fears justified?
1. “It is going to be an administrative headache.”
Chris Chandler, principal consultant at provider Lex Autolease, says: “Designing and implementing a successful car scheme takes considerable investment of resource, time and effort. However, a good fleet partner will provide support and expertise at every step of the process and alleviate the burden of administration once the scheme is up and running.”
Outsourcing the day-to-day running of a fleet is becoming increasingly commonplace, he says. To that end, it is about an employer working with its provider and supplier to decide what it is happy to keep and what it would rather pass on. Having an easy-to-use entry portal for employees can also be helpful.
2. “I am going to be saddled with the cost of early terminations or damage.”
This can certainly be an issue, but only if an employer does not think ahead and work with its provider to manage risk. Jon Burdekin, head of consultancy services at provider Alphabet, says: “When you look at the different barriers, for every single one there is a solution. [Employers] just need someone to discuss the best solution.”
Employers could put in place an agreement with the employee that says if a car comes back damaged, the money to cover the repairs will be taken from salary. Also, insurance or an additional premium can be built in to the scheme to cover the cost of early termination if an employee leaves the business.
3. “It will leave the organisation more exposed around health and safety.”
Consider, for a moment, the alternatives. Either an employer just lets staff drive their own cars or it gives them a cash allowance to effectively do the same. Iain Carmichael, chief commercial officer at provider Tusker, says: “There is often a perception that giving a cash allowance is much less hassle.”
But an employer’s liabilities under the Corporate Manslaughter and Corporate Homicide Act 2007 can be significant if an employee is driving for work purposes in a car deemed to be not fit for purpose and is in, or causes, an accident.
The employer remains responsible but there will have been no duty-of-care checks on the car, such as establishing its insurance status and mechanical condition, adds Carmichael.
4. “Company cars are an outdated benefit in this day and age.”
The fact that benefit in kind (BIK) remains heavily skewed towards the most environmentally friendly cars means even executive perk car schemes are much more likely to be based around hybrid and lower carbon dioxide (CO2)-emitting models.
Andrew Baxter, senior business development manager at provider Hitachi Capital Car Solutions, says: “Some [employers] are not aware of the new models and products out there that manufacturers are now producing, many of which have come on in leaps and bounds. Hybrid and electric models are really pushing out BIK liability.”
Then there is the growing popularity of offering ‘whole-population’ salary-sacrifice-based schemes, as well as a recognition that employers have a range of options at their disposal.
For example, they might offer a whole-population salary-sacrifice-based scheme but give senior managers the perk of an additional cash allowance towards it.
As Baxter concludes: “Company cars are still perceived as a valuable benefit. But it’s not just about whether cash or car by itself is necessarily the right way; it is about having a blended approach.”
