Employer / Salary Sacrifice

What does your future company car policy look like?

As car technology advances rapidly and fleets are including more Electric Vehicles (EVs) and Hybrid Electric (PHEV) in the run up to petrol and diesel cars being banned in 2035 – what will this mean for your company car policy? We take a glimpse into the not-too-distant future of electric fleets.

The company car policy sections that can remain unchanged

Electrification of your fleet doesn’t mean that it will all have to change. The aspects of your company car policy that will remain the same include:

  • Eligibility for a car on the basis of seniority or mileage covered – however, as car costs come down with the introduction of EVs especially when offered as a salary sacrifice benefit, could you afford to offer cars to people further down your grading structure? This is a key point to consider and will depend on your reward policy and where you aim to position yourself within the market.
  • Personal use
  • Accident procedure
  • The company’s responsibilities – for example, providing insurance and retiring and replacing cars will remain the same, but you might need to introduce a policy about how charging at work and on the road will be charged.
  • The driver’s responsibilities – items like paying parking tickets or speeding fines will remain the same but you’ll need to highlight the requirement to charge the car
  • Delivery and return

Company driver rules- The updates to policies to consider

If your company car policy includes a section on car choice, this will need a major overhaul. Including Ultra Low Emission Vehicles in the selection, available by grade or as part of your salary sacrifice offering, will need additional guidance. It will be worth considering the tax benefits of these cars and how to best pass these savings back to your drivers.

Choosing the right ULEV depends on people’s lifestyle and attitude to driving. And employees will need to be educated before choosing their car to help them make the best choice for them and your business.

For example, many pure EVs can now travel over 250 miles without needing to be recharged. This will cover most short daily journeys many times over before the car needs to be plugged in.  In fact, Tusker knows that the majority of UK drivers travel an average of 73 miles a week. Even for those who travel longer distances more regularly, rapid charging means their usual 20 minute stop at a service station simply needs to include plugging their vehicle in to charge while they have a coffee.

Helping your employees to understand the capabilities of EVs and the reality of driving one means they’re more likely to select cars which work for them on a salary sacrifice scheme. Your business can benefit from significantly lower employer NI contributions if you introduce such a policy, and at the same time, lower your company carbon emissions.

Where your policy applies to petrol and diesel cars, you’ll need an update to add the word ‘energy’ to any mentions of fuel. It is worth provide guidance, either in your policy or as a standalone document, on how to charge an electric or hybrid vehicle for drivers who are new to these vehicles.

Tusker have a full suite of training documents and how-to guides, which can make this process simple for you as you introduce EVs to your fleet.

Do you want to cap your emissions?

As you’re likely aware, HMRC’s benefit-in-kind rates provide significant savings for organisations and drivers operating zero emission vehicles and these have been fixed until 2028. However, if you allow drivers to choose any vehicle they want, this opportunity to save money could be wiped out for both parties. It is for this reason that many organisations are beginning to cap the emissions of the cars they allow their staff to choose from.

As far back as 2018, research from Willis Towers Watson showed that 41% of EMEA businesses limited the CO2 emissions of the cars their drivers could choose from and Tusker’s own experience tells us that this is now the industry standard. It’s likely that your organisation has already introduced such a policy, as its an effective way to reduce a business’s carbon footprint and benefit from the tax breaks on offer with lower emissions vehicles.

Educating drivers on tax benefits

Another way of encouraging company car drivers to opt for greener cars is to ensure they understand the tax benefits.

Your company car policy can play a key role in this by clearly setting out the advantages of reduced BIK rates. Include BIK rate tables that show the impact that car choice has on tax and ideally, provide some worked examples to demonstrate the savings available through these choices. By illustrating the impact of greener cars on your driver’s pockets, you’ll help drivers make the right decision for them and your organisation. To make it easy for your company, Tusker’s online portal can provide clear examples for your drivers of these benefits.

Whole-of-life cost savings rely on driver co-operation

Tax is just one part of the equation when considering EVs. You’ll also need to consider the whole-of-life cost (TCO) savings associated with EVs and the importance of driver’s support in making the most of their new cars.

Because electricity costs are cheaper than petrol or diesel, even with recent rises EVs will save your business money when it comes to mileage bills. Even if you don’t go all-electric across your fleet, hybrid vehicles can give your drivers the opportunity to use electricity alone for shorter journeys.

However, as this relies on plug-in hybrid drivers actually charging their cars, this is something that you’ll need to specify in your car policy. And don’t forget to let drivers know if your company uses a charging platform, or app that enables drivers to access charging points all over the UK – by removing obstacles to charging, many drivers will be more likely to take full advantage of their hybrid vehicles in daily life.

When it comes to overseas travel, you might need to ensure your company has a facility to enable drivers to charge their cars while abroad on business. Tusker has a partnership with Zap-Map, which will give drivers easy access to charge points, whether in the UK, or in Europe.

Other car policy updates you’ll need to consider

If you include business mileage rates in your policy, you’ll need to include the electric business mileage rates and those for hybrids too. At the moment, HMRC’s guidance states:

  • 8p per mile for pure electric vehicles
  • Hybrids are to be treated in the same way as petrol or diesel vehicles

Other elements to consider for your car policy is who will pay for electricity when drivers charge their cars at work and on the road for business travel. You’ll also need to decide:

  • Will you allow free charging for visitors? If not, how will you charge?
  • Will your business incentivise EV adoption by subsidising electricity?
  • Or will you consider making a profit?
  • Have you got enough charging points installed?
  • How quickly will you need to ramp up installation as you introduce more EVs?

These are just some of the questions you’ll need to think through as part of your company car and car benefit strategy. For a more detailed conversation about the future of your fleet, call one of our team today.

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