Incentivise staff to choose green cars

IEmployers can use various incentives to encourage employees to choose more environmentally-friendly cars, but senior management staff may be more difficult to convince, says Nicola Sullivan

Employers wishing to avoid the impact of changes to capital allowances that come into effect in 2009 and penalise the ownership of traditional company cars with high CO2 emissions, will no doubt be keen to find ways to encourage staff to drive more environmentally-friendly vehicles. Expenditure on cars with CO2 emissions above 160g/km will attract a lower writing down allowance (WDA) of 10 percent than that on vehicles with emissions of 160g/km or below for which the WDA is 20 percent.

Employers will also been keen for staff to recognise the changes to company car tax which are due to come into 2010/11. Although these will benefit employees personally if they select vehicles with low emissions through their company car scheme, employers stand to gain as fuel-efficient vehicles should also help keep their organisation’s mileage costs under control.

However, simply limiting choice to vehicles with low emissions could backfire, says Alastair Kendrick, partner at Bourne Business Consulting, as any restriction could minimise the impact of what is often regarded as an emotive benefit by staff.

To help encourage staff into greener vehicles, employers have a range of incentives they can use. Vodafone, for example, incentivised its drivers to go green by reducing the price of environmentally-friendly vehicles on its list of cars that staff can select from. Employees who choose a car that emits 120g of CO2 per km or less will receive a discount and can pocket any money left over from their company car allowance.

Gerard Gornall, managing director of Intelligent Fleet, advises employers to offer higher-spec greener cars rather than high CO2-emitting vehicles where possible. Drivers could be tempted by vehicles such as the Volkswagen Passat Bluemotion, which releases 137g of CO2 per km, he says.

However, employers may also have to compensate for the fact that greener vehicles can be more expensive by increasing the car allowance they offer. Gornall says employers should also consider extending the scope of what staff must use their allowance for to cover all the costs of running a car, including tax and fuel. He believes it is important for employees to base their choice of car on the running costs during its lifespan, as well as how much it costs to lease.

“More often than not, if you get an allowance, it’s just for the rental of the car, so that’s not going to give green cars a fair hearing. Two cars with the same lease cost could be massively different in terms of [what] they cost to run. You could have two cars priced at £400 a month, but one could do 50 miles to the gallon and one could do 25 miles to the gallon,” he says.

Mark Sinclair, director of Alphabet, says employees could be further incentivised to opt for greener cars if employers offer lower advisory fuel rates that reimburse drivers for business travel in their company cars. Although HM Revenue and Customs increased these in July, Sinclair says employers do not always have to offer the new higher rate. “If employers are not paying the maximum amount, staff might find it harder to cover their costs and it will persuade them to choose a more economical car,” he saysFurther incentives that could be used by employers to persuade employees to drive greener cars include offering luxurious extras such as satellite navigation systems, leather seats or even an iPod to plug into the car’s radio system.

In addition, employers could allocate the best spaces in an organisation’s car park to drivers of green cars. “Those car parking spaces closest to the office could be outlined in green and green badge holders given a prime parking spot. It doesn’t actually cost anything,” says Sinclair.

But Kendrick thinks employers may find it hard to persuade senior executives to give up their high-spec, gas-guzzling cars, often regarded as a symbol of status. “You’re not going to get senior management out of an expensive car because they see it as part of their position. It’s going to take some considerable time for there to be a change in attitude to get employees at that level into cars emitting less than 160g of carbon,” he says.

If you read nothing else, read this…

  • Employees can be encouraged to select greener cars if they are offered discounts on more environmentally-friendly vehicles.
  • Employers which don’t increase advisory fuel rates for staff in high-carbon-emitting cars may encourage them to drive fuel-efficient vehicles.
  • It may be difficult to get senior executives to swap gas-guzzling, high-spec cars for smaller, fuel-efficient vehicles.
  • Allocating prime parking spaces for drivers of green cars can be a cost-effective way of rewarding employees who select environmentally-friendly vehicles.