Developing a car policy that works for every employee

By Cheryl Clements, head of business development, Tusker

Company cars are a valued benefit and, for many, a pivotal part of their role. This makes car policies extremely important and if enrolled or managed poorly, they can cause stress and disengagement within a workforce.

Continuously changing tax rules, environmental regulations and safety requirements can be complex, but this is precisely why having a clear, well-structured policy is vital to employee fulfilment, safeguarding, and organisational success.

A good policy sets expectations, keeps employees informed, and ensures your organisation’s car scheme runs smoothly. Whether you’re offering salary-sacrifice cars, traditional company car schemes, or both, this is a guide to all the essentials.

Eligibility 

Many organisations align company car provision with role grade and business need:

• Role seniority: Many senior positions offer company cars as a competitive perk to attract and retain top talent, meet industry standards and signal status.
• Business travel requirements: Roles that require significant travel beyond a regular commute may qualify, based on mileage and accessibility needs.

Transparency around company vehicle eligibility is essential and should be embedded from the recruitment stage through to onboarding. This helps manage expectations and reduce potential disputes that can overload HR teams.

For organisations using Tusker’s Salary Sacrifice Scheme, car benefits are made available to a much wider group of employees, as pre-tax salaries are used for the car scheme, as long as the salary remains above national minimum wage.

Simultaneously, with Tusker’s wide range of electric and hybrid vehicle options, employees can afford to drive more sustainably through tax savings – helping you meet CSR targets, whilst providing an attractive benefit that embraces accessibility over seniority and mileage.

Vehicle choice

Your policy should be clear about the types of vehicles you have on offer, how employees choose them, and the costs involved. In 2025, most employers are:

• Encouraging or mandating low-emission vehicles: Many organisations now encourage the use of electric or hybrid vehicles to align with net-zero goals, company and employee values, as well as impeding environmental laws.
• Maintaining company image: For some businesses it is useful to choose vehicles associated with company and employer branding.
• Ensuring safety and suitability: Legally and morally it is important to maintain a duty of care for employees by choosing safe vehicles, for example by limiting excessively high-performance vehicle options and ensuring cars adhere to UK safety standards.

With Tusker, you can offer a wide range of makes and models, including the newest electric and hybrid options, while ensuring all vehicles meet your safety, environmental, and cost criteria.

What’s included

Your policy should clearly set out what’s included in the car package. A typical Tusker package includes:

• MOT and servicing
• Fully comprehensive insurance for the employee; additional drivers can be added as well
• Road tax
• Tyre and glass replacement
• Breakdown cover
• Routine maintenance
• Replacement vehicle during repairs

 It’s important, however, to remind and educate employees of their responsibilities:

• Keeping the car in good shape and following the terms and conditions within any agreements signed
• Staying safe whilst on the road and complying with local laws (accidents involving company fleet vehicles during work-related driving may carry legal liability for the employer)
• Following the manufacturer’s servicing schedule
• Paying any insurance excess due

Acceptable use

Most company and salary sacrifice cars can be used for both business and personal travel, but you may want to create clear restrictions or guidelines around their use, for example:

• Driving irresponsibly
• Use for hire or reward (e.g. ridesharing for payment)
• Driving lessons
• Towing (unless agreed)

These restrictions often align with insurance conditions, so make them clear from the outset.

Licence requirements

 Your policy should detail how you check and monitor employee driving licences:

• Initial licence check when the vehicle is issued
• Annual re-checks for all employees driving for work (including the use of their own cars)
• Immediate notification of points, bans, or medical conditions affecting fitness to drive, in order to protect duty of care and mitigate against compliance and legal issues

 Explain the consequences if an employee can no longer legally drive.

Penalties and fines

Make it clear to your employees what their responsibilities are regarding fines and any monetary expenses that are not company responsibility. For example:

• Speeding or parking fines
• Congestion charges (unless business-related)
• Clean Air Zone or Low Emission Zone charges, where applicable

Fuel and charging

With the growth of electric vehicles, your policy should cover both fuel and charging:

• For company car drivers, this includes clear information on Reimbursement at HMRC’s Advisory Fuel Rates (AFR) or Advisory Electricity Rates (AER) for EVs.
• For employees using their personal cars, business travel should be reimbursed at HMRC’s Approved Mileage Allowance Payments (AMAP) rates. Employees should be made aware if personal mileage is not reimbursable.

Also ensure that you update employees whenever HMRC rates change to make expenses processing easier.

Tax

Cars provided through a company or salary sacrifice schemes are subject to the Benefit-in-Kind (BiK) tax. This is what employees pay when an employer provides a benefit with monetary value, like a company car. HMRC adds the benefit’s “taxable value” to income, and they pay tax at their normal rate.

 However, when it comes to salary sacrifice car schemes, employees can still expect significant cash savings. This is because they give up a fixed monthly amount of their pre-tax salary offering reductions on Income Tax and National Insurance. Therefore, while BIK tax is still payable, employees come out with large overall tax reductions. Additionally, when employees choose electric or hybrid vehicles, BIK tax means employees can enjoy a brand-new, sustainable vehicle for far less than the retail price.

With Tusker, we also provide detailed breakdowns of tax and savings so employees can make informed choices. You can include a simple summary in your policy and link to Tusker’s resources for full details.

Final thoughts

 Your car policy should be clear, concise and fair. It also needs to continuously evolve. With the surge in EV use, new tax incentives, changing HMRC rules, and growing environmental regulations, policies should be reviewed annually to keep employees informed, safe, and happy.

By working with Tusker, cars are made accessible to most employees – National Minimum Wage-permitting. Our salary sacrifice car scheme makes employee satisfaction and recognition, sustainability and driving a new car much more simple. Plus with our fully managed service, you can be confident that your car benefit is effective, compliant, and valued by your workforce.