Is it time for Cash Allowance for your drivers?
For the last decade, the prevailing wisdom has been, where possible, to replace your company car scheme with a cash allowance to those employees who are eligible.
The obvious benefits include having less administration, less tax for both employer and employee in the case of premium and diesel cars, and far more flexibility in the event of employees leaving.
The benefits are clear to this approach, but, with new tax rules in 2021, there are two things to keep in mind:
- Cash allowance systems only work when the employer retains a clear organisational remit for managing those employees who use their car for business. Regular driving licence checks, insurance policy reviews, and indeed checks on roadworthiness and ‘brand fit’ (you may not want your team arriving at clients in a convertible, for example) are all essential.
- Some of your competitors in the recruitment of top talent may now be offering salary sacrifice on electric cars (more below).
Can you move your company car drivers, or ‘Essential’ vehicle users to electric vehicles?
At P+B, we often find clients are not ready to switch their entire fleet to fully electric. The switch to electric throws up questions around range, chargepoint availability for urban dwellers, as well as practicalities about the number of models available.
It isn’t always the volume of mileage that dictates how good the fit may be for the switch to electric, rather it is the composition of the mileage.
Let’s say your employee drives 20,000 miles per annum, on a regular commute back and forth from home to work. If they have a chargepoint at each end, then electric is actually a great fit, as it means the cost savings on fuel will be huge.
However, if your employee has many unpredictable trips each day, and lives in a 3rd floor flat, the savings are probably outweighed by the hassle, and indeed the hit on productivity.
With the plug-in hybrid market now offering some cars with 60 miles of ‘electric only’ range and vastly improved tax regime for such cars, it may be worth reviewing again what your needs are.
Have you looked at Salary Sacrifice on electric cars?
By far the biggest growth in enquiries for our Professional Services team has come through our Salary Sacrifice offering for electric vehicles.
There are 3 main advantages:
- An evidential impact on the environmental credentials of the business, something that is becoming increasingly important attracting both clients and staff.
- An improvement in the business’ employee offering, at a time when most firms are looking for some ‘good news’ to share, with no cost to the business.
- Cost savings for employee and employer, with employees often able to take a net pay rise compared to their existing car, whilst the employer saves the National Insurance contributions on the salary sacrifice.
Are you ready for the Mobility as a Service (MaaS) packages?
Many predict business mobility in the next decade will move to a MaaS platform, meaning a series of ‘on demand’ travel packages, managed through one single platform.
This may be ride hailing, combined with air and rail travel, as well as autonomous vehicles for your more day-to-day travel.
At present, this opportunity is probably best suited to major urban centres, with London and Birmingham currently trialling a number of government-backed solutions.
Conclusion
In the decade ahead, the world of mobility is set to change more fundamentally than it has for a century.
We now live in a world of electric mobility, and this will only continue to increase, and with the twin focuses on employee wellbeing and climate action now bringing electric vehicles to the forefront again, employers would be ill-advised to ignore the rapid change in how employees will see their car package.
Our team invests daily in its professional development. Over the past 5 years, our team of experts, has helped over 2000 busy professionals through the time-consuming, confusing, and difficult process of buying their new car.
We deploy our proven expertise to help clients offer their employees a more tailored employee car benefit package, delivering better returns on costs, and less administration and hassle when it comes to delivering the car their employees need.
