How will employers deal with the fuel crisis

With fuel prices spiralling, employers are being forced to think of ways to help them and employees cope.

Soaring fuel prices are forcing compensation and benefits professionals to review their fleet policies. Fuel prices topped a list of issues impacting on fleet policies when provider Alphabet surveyed fleet managers in May. The survey, of more than 250 fleet managers, found 39% think the price of fuel is the biggest influence on fleet policy.

With the price of a barrel of oil more than doubling in less than a year, staff are also feeling the pinch. Rising fuel prices have led to demands from Shell drivers for higher wages, resulting in a strike in June, and agreement from Shell to a 14% pay rise over two years. Community nurses have unsuccessfully called on the government to increase mileage allowances to compensate for the price hike.

HM Revenue & Customs has offered some relief by increasing the advisory fuel rates that can be reimbursed for drivers of company cars. But no concessions have been made for those who drive their own car for business.

Under the approved mileage allowance payment (Amap) scheme, the maximum tax-free payment that can be made by employers to reimburse workers driving their own vehicles is 40p a mile for the first 10,000 business miles and 25p a mile thereafter. 

Nigel May, tax principal at accountancy firm MacIntyre Hudson, said: “The Amap scheme was introduced in such a way that the Treasury can change the rates by regulation, without recourse to Parliament. As such, it is difficult to justify the [government’s] failure to make this step and increase the payments that may be made by employers [tax] free.”

Employers could decide to ease the load for staff through wage rises. Chris Smith, assistant editor of Incomes Data Services (IDS) Executive compensation review, said: “If the price of fuel goes up enough, you might well see some pressure on employers to react to that and look after their employees.”

But Peter Boreham, associate director of the Hay Group, said: “This is a strategic decision and companies will have to weigh up the extent to which they feel they should compensate for that.”

Companies are also likely to think twice about agreeing to new pay deals after Chancellor Alistair Darling urged them to keep salary increases within the government’s inflation target of 2%.

So employers may be looking at other ways to minimise the impact of the fuel crisis on both their own costs and those of staff. Some may reconsider paying for private fuel for staff, however, they may have to consult with employees on the matter if this is a contractual benefit.

Other methods include limiting vehicle choice to fuel-efficient models, restricting business travel to journeys that are absolutely necessary, or allowing staff to work from home. Employers could also provide training on how to drive more efficiently.

Nicola Sullivan