Editorial Comment
The survey
Attitudes
What’s on offer
Cash allowances
Health and safety
Environmental issues
Future plans
Sponsor’s comment: Safety and green issues drive fleet
Editorial comment
Health and safety, and the state of the environment are two key factors that appear high on the agendas of many fleet managers according to our fleet survey. This is hardly surprising given the high profile of these issues.
The Corporate Manslaughter and Corporate Homicide Act 2007 finally hit the statute books last year causing many fleet managers to review their health and safety practices. Almost a third (27%) say they will have to make changes to comply with the legislation when it comes into effect later this year, while 44% are satisfied with their practices.
However, when it comes to assessing the impact of fleets on the environment there is much work to be done. Despite the fact that 45% of fleet managers say they are taking the environment into account when developing fleet policy, 17% have yet to establish the carbon footprint of their fleets.
Apart from health and safety and environmental issues, fleet managers are unsurprisingly still concerned with minimising costs and administration levels, but, worringly, just 13% of respondents believe the company car provides a good return on investment. Nevertheless, its stock as a recruitment tool is rising, with 42% of respondents believing it is essential, compared with 30% last year.
As organisations begin to assess their environmental impact, it is likely that the perk will come under closer scrutiny both in terms of its availability as a staff benefit and the way it is utilised in order to keep mileage covered to a minimum.
Amanda Wilkinson, editor
The survey
Our survey was carried out in November 2007. We received 480 replies from Employee Benefits readers and users of www.employeebenefits.co.uk
Key findings
42% of respondents say company cars are an essential recruitment tool, however, 17% say that they are an outdated benefit.
39% of employers manage their fleet in-house.
While only 11% reduced the size of their fleet in 2007, 69% plan to do so during the next 12 months.
Almost a third (32%) of employers say that if they were to review their fleet then achieving maximum savings in costs and tax or national insurance would be of most importance to them.
Almost half (45%) of employers say that they are taking the environment into account when developing fleet policy, yet only 17% have established their fleet’s carbon footprint.
44% of respondents say they are already compliant with the Corporate Manslaughter and Corporate Homicide Act 2007, while 27% believe they must make changes in light of the new law.
54% of respondents who will have to make changes plan to begin checking that cars’ MOT and service records are up to date.
Diesel cars are offered by 71% of respondents, making them one of the most widespread benefits offered to drivers.
80% of employers offer some form of cash allowance for staff, 46% of whom offer the perk to all drivers.
Three-quarters of employers offer a cash allowance to give staff more choice, while a further third do so to reduce the tax liability for employees.
Attitudes
The importance of offering environmentally-friendly fleets appears to be on the rise, while cars remain a key recruitment tool for employers, says Amanda Wilkinson
The image of the company car as a recruitment tool has been on the wane in recent years, however that trend appears to have been reversed. According to the results of this year’s Employee Benefits’s research, 42% of respondents perceive the company car to be an essential recruitment tool, compared with 30% last year and 36% in 2006.
The value of the company car as a retention tool is not so great. Just under a third (29%) of respondents believe that the perk is useful for retention purposes, the same as two years ago.
Although the percentage of respondents who believe company cars will always be part of the benefits package is significant at 39%, only 13% say company cars provide a good return on investment.
The issue of health and safety requirements increasing employers’ exposure to corporate risk is gaining ground, with 41% citing this as a concern, compared with 30% last year.
This year is the first time that we have asked respondents whether they are taking steps to make their fleet more environmentally friendly. Just over a third (37%) say they are, however, only 10% believe that company cars have a negative effect on the environment.
The proportion of employers managing their fleet in-house has dropped from 51% last year to 39% and just over a quarter (26%) of employers have outsourced their fleet entirely.
Outsourcing is much more popular among larger organisations. Only 9% of organisations with less than 100 staff have outsourced their fleet completely, compared with 63% of those with between 5,001 and 10,000 employees.
The use of suppliers to help manage the fleet appears to be more widespread, as 88% of respondents use the services of third parties to some degree or another.
The impact of company cars on the environment, and health and safety issues are the two main factors that have driven changes to fleet management over the last year.
Just over a fifth (22%) of employers have introduced a health and safety policy in the last 12 months, making it the most widely undertaken initiative. This is fewer than the 33% in 2006 who implemented such a policy. This is hardly surprising as the issue of health and safety has been high on employers’ agendas ever since the publication of the Health & Safety Executive’s guidance on work-related road safety in 2003. As the years go by there will be even fewer employers left that have yet to introduce such a policy. This is borne out by the small percentage (13%) of employers planning to introduce a policy in the next 12 months.
The environment is an issue that appears to be rising in importance among fleet managers. A number of employers have taken steps to limit vehicle choice, with 14% opting for diesel and 9% for cars with low CO2 emissions. In the course of the next year, however, 18% of employers plan to restrict vehicle choice to those with low CO2 emissions ratings. Other green initiatives include monitoring employee mileage to help reduce CO2 emissions, with 9% having taken this course of action in the last year.
While only 11% of employers have reduced the size of their fleet this year, 69% plan to do so in the next 12 months. The reason for this significant increase in interest in fleet reduction is not clear. It may be to do with controlling costs or a desire to remove company cars from the balance sheet. In fact, a third (32%) of employers say that if they were to review their fleet then achieving maximum savings in costs and tax or national insurance would be the most important factor to take into account.
Minimising the amount of time and the cost of administration and meeting safety and dutyof- care requirements also rank pretty highly as factors that would influence any review.
Reducing carbon emissions has risen up the agenda, with 14% of employers raising this as an issue to be considered during a review, compared with only 7% last year.
What’s on offer
Cash allowances remain a popular option and are more widely available within organisations, along with green alternatives to petrol-driven cars, says Debbie Lovewell
Cash allowances remain popular. More than two-thirds (67%) of respondents offer one for staff to take up if they wish, while a further 13% do so on a compulsory basis. Last year 78% of respondents offered a cash allowance.
Although cash allowance schemes remove cars from the company balance sheet, they can leave employers open to duty of care claims if employees use the money to purchase a car that is unsafe or not suitable for its intended purpose. This may be why a relatively small proportion of respondents insist staff use their allowance to pay for a car. Cash allowances are more commonly used to supplement other forms of fleet provision. For example, staff who are not provided with a company-run vehicle sometimes have the option to either use an allowance to fund a car or keep the money.
The past year has witnessed a slight shift in the availability of cash allowances. Some 46% of respondents offer the perk to all drivers, up from 35% last year.
Where cash allowances are offered, the percentage of employers experiencing take up of more than 50% has risen from 33% last year to 38%. At the other end of the scale, take up of between zero and 5% has risen to 17%.
The proportion of respondents looking to use cash allowances to get rid of company cars altogether or to reduce the number of cars in their fleet has fallen significantly over the past year. Just 17% are now looking to get rid of all company cars, which is down from 29% last year, while just under a third (32%) want to reduce the number of fleet cars, a sharp drop from the 47% of last year.
This shift may be partly due to the Corporate Manslaughter and Corporate Homicide Act 2007, which is due to come into effect on 6 April this year. Under the new legislation, organisations whose gross corporate failings lead to the death of an individual could face prosecution and an unlimited fine.
In some industries and among some groups of employees, entitlement to a company car is still perceived as a status symbol. Employers that offer drivers a car as a perk, therefore, may find that this helps to recruit and retain employees, as well as boosting motivation levels.
Just over a quarter (26%) of respondents, however, say that less than 10% of their company car drivers receive a vehicle purely as a perk. In these instances, it is likely that the benefit is offered purely to senior and executive staff.
Some 17% of respondents offer perk cars much more widely, meanwhile, to between 76% and 100% of their workforce.
Overall, employers’ methods of sourcing company cars have changed little year on year. Contract hire remains the most popular way for respondents to source company cars, favoured by half of respondents.
Employees using a cash allowance to buy their own cars, meanwhile, remains in second place, offered by just over a quarter (27%) of respondents. This method is followed by outright purchase, which continues to be the third most popular way of sourcing cars.
Less popular, however, are funding methods such as affinity or all-employee car ownership plans and personal contract plans, where employers provide a cash allowance, which staff then use to purchase their own car.
When it comes to employers’ reasons behind their choices, more than two-thirds (67%) of respondents claim that their favoured method is the most cost-effective way of sourcing cars. Selecting a way that is simple to manage, meanwhile, is a priority for 64%.
A further 29% want to keep cars off the balance sheet, 13% selected their funding method to maintain control of health and safety, while 10% want to make the most of VAT savings.
Their low CO2 emissions also means that diesel cars incur less tax than petrol models, however, in a somewhat contradictory move, they are also liable for a 3% supplementary charge on petrol percentages as the government considers them to be more polluting overall.
Other green fuel cars, such as hybrid and electric vehicles, have also risen in popularity. A quarter of respondents now offer such cars, compared with 13% in 2007.
Similarly, there has also been a slight increase in the number of respondents offering drivers liquefied petroleum gas (LPG) vehicles and alternatives to company cars – up from 7% and 4% respectively to 11% and 7%.
This move towards greener fleets is hardly surprising given the media attention that environmental issues are now receiving.
Cash allowances
Cash allowances are a popular option of funding cars among employers. Such schemes remove cars from the balance sheet and can help to reduce the administrative burden for employers by passing it onto a third-party provider. This may account for the fact that a third of respondents say staff who are eligible for a cash allowance represent between 76% and 100%of all of their organisation’s drivers.
At the other end of the scale, however, providing staff with a cash allowance to purchase a car of their own choosing means that employers have little, if any, control over what they purchase, which can open them up to legal claims around their duty-of-care obligations if staff purchase cars that are unsafe or†not fit for purpose and then go on to have an accident. This may be why 18%of respondents say that less than 10% of their drivers are eligible for a cash allowance.
Cash allowance schemes that enable staff to take straight cash typically hold more risk for employers as there is no guarantee employees will spend the money on a car that is both safe and fit for its intended purpose.
It is surprising, therefore, that just under two-thirds (65%) of respondents say that between 76% and 100% of their drivers who take a cash allowance take this as straight cash. At the other end of the scale, just 5%of respondents say that the same percentage of staff spend their cash allowance through a structured scheme.
Many organisations, however, are often reluctant to refer to their cash allowance scheme as structured, as employees may perceive this as offering a limited choice therefore diluting the value of the scheme in their eyes.
Health and safety
With corporate manslaughter laws soon to come into force, road safety takes on greater importance, particularly if staff use their own cars, says Debbie Lovewell
Employers’ top health and safety concerns involve staff who drive on business. This is the same as last year, although the proportion of respondents for whom this is an issue has increased slightly from 82% to 85%.
Concerns about physical injuries in the workplace have also increased. Half of employers now say this is a worry for them, compared with 42% in 2007. With the Corporate Manslaughter and Corporate Homicide Act 2007 due to come into effect in April, it is perhaps no surprise that employee safety has sped up the organisational agenda.
The long-awaited Corporate Manslaughter and Corporate Homicide Act 2007 represents something of an unknown for employers. For the majority, it is likely to have little effect, as long as they comply with existing health and safety standards. However, company cars and vehicles driven for work are seen as a weak link, particularly if employers do not already ensure their employees and vehicles (even those that are privately-owned) are fit to drive.
Nevertheless, just over a quarter (27%) believe that they will have to make changes to their fleet policy as a result of the Act, while less than half (44%) of respondents say that they are already compliant with the legislation.
It could be that even more respondents find it necessary to make changes, as 26% have yet to assess whether their organisations are compliant with the legislation. Rather worryingly, 4% claim not to have even heard of the Act.
More than half (54%) say they will now need to take steps to regularly check that cars’ service and MOT records are up to date. A further 37% intend to begin keeping up-to-date records of all named drivers. And just under half (48%), plan to introduce driver training.
Given last year’s extension of the Road Safety Act 2006, which increased the penalties for using a mobile phone while driving, it is no surprise that a formal mobile phone policy is the health and safety measure that is most widespread among employers. This tops the list of employers’ health and safety measures around company fleets for the fourth year running. Just over three-quarters (77%) now also provide staff with a hands-free mobile phone kit.
Last year’s smoking ban is perhaps behind the huge increase in the percentage of employers that now have a policy on in-car smoking, which has risen to 85% from 38% in 2007.
A large number of employers (84%) permit employees who are not eligible for a company car to drive their own vehicles on business. On the face of it, this may seem like an advantageous solution for employers, by helping to keep fleet costs low. However, this could leave employers exposed in other areas.
Employers are unable to dictate what kind of car staff drive, for example, so employees could turn up for businessmeetings in vehicles entirely at odds with their organisation’s desired public image. This lack of control also means employers have no guarantee employees will ensure that their cars are well maintained and roadworthy. Under the terms of the Corporate Manslaughter and Corporate Homicide Act 2007, employers could face prosecution and an unlimited fine if they fail to ensure that both employees and their vehicles (even if privately owned) are fit to be on the road and a dereliction of their duty results in a fatal accident.
It could be for this reason that such a high number of respondents that permit employees to use their own car on business check items such as whether staff hold a valid driving licence that is not endorsed (84%) and that employees’ insurance covers them for work-related trips (78%). Ensuring that employees’ cars have been serviced and have passed their MOT is also becoming increasingly important to employers. More than half (51%) now check service and MOT history, compared with 41% in 2007 and 32% in 2006.
Providing training for staff is the only way employers can ensure they are equipped with the necessary knowledge to deal with incidents on the road, the pressures of driving for long hours and vehicle maintenance. Yet almost half (49%) of respondents do not provide any form of training for staff who drive on company business.
Rather worryingly, just 30% provide information to staff about what vehicle checks they should undertake to reduce risk, such as gauging tyre pressure, although this is a slight improvement on last year’s 27%.
Ensuring staff are familiar with such information is particularly important where they are provided with a company car, which may be a different make and model than they are used to.
As just 39% of employers provide staff with advice on what to do in the event of an accident and 32% offer assistance with journey planning, then it would appear that many employees who regularly travel on business are ill-equipped to deal with basic situations.
Almost two-thirds (63%) of respondents ensure employees’ work schedules are planned around business trips so that staff have enough time to complete journeys safely. Over threequarters (76%) ensure sufficient time is built into employees’ schedules to enable them to get to their destinations safely, while 70%consider it a priority to minimise drivers’ time on the road, for example, by building in time for realistic breaks or even overnight stays.
A further 68% offer staff alternatives to driving where possible, such as travelling by train, although this is a drop from the 76% who did so last year.
In comparison, a relatively small proportion of respondents (36%) put checks in place to ensure drivers are not at risk of fatigue caused by excessive driving.
With the Corporate Manslaughter and Corporate Homicide Act 2007 due to come into effect on 6 April 2008, it is perhaps no surprise that employers are keen to introduce pre-emptive measures aimed at reducing risk for both drivers and their company fleet. More than a quarter (27%), for example, plan to introduce comprehensive risk assessments of all workrelated car use, while 26% plan to introduce driver training.
Ensuring employees are physically fit to drive can also help to minimise the risk of accidents. To this end, a fifth of respondents say they plan to implement regular eyesight checks, while 19% intend to check that drivers are sufficiently fit and healthy to drive safely. This not also minimises the potential risks to staff, but also to other road users.
At the other end of the scale, very few respondents plan to introduce measures around mobile phones, such as a formal policy on their use while driving (5%) or use of handsfree mobile phone kits (3%). This is because the majority of organisations already have such policies in place. However, there is still a number that do not and have no intention of implementing them. This could leave organisations open to claims of negligence under health and safety, and corporate manslaughter legislation.
Environmental issues†
A growing number of employers look set to shape their fleet policies with the environment in mind, however, a number have yet to take action as larger organisations take the lead in this area, explains Amanda Wilkinson
The state of the environment is becoming a key force in the development of employers’ fleet policies. Almost half (45%) of employers say the environment is now taken into account when they are developing policies, while 37% say they would like to pay regard to it.
Environmental considerations are strongest among larger employers, with 62% of respondents with more 10,000 employees saying that they take these into account, compared with 21% of organisations that employ 100 staff or fewer.
However, environmentally-friendly sentiments have yet to translate into any real action. Less than a fifth (17%) have established their fleet’s carbon footprint, although encouragingly 24% of employers plan to do so. Unsurprisingly, an even smaller proportion (13%) have agreed a strategy to reduce the carbon footprint of their fleet, although 35% are hoping to agree a plan of action. Again, larger organisations are more advanced in their plans to reduce carbon emissions. At least 40% of organisations with more 1,000 employees have plans to reduce their fleet’s carbon footprint, compared with only 26% of organisations that employ between 501-1,000 staff.
However, when it comes to measuring the impact of any environmental initiatives respondents offer around their fleet, 47% of employers monitor carbon emissions, 32% look at reductions in fuel consumption and the same proportion at reductions in mileage.
Future plans
A staggering 69%of employers plan to reduce the size of their fleets over the next year. Whether this is due to a need to reduce costs or a desire to keep the environmental impact of their fleet to a minimum is not clear. However, if employers are to proceed with a review of their fleet, maximising savings will be the most important factor taken into account according to 32%of respondents, compared to 14%who cite reducing carbon emissions as an aim.
Nevertheless, when it to comes to making further changes over the next year, the environment, and health and safety appear to be influencing employers.
Almost a fifth (18%) of respondents say they plan to restrict choice of cars to vehicleswith low CO2 emissions, 4% plan to introduce cars fuelled by liquefied petroleum gas and, 15% other types of green fuel-powered cars, while 11% plan to monitor employee mileage in an attempt to reduce their fleet’s carbon emissions.
Health and safety is also still a key issue, with 13% of employers planning to introduce a health and safety policy next year.
Sponsor’s comment: Safety and green issues drive fleet
The responses from readers of Employee Benefits magazine to this year’s survey confirm the findings of Jelf Group’s own research among our clients and members of the fleet management community over the last 12 months: that whether vehicles are owned by employees or the organisation, operating a fleet in 2008 presents an increasingly difficult challenge.
The rising lifetime cost of a vehicle, spiralling fuel prices and the recent credit crunch will place pressure on bottom line profits in the coming year and demand imaginative cost control measures from fleet managers, human resources chiefs and financial controllers. In addition, new legislation and an increasing awareness of how existing legislation applies to a company car as an extension of the workplace requires a proactive approach from employers to understand and meet their duty-of-care responsibilities. Furthermore, companies will be determined to demonstrate their environmental credentials and minimise their carbon footprint – a significant agenda for a function often accused of distracting administrative resources from profitable, core activities.
The survey shows that a significant number of respondents are seeking to reduce vehicle numbers in 2008. This is, no doubt, the result of some of the factors mentioned above, a reflection of changes in the way business is conducted, and (perhaps) a movement towards cash allowances for employees. Nevertheless, company vehicles are essential to many businesses and are often a primary tool in recruiting and retaining key employees. As such, developing a coherent fleet management strategy addressing cost, duty of care and other issues in the long and short-term remains an imperative for many businesses.
When comparing results against the 2007 survey, it is interesting to note fleet management is increasingly being wholly or partially outsourced. This reflects an appreciation of the complexity of the task and an awareness that a specialist resource is often necessary for a business to deliver its fleet objectives. Every business operates vehicles differently, and the choice of external providers needs to be carefully made, to ensure any outsourced partner supports the firm’s objectives and works effectively with internal arrangements.
Increasingly, businesses wish to promote cash allowances to provide staff with more choice while apparently reducing their statutory responsibilities. In our view, this course of action may be hazardous. A significant duty of care exists for cash allowance drivers, a fact that is often misunderstood when a strategy
is developed.
A business needs to manage the amount of time drivers spend on the road, ensure the safety, service schedule and suitability of each vehicle, and verify that vehicles are insured correctly. It also must be able to demonstrate such procedures are in place. A failure to do so could potentially lead to prosecution of the company or the person responsible for its fleet.
The number of employers offering “green fuel&#