Need to know:
- Small SUVs and low-emission cars are gaining increasing traction in the company car market.
- Employers must have a thorough understanding of how cars will be used and tailor scheme parameters accordingly.
- Offering a choice of models and manufacturers can ensure that company car schemes remain attractive to existing and potential employees.
Almost a fifth (19%) of employees view a company car as a deciding factor when taking a job, according to research published by independent vehicle supply organisation OSV in February 2016. Company cars can be a powerful attraction and retention tool, so how can employers ensure that the schemes they offer keep pace with evolving employee demand while continuing to meet business objectives?
One of the vehicle types that has risen up employee choice lists is the small SUV, with a particular shift in interest towards cars with smaller engines and two-wheel drive capability, says Simon Cooper, director at vehicle sourcing and fleet management organisation Tyson Cooper. The higher driving position, space, and performance offered by SUVs can make them an attractive prospect, including for families.
Although small SUVs might not be appropriate for all organisations’ budgets and purposes, Advancements in technology and fuel efficiency mean they may not be as contrary to fleet carbon-dioxide (CO2) emission caps as one might expect. Lauren Pamma, head of fleet consultancy at Lex Autolease, says: “Historically, they probably aren’t seen as environmentally friendly, but I think the technology is making these a lot cleaner than they used to be.”
There has also been an uplift in the quality of cars that drivers are opting for, with manufacturers stepping up to meet this demand through the development of high-spec, business edition models, says Nick Poole, sales director at Fleet Hire, now part of SG Fleet. “Drivers on company car schemes are looking for these business edition models, they’re looking for a good level of spec. Certainly, satellite navigation and connectivity are important to a company car driver,” he adds.
Low-emission vehicles, such as electric cars and plug-in hybrid electric models, have been commanding increasing attention from both employers and employees as the government continues to incentivise the manufacture and take-up of clean car technologies. Improvements in infrastructure, grants for the installation of domestic charge points, and lower benefit-in-kind (BIK) tax are fuelling interest in low and ultra-low emission vehicles (ULEVs), says Pamma.
However, while lower-emission cars attract preferential BIK rates, this should not be the only factor taken into consideration. “People are attracted by the [low] benefit in kind but then some of them aren’t always thinking through exactly how they are going to drive that [car],” explains Pamma. “Some of the low-cost benefits they think they are going to get by driving electrically aren’t always coming through if they are doing a lot of motorway driving and the car is reverting back to diesel.”
A thorough understanding of how employees are going to use their company car and the mileage they expect to do can enable organisations to set parameters around the types of cars they make available to staff, thereby ensuring that schemes are cost-efficient for both parties. “In the company car market, the car still has a job to do,” says Cooper. “If it’s a perk car, the job could be as little as running three or four miles down the road and back from work, or it could be doing 30, 40 or 50 miles a day, so it’s very much about the employer understanding [its use] and the employee being educated.”
Getting the balance right
To meet the requirements of both employers and employees, a happy balance will need to be established between offering a choice of cars that appeals to employees on the one hand, and employers’ key objectives, whether that is cost efficiency, reducing their carbon footprint, or encouraging staff into newer, safer cars that represent the organisation, on the other. Of course, the two are not mutually exclusive. For example, offering cars from a range of manufacturers, rather than just one, may lower the discount an employer enjoys, but ensuring staff have access to cars that they actually want and that suit them can have a knock-on effect on the value employees place on company cars as a benefit.
“A good company car policy with attractive choices in manufacturers, rather than a single badge, seems to be working better,” says Poole. “Provided there are green alternatives as well, getting choice into a policy is key, and that’s good for employers and employees alike.”
Pamma adds: “[Organisations] need to think carefully about their schemes so that they are attractive to employees, otherwise [they] start to run the risk that employees start to opt out of the company car scheme and take cash allowances instead.”
For employers, this can present risk and duty-of-care issues, with staff driving around in potentially older, second-hand, higher-emission cars and without access to the value-added benefit and convenience of services such as vehicle maintenance that accompany company car schemes.
Where available, employees who opt for a cash allowance could put this towards a salary sacrifice car scheme, thus reducing the risks associated with grey fleet. Salary sacrifice schemes also enable staff who would not usually be eligible for a company car or cash allowance to afford to drive a new car. Indeed, a survey of employees in Tusker’s salary sacrifice car scheme, conducted in August 2016, found that only 7% would have bought a new car car were it not for the salary sacrifice scheme.
Paul Gilshan, chief marketing officer at Tusker, says: “The company car market is changing. It’s broadening out to people that wouldn’t [otherwise] have been able to take a company car or drive a brand new car.”
With 33% of staff in the OSV survey listing a car as the best perk an organisation could offer, not only providing cars as a benefit but making sure that benefit is as well-suited to employer and employee needs as possible, is key.