Should Your Business Provide Company Cars? The Pros And Cons

Company cars are a popular perk for employees. They can make commutes easier, and they can also be used for business purposes. However, there are pros and cons to providing company cars that every business owner should consider before making a decision. This blog post will discuss the pros and cons of providing company cars so you can make an informed decision for your business!

What Is a vehicle fringe benefit?

A vehicle fringe benefit is a work-related perk that allows employees to use a company car for business and personal activities. This benefit includes fuel, registration fees, insurance premiums, maintenance costs, and more. It can also provide tax savings for the employer since they may be able to deduct some of these expenses from their taxes.

What does providing employees with company cars entail?

Providing employees with company cars entails different costs, regulations, and responsibilities. The most significant cost associated with providing company cars is purchasing or leasing vehicles for your employees. You will also need to pay for required repairs, maintenance, and insurance premiums. Additionally, you should be aware of specific tax implications when providing company cars; this should be considered before you move forward with such a plan. Lastly, you will want to ensure that you have clear policies for how the car is used and who is responsible for any damages or other issues that could arise from its use.

PROS:

Improved Productivity and Time Management

Providing company cars can help your employees get to work on time each day and save them money by removing the need for public transport or running their vehicle. Employees may also be able to take advantage of higher speed limits while in a business car, further improving their ability to get from place to place quickly. In addition, this can improve productivity as more time is spent working instead of commuting.

Increase in employee satisfaction

Having access to a company-provided car can make your employees feel valued and appreciated, directly leading to increased employee satisfaction levels. Providing a company car also gives staff more freedom and flexibility when it comes time for tasks that involve travelling outside the office, such as meetings or site visits.

Financial benefits

Providing a company car can save your business money in the long run, as you can claim back certain expenses such as fuel costs and road tax. This is particularly beneficial if the cars are used for multiple business trips throughout the year, as these costs increase quickly over time. Additionally, providing company cars may enable eligible businesses to qualify for various tax reliefs and grants, which could benefit them financially.

Branding opportunities

Company cars are a great way to increase brand recognition and visibility, as they offer excellent advertising opportunities. Company logos or messages can be printed onto the cars for maximum exposure. This is particularly beneficial if your business makes deliveries or travels to multiple sites throughout the day, as you can reach a wider audience of potential customers and clients.

Salary sacrifice

Salary sacrifice schemes enable employees to exchange part of their salary for a company car. This can benefit the employee, as they can benefit from reduced national insurance contributions and lower overall costs associated with running a vehicle. It is also beneficial to the employer, as it can help reduce payroll taxes and make providing vehicles easier than purchasing them outright.

CONS:

Increased liability

Providing company cars comes with increased legal liability for the employer, as they are responsible for any damage caused to other people or property. At the same time, vehicles are being used for business purposes. This can be costly in terms of repairs and potential lawsuits, so it is essential to make sure that your employees have proper training when it comes to driving safely. Additionally, you should consider purchasing adequate insurance coverage before providing a company car.

Costly upkeep

Owning a car is even more expensive if you run multiple vehicles simultaneously. In addition, keeping up with regular servicing and maintenance checks can add up quickly over time, which may lead to additional costs that need to be factored in when deciding whether or not to provide company cars. Finance for number plates can help to reduce the initial costs associated with purchasing a vehicle. However, these will still need to be factored in when deciding whether or not it is financially feasible to provide company cars.

Administrative burden

Managing multiple vehicles and their respective drivers can take time and effort, mainly if you run a small business with limited resources. You must ensure that each car is adequately insured, track driver behaviour, and comply with certain rules such as speed limits or other road regulations. It is also essential to keep track of fuel expenses for each vehicle, which may require additional administrative resources.

Unreliable usage

Company cars may be misused by employees if there is no clear policy for their use. Without a strict system of rules and regulations, it can be challenging to ensure that vehicles are used only for their intended purpose. Additionally, you may find that some cars’ condition deteriorates quickly if not maintained properly, leading to additional costs associated with repairs or replacements.

Environmental impact

Providing company cars can have a negative impact on the environment due to the emissions that are produced when they are driven. This is especially true for vehicles with older models or those running on petrol or diesel, as these tend to have more harmful pollutants than electric or hybrid cars. Additionally, increasing traffic levels can lead to noise pollution and other environmental issues that must be considered before providing a company car.

Loss of employee privacy

Providing a company car can invade employee privacy, as employers may be able to track employees’ movements and use the data gathered from GPS tracking devices installed in the vehicles. This could potentially violate their rights to personal freedom, so it is important to ensure that such devices are used within legal parameters before providing company cars.

Liability for Tax

Providing a company car comes with certain tax liabilities, as various taxes must be considered when running a business. This includes vehicle excise duty and fuel benefit charges, which can quickly add up depending on the size of your fleet. Therefore, it is crucial to understand how each of these applies to your situation before providing a company car, as failure to pay the necessary taxes could result in hefty fines or even criminal prosecution.

How to create an employee use of company vehicle policy

Define Company and Employee Responsibilities:

The first step in creating a policy for employee use of company vehicles is to define the responsibilities of both the employer and the employee. This should include who is responsible for maintenance, upkeep, and any damage that occurs while using the vehicle. Additionally, it should outline what is expected from employees regarding safe driving practices and other rules regarding how the car should be used.

Set rules and expectations:

It is important to set clear expectations when it comes to how employees are using company cars. This could include requiring them to log their mileage and adhere to designated routes or speed limits when travelling on business trips. There should also be strict rules around personal use of company vehicles, as this can quickly become an issue if not properly monitored.

Eligibility for use:

It is also essential to define who can use company cars and when. For example, depending on the size of your business, you may want to limit usage to specific employees or departments only. Additionally, you should set rules around how many people can be in the vehicle at any given time, as this can affect insurance costs and other liabilities associated with providing a company car.

Enforce rules:

Once all rules and expectations have been laid out, it is important to ensure they are consistently enforced. This could include regular check-ins with employees or even installing GPS tracking devices in vehicles to monitor their usage. By consistently implementing these measures, you will be able to reduce potential risks and ensure that your company cars are being used within the scope of your guidelines.

Limitation on personal use of company vehicles:

Limiting the amount of personal use allowed for company vehicles is important, as this can quickly become an issue if not properly monitored. Depending on your business, you may decide to allow employees to take the car home or even use it for weekend trips, but these should be kept to a minimum and must always be within the scope of your guidelines. Additionally, any personal use of a company vehicle must be logged to ensure that taxes are paid correctly. Provide Adequate Insurance Coverage: The last step in creating a policy for employee use of company vehicles is to ensure adequate insurance coverage. This will help protect your business and employees from any liabilities that may arise while using the vehicle. It is essential to understand the different types of insurance available and ensure that you are adequately covered in all areas.

By considering these various factors, businesses can ensure that providing company cars remains a cost-effective solution for their needs. Understanding the pros and cons of this decision before diving in will help reduce potential risks and ensure that any vehicles provided are being used within legal parameters. Additionally, it is crucial to create a clear policy outlining employee responsibilities when using such devices, which should be consistently enforced to maintain compliance with applicable laws. By keeping these considerations in mind, companies can ensure that providing company cars remains viable for their business needs.