Standardising car policies across borders can bring economies of scale but it can also be to the detriment of cultural and tax issues locally, so remember to always think flexibly, says Sarah Coles
Few benefits are likely to evoke the same kind of passionate and emotive response as company cars. Yet, while employees may prefer to have freedom of choice when it comes to the type of car they drive, some benefits professionals are working on harmonising car policies internationally.
Honeywell’s director of compensation and benefits for Europe, Middle East and Africa, Debra Corey, is in the process of standardising cars across her region as part of a move to align benefits regionally and improve equality. The technology and manufacturing firm is working to offer cash allowances, diesel cars, and some choice of models in all 37 countries in the region, while bringing together purchasing power under one manufacturer.
Aside from a desire for fairness, there are also cost savings. These are typically obtained by negotiating better prices with manufacturers rather than by squeezing leasing companies, which tend to operate on tight margins. Colin Wrigglesworth, head of benefit partnerships at Lloyds TSB Autolease, says: “If you can talk to manufacturers about pan-European purchasing, they will sit up and listen, because it’s a large [deal]. It’s a one-time-opportunity to get into the group, rather than having [to negotiate with] several purchasing managers.”
If employers limit the number of leasing companies they use, much of the administration can also be effectively outsourced to them. This may result in more streamlined processes, which can have a positive effect on efficiency, and save on costs.
But there are serious hurdles to overcome before harmonisation is possible. Firstly, every region will have its own local quirks, which have to be respected. The choice of manufacturer, for example, is often driven by cultural factors. “In Spain, SEAT is very popular, but it is much less so in the UK or Germany. In France, choices tend to be quite nationalistic, so Renaults and Peugeots are popular,” says Wrigglesworth.
John Lewis, director general of the British Vehicle Rental and Leasing Association, adds that although recognising cultural differences is vital, compromises can be broached by offering a few mainstream brands that are acceptable everywhere, such as Ford, Audi and BMW.
Other hurdles for organisations keen to harmonise policies include variations in tax law. The UK, for example, has tax breaks for diesel cars, which helps make them more popular. Corey says: “Cash allowances are more popular in the UK. In Belgium there’s no tax advantage, so it’s very costly to provide, so most companies don’t offer it. We wanted to offer choice, so we offer cash allowances across EMEA, even where the tax makes the sums involved relatively unattractive to give employees this choice.”
When it comes to local variations in the competition for talent, harmonisation needs to take a back seat to ensure policies remain attractive. “A model that’s suitable for one grade might be seen as too generous for another country, for example,” says Wrigglesworth.
Harmonisation is also secondary to meeting the specific needs of drivers in each country. So, for example, Scandinavian drivers need both winter and summer tyres, while in Romania, where there are no motorways to speak of, tyres require changing more frequently. This means there is a need to be flexible within an overall policy. Lewis believes that in a standardised European policy there can be around 60% parity, and 40% flexibility.
Standardising support suppliers can prove tricky. “The lease, support and repairs all have to be bought locally,” says Lewis.
Wrigglesworth explains: “For larger organisations, providers will work through alliances and joint ventures to cover the workforce.” However, there is no guarantee that one company will be the most competitive in each area.
In theory, harmonising car perks can provide a fairer international policy, and generate cost savings. But, in practice, putting a standard policy in place takes time and sensitivity, and is fraught with headaches. So far, Honeywell has done this in a handful of countries and had to overcome issues in every territory.”We have slowed down the process to take time to learn about each country and ensure the changes are communicated [well],” says Corey.
If you read nothing else read this…
- Harmonising car policies internationally allows fairness and equality for employees.
- This also brings cost-savings on car purchasing.
- Streamlining suppliers provides back-office efficiencies which can save time and money. However, policies will often need to overcome cultural difficulties and tax differences.
- The needs of specific countries along with those of the market must be taken into account.
- Support suppliers need to be sourced locally, and several leasing companies may be required to provide full geographic coverage.
- Centralised harmonisation works best with local involvement and flexibility.