Why cash rather than company car may negatively impact employee wellbeing
Most fleet owners manage their car selection design quite tightly so they can exert some control over their fleet and the type of vehicles driven by their employees. A well organised and correctly specified car fleet provides a more controlled environment for both the employer and the employee; assisting safety, comfort and productivity.
Company car support network
As the fleet supply chain exists to manage the vehicle, and support the driver, it also removes the personal burden of responsibility for the upkeep of the vehicle, allowing the employee to be free from the distractions and compromises of personal car ownership. However, once this support network is removed and the requirement to source, maintain and eventually dispose of a personal car, albeit with employer financial support, becomes the responsibility of the employee, then the convenience of a company car compared with a cash allowance is drawn into sharp contrast.
If a company decides that a cash allowance is how they wish to mobilise their workforce, there will be a number of implications that could impact employee wellbeing:
Switching people into a cash allowance scheme will expose them to a number of situations with which they may not have been familiar with for many years, such as financing, insurance, maintenance, all of which can cause anxiety, become huge distractions and create financial challenges.
A personal vehicle needs to be sourced and, unless the employee has the luxury of being able to afford to buy a car outright, it is likely it will need to be financed – which also raises the issue of exerting some control over the quality and age of the vehicle being used. Car purchases could be private or most likely Personal Contract Plan (PCP) or Personal Contract Hire (PCH) schemes, for which there is usually a deposit required.
A cash allowance will provide a monthly fixed sum which can be used to cover the financing payments, but it will not cover the deposit; something that will need to be covered by the employee.
Minimum term commitment
If the car is to be financed there will be a minimum term to which the employee will need to commit. If their employment circumstances change, they will be committed to the term or likely face early termination penalties.
Insurance will need to be arranged by the employee and as most employees may be coming off the back of a company car (it is often difficult to prove no-claims from a company policy), they may struggle to negotiate cost-effective and appropriate levels of cover. And in the event of a claim, the typical excesses of £300 to £500 needs to be paid by the employee.
Company car drivers have the luxury of a centrally applied maintenance arrangement. MOT’s are covered, servicing is just an email away, tyres replaced at the drop of a hat. Dealing with these without the support network of the employer can lead to many hours of sourcing, negotiating and appointment making, as well as creating a serious concern over its financing.
Company-wide roadside cover is universally applied to a company car fleet, while cash allowance drivers fend for themselves. It is not a particular onerous task to appointment a roadside recovery partner, but it still requires effort and expense.
In-life and end-of-contract damage
If indeed the employee arranges their vehicle on a PCP or PCH, unforeseen operating costs such as damaged tyres and wheels, minor scratches and non-routine maintenance costs are typically not covered under either the maintenance or insurance programmes. Employees will be liable to a recharge if their vehicle is returned with what is classed as unfair wear and tear, a set of tyres for a typical fleet car can cost between £800 to £1000.
When the employee negotiates their vehicle financing they can be easily lured into an attractive deal with relatively low contract mileage, often overlooking the punitive penalities that are imposed if they exceed the contracted amount on vehicle return.
The offer of a cash allowance can have consequences for company car drivers. If a company car driver has deliberately chosen a more energy efficient car with a lower Benefit in Kind tax point, and their employer offers a cash alternative, then the employee will be charged at the higher of the cash or car benefit value. A consequence that the driver may not even be aware of, and ill-prepared for, until they get their tax bill.
The positive impact on employee wellbeing of a well-designed and carefully administered company car programme compared to a cash allowance scheme should not be underestimated. Personal car ownership brings with it a whole host of challenges that employees need to manage, adding anxieties and pressures that can be hugely distracting and stressful.
This article was provided by Fleetworx.
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