Organisations running company car schemes are under constant pressure to keep costs down and identify savings where possible.
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- Savings can be made by choosing the right cars to offer employees.
- Fuel is the biggest area where savings can be made.
- Car telematics can monitor how employees drive.
- Driver training can teach staff driving techniques that can save on costs such as fuel.
Short and long-term savings can be made by taking steps to make employees more aware of how they drive, and using tools and services to keep track of, and save money on, costs such as fuel.
There are some key areas in which savings can be made, and here are seven top tips.
1. Choose cars carefully
Choosing the right cars to offer employees is one factor that can save on running costs. When selecting cars, employers can still prioritise what is important to drivers, but they should also bear in mind the type of car and its performance.
Taking a car’s tax status into account before offering it as an option for employees can also help employers to save on fleet running costs.
HM Revenue and Customs (HMRC) bases the tax paid on a car on three factors: the list price of the car plus any accessories, its carbon dioxide (CO2) emissions, and the fuel type.
The benefit-in-kind (BIK) tax rate is lower for cleaner cars, to encourage take-up of cars that are less damaging to the environment.
Employers should also be aware of the contract details. It could include an early termination fee to be paid by the employee and there is a significant risk for employers too. Depending on the size of the early termination charge, an employer may be left with a shortfall to cover for the termination cost.
Alan Hillier, marketing and data leader at Pendragon Contracts, says: “Be sure to choose a car that is suitable for an employee’s lifestyle in three years’ time but, as part of the selection process, employers should pay close attention to the contractual details relating to causes for early termination of contracts, or excess mileage.”
2. Introduce a CO2 cap
Employers could also implement an emissions cap to ensure staff take up cars with better green credentials.
Cars with lower CO2 emissions are more cost-effective, particularly when offered via a salary sacrifice arrangement. This enables employees to save tax and national insurance (NI) on the portion of salary sacrificed.
Although the car is liable for BIK, the tax and NI savings will outweigh the BIK contributions. Employers will also benefit from reduced class 1A NI contributions.
Keith Allen, managing director at ARI Fleet, says: “The level of CO2 is a major issue to keep car running costs low. Employers could think about introducing a cap at a level of 130g/km.
“But employees should always go for low-emitting cars, especially as manufacturers are improving the performance of such cars. Low-CO2 cars are also better for fuel consumption. Electric cars are another option.”
Roddy Graham, chairman of the Institute of Car Fleet Management, adds: “Employees can enjoy the use of a more fuel-efficient, low CO2-emitting, fully serviced and maintained new car for the fixed period, backed by comprehensive insurance provided by their employer.”
3. Use in-car technology
Most cars are now fitted with technology that aids their efficiency, helping to save money on running costs.
For example, technology can alert drivers when to change gear, while switching on the eco-driving system can make a significant difference to fuel economy.
Nigel Trotman, strategic fleet consultant at Alphabet, says: “[Eco-driving] is a simple button and one that should be used. If employees take notice of and use a car’s technology, it can make a difference, whether driving on business or private mileage.”
4. Introduce telematics software
Employers could also look to install in-car telematics to monitor how their employees drive.
Telematics can enable employers to monitor the location, movement, speed and behaviour of a car. It uses satellites to pinpoint and track a car’s movements, displaying the results visually with computerised mapping software.
Such systems can help employers manage car running costs and reduce fuel consumption by identifying areas for improving employees’ driving habits. Driver monitoring can also flag up potentially hazardous behaviour, which can be acted upon to reduce the likelihood of accidents and also keep the car in better condition.
Alphabet’s Trotman says: “Some employers are looking at driver behaviour systems to help manage car running costs. This can show how a car is being driven and helps keep costs down, but it only works if everyone is prepared to use it. It might be seen as a big no-no with unions, and employees may feel they are being spied on.
“But it can be beneficial because it can have a knock-on effect on driver safety and fuel economy.”
5. Review fuel policy
Reviewing fuel policy could result in significant savings for an organisation. Firstly, employers can ensure staff buy fuel from the cheapest forecourts, which would restrict spend.
Tools such as a fuel finder can help staff find the cheapest places for fuel and enable drivers to make decisions to help reduce car running costs.
Another tactic is to educate staff about the impact of speed on fuel costs. The faster a car is driven, the greater its fuel consumption and the pollution it causes. Driving at 70mph uses up to 9% more fuel than driving at 60mph and up to 15% more than driving at 50mph. Cruising at 80mph can use up to 25% more fuel than travelling at 70mph.
6. Introduce fuel cards
Fuel cards are another way for employers to monitor fuel usage and reduce their fuel bill by helping employees to pay less for fuel at the pump.
Fuel cards can also save employers money by reducing administration costs. For example, employers that do not use fuel cards are likely to have a pay-and-reclaim system in place, which increases the administration time to process each claim, repay the employee, get sign-off and file the records for tax purposes.
A fuel card minimises administration by using a single data report with one invoice for all employees and their journeys, which are prepared to be HMRC-compliant for reclaiming VAT.
Fuel cards can also save employers money by reducing the risk of fraud and employee misuse by ensuring accurate recording of business and personal mileage for HMRC reporting.
Brian Flood, vice-president at AllStar, says: “Fuel cards can cut fleet running costs through a mixture of lower fuel prices at pumps, savings due to limiting purchases, reducing administration and reducing possible fraudulent reporting. They are a massive time-saver for employers because they are not tied up in expenses.
“With some fuel cards, there are also mobile apps that can tell the driver where the cheapest fuel is and enable drivers to make informed decisions. It is always useful to know where cheap fuel is.”
7. Employee driver training
Risk management around company cars is a never-ending process, but without fresh thinking and driver awareness, costs are likely to rise. To combat risk, employers could offer employees professional driver training, which, in the long term, can be an effective way to save on car running costs.
Driver training can teach staff how to drive effectively and highlight what they can do to reduce car running costs, such as being aware of correct tyre pressures, which can reduce fuel consumption and minimise tyre damage.
Training can also include how to check oil and coolant levels, as well as simple driving tips such as opening a window when driving at 35mph or below. At lower speeds, this can be more fuel-efficient than using air-conditioning, says Pendragon Contracts’s Hillier. But at higher speeds, the reverse is true.
Employees could also be instructed not to carry unnecessary weight in the car, which can also increase fuel consumption. Hillier says: “When driving on the motorway, a large roof rack or roof box can increase fuel consumption by as much as 30%.”
Training can also make employees more aware of the car itself, encouraging them to take care of it as if it was their own. Most car schemes are provided on a fully maintained, fully serviced basis, but it is still down to the driver to be proactive about looking after the car.
Lex Autolease’s Hodgson says: “Services are provided by car providers, but the driver has to make it happen. It is about making sure the car is maintained, that tyre pressures are correct and checked regularly, and that everything follows manufacturers’ recommendations. Employers could send out notifications about when a car needs to be checked to keep employees aware, but they still have to be proactive themselves.”
CASE STUDY: Asda
Asda introduced a company car scheme in 2011, encouraging employees to take up the scheme rather than than receive a cash allowance to use their own cars.
The retailer has more than 150,000 staff and introducing the scheme, provided by Zenith, has helped the organisation and its employees to save on car running costs.
To date, Asda has saved about £6,000 per company car compared to the cost of providing a cash allowance. Savings are made on fuel, insurance and maintenance costs.
Jane Earnshaw, senior director of reward at Asda, says: “The savings we have made on running costs have enabled us to put money back into the company car scheme, to improve the quality of cars on offer that are tax-efficient.”
Asda has worked to raise staff awareness of how to make savings on car running costs by communicating the benefits of the scheme and the use of a cash calculator, which shows employees where savings on the car can be made.
The online calculator demonstrates the costs of the driver’s chosen car and highlights potential expenditure.
“There is a lot of information available for employees on things such as fuel, to make sure the car is sustained for fuel economy, as well as on tyres, and other simple tips,” says Earnshaw. “Staff also get a reminder when the car needs servicing.
“This all helps reduce car running costs, but we want to tell employees that it is preventative rather than a cure. It is about making staff aware of the savings they can make on an expensive benefit.”
Asda has also worked to raise awareness of driver safety by setting up a risk committee, with representatives from across the organisation, which meets regularly to raise the awareness about, and the cost implications of, accidents.
Earnshaw adds: “Every organisation has a challenge on cost control and wants to improve and save where possible.
“The key for us is that the savings made have helped us be more streamlined and more efficient, with everything now being online. There is less administration, but we have also improved the duty of care on us as an employer and significant savings have been made on car running costs.”