The ease of making cash payments each month instead of looking after a fleet of company cars is tempting. But it’s not the best option for employee wellbeing, as we explain in this article.
Why cash doesn’t cut it
Company car cash allowances are usually offered to employees in roles that are considered senior enough to attract a company car benefit as an alternative option to a car. A single payment each month via payroll and the job’s done.
However, cash payments have a range of unintended consequences. One of which is the tax impact on company car drivers.
Following HMRC’s 2017 benefit-in-kind changes, employees are now taxed on whichever is the highest: the value of the cash or the car. If an eligible employee deliberately chooses an energy-efficient vehicle, they could be taxed on the cash allowance value instead making them worse off than expected.
Which will soon take the shine off their new car.
The other downside to cash is that it can be spent on anything. Which means your staff could be driving around in older, less safe vehicles that are more likely to break down.
Known as the grey fleet, your employees’ private vehicles are outside your organisation’s control. Not only might they be unsafe, but they could fly in the face of your firm’s green initiatives, corporate social responsibility aims and employer brand.
Why physical cars beat cash
Company cars are one of the most appealing employee benefits and they beat cash allowances for many reasons, including these…