Employer / Salary Sacrifice

Developing a car policy that keeps everyone happy

Cars are an important part of people’s lives which makes your company car policy an emotive topic. Then there’s a whole heap of legislation that employers must also keep on top of. Creating an upfront policy about your what your employees can and can’t do is key to managing your cars successfully. Here’s our guide to what you should include in yours.


Most companies align company car benefit provision in line with grade and need:

  • More senior roles usually attract a company car, generally determined by benchmarking
  • Roles that require a lot of travelling, like area sales managers, qualify for a car on the basis of need

Make it clear in your policy which grades and roles are entitled to cars to be transparent about your position.

Many organisations that offer company cars also choose to extend the benefit to other employees via salary sacrifice. If this is the case in your company, explain how everyone has the opportunity to get behind the wheel of a brand new car. You might decide to split your policy into two sections for the different kinds of car users.


If your organisation has decided to limit the type of cars available to employees your policy will need to be clear about which makes and models are available to staff. You don’t need to include a huge list; simply let people know that they can only choose from the makes and models available on your provider’s online platform.

Limiting car choice can be beneficial in many ways including:

  • Safety – to prevent people from driving cars with excessively big engines
  • Company brand – so people drive cars that aren’t too flashy (particularly important for charities or public sector organisations)
  • The green agenda – to enable organisations to lower their CO2 emissions and their tax bill

That said, the best way to engage employees with a company car benefit is to have a wide range of makes and models to choose from. Finding a provider who can meet any organisational criteria while still offering a large choice is critical to a successful scheme.


It’s really important to be open from the start about what your employees get with their company car or their salary sacrifice car benefit.

The best car benefit providers offer packages that include:

  • MOTs
  • Servicing
  • Fully comprehensive insurance for you and your domestic partner
  • Road tax
  • Glass and tyre replacement
  • European breakdown cover

Your policy needs to make it clear that employees are responsible for ensuring that:

  • The car is roadworthy
  • It’s maintained in line with the agreement they sign
  • They’re liable to pay the insurance excess as with a normal insurance policy


It’s highly unusual for company cars to be provided to staff for business only. That’s because the difficulty of monitoring and assessing the use of the car for personal journeys often outweighs the benefits. Therefore, most companies allow drivers to use the car for both business and personal trips.

You might decide to impose certain limits on drivers like not using the car for hire or reward (usually a stipulation of the insurance policy) or potentially also for driving lessons or towing.


Your car policy should also specify how you will keep records of employees’ driving licences. You need to do this when they first take up a car and then annually each year. This applies to anyone who drives on business regardless of whether they’re using their own personal car, a company car or a car taken up as an employee benefit.

Notifications of any points, driving bans, changes in health or any other details will need to be brought to your attention immediately. Your policy should also set out what will happen if someone is no longer able to drive.


Most employers place the responsibility firmly on employees for paying speeding tickets and any other driving-related fines. Tolls and normal parking charges would usually be covered by the company using your expenses process.


Most companies apply HMRC’s mileage rates because they do not incur any additional tax and national insurance. Your policy will need to set out two sets of mileage rates for:

  1. Company car drivers whose maintenance is covered by the company’s car scheme – these are called the Advisory Fuel Rates
  2. People who drive their own cars on business – these are the business travel mileage rates which include additional money to cover wear and tear on the vehicle as well as fuel

Don’t forget to send out an all-employee communication should the mileage rates change – this will make expenses claims processing much easier to deal with.


Company car drivers or those taking a car benefit up through a salary sacrifice scheme will be required to pay benefit-in-kind tax. Your policy needs to provide an explanation of how this works – we’ve provided one in this article.

Good car benefit providers will give a detailed breakdown of any payments including tax savings and benefit-in-kind tax. If you don’t want your car policy to go into too much detail, you can point employees to your provider’s website for examples.


You’ll want to ensure your policy includes a section relating to recouping the cost of any damages to the car beyond fair wear and tear. Be clear in your policy that deductions can be made from employees’ wages and ensure this forms part of the agreement that employees are asked to sign.

This will protect your company from any excessive costs and incentivises the employee to look after their company car.

It’s also a good idea to ask drivers to report any damage or if the car is lost or stolen or has been involved in a road traffic accident. Your car provider should have a driver hotline to offer support to your employees. You might want to include this in your policy and advise staff to call this number first and you second.


Employers have a duty of care to all employees who are driving on business. It’s a good idea to set out basic guidance on driver safety in your car policy highlighting that drivers must follow the law of the country they’re driving in.

Mobile phones are a particular concern so it’s also worth setting out your expectations around not using phones or dialling into meetings while driving.


If your drivers fail to follow the policy, simply include a sentence that says you will revert to your disciplinary procedure.


Your driver will need to return the car, depending on your arrangement, to you or your provider in the following situations:

  • Termination of employment
  • The employee ceases to have a full UK driving licence
  • During any period of extended leave (unless agreed with you first)
  • If the employee is convicted of reckless, careless or dangerous driving (at your discretion)
  • At the end of the vehicle’s lease agreement

Your provider will have detailed guidance on what to do at the end if the agreement so you can direct employees to this information.

Company car policies can be as complicated or straightforward as you want to make them. Work with your car provider to identify which information they have covered so you can link to the relevant documents and agreements to keep your car policy easy to read and understand. This will ensure staff actually read and engage with it, making cars feel accessible and easy to deal with.

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