Driving conditions

Companies are coming under increasing pressure to meet requirements for cost-efficient and green car hire schemes for their workforce.

Financial Management

Companies are coming under increasing pressure to meet requirements for cost-efficient and green car hire schemes for their workforce. Today, many salary sacrifice company schemes are flexible enough to fulfil both requirements.

Publishing company Archant’s head of procurement and sustainability, Greg Parton, says, ‘In terms of overall cost impact, our scheme reduces the cost to the employee but it’s cost neutral to us. In other words, when the employee chooses to take a car that saves Archant money, we give that money to the employee.’

Some employees in the firm are eligible for a company car but can only choose from a limited selection. If they opt for the car with the lowest carbon dioxide emissions, at 95g/km, it works out at around £40 cheaper than the standard option, according to Parton.

Senior members of management are entitled to a car as a perk but also need the vehicle to reflect the company’s image when they travel to clients. Under Archant’s scheme, staff can choose any model as long as its carbon emissions do not exceed 160g/km.

Parton explains that what the scheme tries to achieve is a balance between business need and rewarding its staff for selecting greener cars.

Business consultancy firm Deloitte has similar schemes in place and advises other companies on car hire. Mike Moore, director of Deloitte car consulting, observes that businesses are structuring their schemes so that employees have to give up more of their salary or make a greater contribution to the expensive cars, which results in a greener fleet. This has been prompted by the introduction of company car tax, which makes greener cars less costly to run.

Cost control with company car schemes

Deloitte implemented two salary sacrifice company car schemes in February 2009. Under its all-employee scheme, vehicles are limited to those that emit 120g/km of carbon dioxide or less.

Moore admits that, while this may seem restrictive, manufacturers are releasing a wide variety of models that meet this requirement. The management scheme that runs alongside this places no restrictions on the car model. Instead, the less efficient the vehicle is, the more of their salary or cash allowance employees are required to give up.

He suggests that businesses planning to launch a car hire scheme put a ceiling on the amount they are prepared to stump up for an employee’s vehicle.

‘One way of controlling cost has often been to limit manufacturers and therefore choice,’ explains Moore. ‘The trick is to ensure that if employees select cars over that budget, you get a contribution that reflects the additional whole-life cost.’

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