How to reduce company car scheme costs and administration

Fleet - scheme data 2016

Need to know:

  • A joined-up approach to fleet, travel and expenses can identify potential cost savings and areas for policy optimisation.
  • Focusing on mobility and total journey cost can help determine the most appropriate means of travel.
  • Data connectivity between employers and providers can enhance efficiency and help to control costs.

Company car schemes can provide benefits for both employers and employees, but how can the process be streamlined to maximise their value and lower the associated costs and administrative burden?

Data flow

Linking up data sets, for example to cross-reference whether employees have a company car or have taken a cash allowance in order to assess whether they are eligible for a hire car, is one way in which employers and providers can work together to control costs. A robust data set that is used in this way can allow eligibility information to be continuously updated, to the extent desired by the employer, which can help to improve efficiency, says Jonathan Smith, relationship director at leasing and fleet management services provider Zenith. “Once that connection is [established], what happens afterwards is largely automatic,” he explains.

In the future, predictive analysis of data could also be harnessed to provide greater understanding of the type of car an employee is looking for, and the factors that cause them to proceed with or decide against placing an order after receiving a quote, says Smith. This could help to improve the experience for employees, as well as lead to greater synergies with car manufacturers around the type of deals that are most likely to appeal to staff.

Joining up the dots

Improved internal connectivity can also enhance efficiency, says John Pryor, chairman at the Association of Car Fleet Operators (ACFO). “There’s the fleet element, the travel element and the expenses element; you have got to join those three elements up,” he says.

The data for each of these elements can often sit in silos within an organisation, adds Toby Poston, director of communications and external relations at the British Vehicle Rental and Leasing Association (BVRLA). Taking a joined-up approach, therefore, can enable organisations to identify areas that can be optimised, and where potential cost savings can be made.

Kathryn Batchelor, manager, employment tax technology, tax and people services at KPMG, says: “Having all the information moves [employers] to put the right type of schemes in place as well.”

Having a well-rounded data set, such as mileage and usage information, can enable employers to ensure that the schemes they offer are best suited to the requirements of the business and their workforce. It could also demonstrate the benefits of a blended approach, such as a combination of a traditional company car plan, car salary sacrifice arrangement and employee car ownership (Eco) scheme.

The wider view

Taking a broader view of mobility and considering the total journey cost could also enable organisations to help their staff find the best means by which to travel. “It’s about understanding how people travel around,” says Pryor.

Technology can facilitate this by suggesting routes and methods of transport based on selected criteria, such as cost, time or carbon emissions, adds the BVRLA’s Poston.

Approaching mobility in the round could also allow employers to support their employees’ travel preferences through their benefits package. Gary Hull, executive director, people advisory services at EY, says: “A trend that we could see is potentially around employees wanting a car for the weekend as opposed to having a car all of the time.”

This need could be met through the inclusion of car-sharing clubs within a benefits programme and run alongside other travel offerings such as discounts on rail tickets, says Pryor.

Bringing together travel-related benefits, such as car hire, salary sacrifice car arrangements, and discounts on products such as insurance or driving lessons, could also provide employees with more comprehensive total mobility support, says Smith. These could be brought together within a flexible benefits offering but would likely require the flexibility of open or regular enrolment windows, adds Batchelor.

Salary sacrifice

By equipping employees with newer, safer, and lower-emission cars than they might otherwise have access to, car salary sacrifice arrangements can support employers in their duty-of-care responsibilities, help them manage risk and control their carbon footprint. Salary sacrifice arrangements also provide national insurance contribution (NIC) savings for the employer, and tax and NIC savings for the employee.

However, there has been some uncertainty about the future of salary sacrifice. In the Spending review and autumn statement 2015 policy paper, the government expressed its concern at the growth of salary sacrifice arrangements and in Budget 2016 documents it confirmed its intention to limit the range of benefits that can be offered through a salary sacrifice arrangement. While the government indicated that salary sacrifice arrangements for pension contributions, childcare and health-related benefits such as bikes-for-work schemes would be exempt from this, it did not specify its intentions for car schemes.

Yet, even if the government acts on salary sacrifice, cars will still be a benefit that is valued and desired by employees, says Smith. “The people who take up car salary sacrifice today want a car. They are currently opting for salary sacrifice because it is the most effective route, but they are still going to want a car even if salary sacrifice doesn’t exist,” he explains.