The business is in a stronger and safer position if staff travel in a company car

“The popularity of the traditional company car looks likely to rise, thanks to emerging issues such as the latest duty of care legislation affecting fleets”

Bosses who have taken away company cars and replaced them with a straightforward cash option are slowly realising that they could be walking into a health and safety nightmare and the trend is starting to reverse.

For around a decade there has been a trend for companies to introduce a myriad of alternatives to the company car in the belief that a move to cash-based alternatives would be cheaper and less hassle. Meanwhile, tighter legislation governing occupational road safety and new corporate manslaughter regulations on the horizon signal that companies with little or no control over business driving could face the long arm of the law if one of their employees is involved in a serious crash.

Richard Schooling, commercial director of fleet funding company Alphabet (GB), says in a report entitled “Cars, cash, care and control”: “Many UK companies are unwittingly storing up trouble for the future because they have not connected two vitally important trends. “Too few employers are keeping an eye on fleet issues or work-related road safety at board level. Too many, on the other hand, seem to be following the trend towards providing fewer company cars.”

However, evidence is emerging that the trend to provide uncontrolled alternatives to the company car may be in reverse. The “Employee Benefits Fleet Research 2006” report, which attracted a total of 323 responses, highlights a massive slowdown in the move to cash allowances. After 44% of employers introduced such schemes in 2004, only 4% of employers intend to switch to allowances in 2006. Some 9% of employers intend to introduce an all-employee car ownership scheme in 2006.

The “Employee Benefits Fleet Research 2006” report also reveals that 77% of employers offered cash in some form last year compared to 81% 12 months earlier. There has also been a sea-change in the organisational structure of cash allowances with 77% of employers saying allowances were available to all employees in the 2005 survey, but now just 35% offer allowances across the board, suggesting firms have tightened access to cash allowances considerably. The data suggests that employers moved rapidly to give massive flexibility to employees who drive on business, but now, due to at-work driving health and safety concerns and also an acknowledgement in some quarters that anticipated financial and administrative savings have not accrued, they are pulling back.

Companies have a duty of care towards their drivers under health and safety at work legislation irrespective of who owns the vehicle being driven on business. Professor Peter Cooke, who wrote the Alphabet report, says: “Many companies have abolished company cars and now have no idea whether their employees’ own cars are up to the job or are properly maintained or insured.” Mr Schooling says: “Making the right decisions about business cars has never been more important. Employers need to be absolutely sure they fully understand all the options and implications before taking away company cars. “Some alternative schemes deliver both the cash benefits that businesses want and the control they need. Others do not. Simply cashing out of company cars without due consideration – which is what many firms have done – is hugely risky.”

It is a view shared by Clive Forsythe, sales and marketing director of fleet management company Masterlease, who says: “I recognise the trend back to company cars and alternatives which give the company significant control such as some personal car purchase (PCP) and employee car ownership (ECO) schemes.” Masterlease’s own policy is that no employee is allowed to clock up a single business mile in a private car, and Mr Forsythe says: “If employees are to travel on business, even a single mile, it is much easier to take responsibility if it is in a vehicle over which the employer has direct control and influence.”

Typically, employers will ensure that a company-funded vehicle is fit for purpose, is covered by the correct business insurance, is serviced and maintained in accordance with manufacturer recommendations and is generally looked after. Mr Forsythe says: “Unless a company is prepared to work very hard to mitigate the risks associated with an employee clocking up business mileage in a private car, the business is in a stronger and safer position if staff travel in a company car.”

However, all fleet experts spoken to by RoadSafe acknowledge that so-called structured or controlled alternatives to the company car, such as some PCP or ECO schemes, which typically enable the employer to retain a significant amount of control over the type of vehicle chosen and its operation, even though a cash option is given, should remain on the corporate agenda. Professor Cooke adds: “Directors need to assess the implications of any decisions they take that affect employees’ health and safety.

(from left): Karen Baker, customer services manager, GE Fleet Services; Gareth Smith, strategic growth manager, GE Fleet Services; Caroline Sandall, fleet manager, Barclays Bank plc; and David Viney, senior service development executive, GE Fleet Services

“If a member of staff's role involves regular driving, we want to be certain they are as safe as possible on the road”

Therefore, it is important to evaluate the risk profile of every car or cash alternative that is offered, especially if the cash option is made compulsory. Unstructured cash schemes dilute the employer’s degree of knowledge and influence over cars used on business without in any way diminishing the organisation’s responsibility. “It is not unknown for employees who cover high business mileages to ‘cash out’ and then buy a cheap car in the hope of making a ‘killing’ on mileage payments – a phrase that could come back to haunt their employer. Organisations need to minimise risk to themselves and to others and therefore they must consider the question of control every time they take a decision to offer a company car or a cash alternative.”

Jon Walden, managing director of Lex Vehicle Leasing, Britain’s largest contract hire and leasing company, says: “We have found over the past year more of our larger fleet customers are returning to contract hire following dalliances with cash or car. The main reason they give is the increasingly complex world of duty of care. “The safe upkeep of company cars is paramount and can only be guaranteed through outsourcing the day-to-day running of vehicles to experts like ourselves, with stringent maintenance processes in place on a national basis.

“In turn we have seen more corporates, both large and small, utilising daily rental to look after the motoring needs of drivers who do not qualify for company cars, but who need to travel on company business. Fleets can rest assured that the strict preparation standards of rental companies ensures each car is safety checked thoroughly before a driver uses it, something which isn’t always the case with pool cars, or when drivers use their own personal cars on work related journeys.” (See panel).

Support for the return of the company car also comes from GE Commercial Finance Fleet Services with managing director Rich Green saying: “The numbers of company cars supplied by UK businesses is set to increase over the coming months after more than a decade of gradual decline. “The popularity of the traditional company car, which has fallen in favour of cash for car and other employee vehicle schemes, looks likely to rise thanks to emerging issues such as the latest duty of care legislation affecting fleets.”

A spokesman for Inchcape Fleet Solutions, which like Lex Vehicle Leasing has also witnessed increased demand for temporary vehicles on health and safety grounds, says: “A lot of our customers that have introduced alternatives to traditional company cars are talking about a move back for health and safety reasons but we have not seen a definite move.

However, what we are seeing is companies that offer a cash alternative tightening up their health and safety procedures, particularly by including licence checking through our Driver Licence Verification Service for those drivers as well as for staff who continue to drive company cars.” While there is growing recognition of the health and safety dangers associated with giving staff a cash handout instead of a company car, and freedom of choice with no built-in controls over the private car they choose and drive on business, the pace of policy reversal remains slow.

“That is the worrying aspect,” according to Mr Forsythe. “I don’t think there is a full appreciation of the risks associated with cash for car by corporates at the moment. I think the pace of change will only accelerate when there is a high-profile accident and the employee is driving a private vehicle that is not fit for purpose and not insured for business use. Only then will there be a major focus on this issue. However, for that company it will be too late.”

Back to the fleet
Duty of care as well as environmental responsibilities have seen Barclays, the UK-based global financial services group, move to encourage drivers back into company cars. Under a five-year deal forged with GE Commercial Finance, Fleet Services, the Barclays Company Car scheme covers all eligible employees, around 3,500 of whom currently take a cash option under the organisation’s existing employee car ownership (ECO) scheme. Catherine Redmond, head of employee reward and benefits at Barclays, says: “There are two good reasons why we are encouraging Barclays people undertaking significant business mileage to opt for a company car: first, if their role involves regular driving, we want to be certain they are as safe as possible on the road. And second, Barclays wants our company car choices to be as environmentally friendly as possible.

“Our main objective is to make the Barclays Company Car scheme as attractive as possible for our staff. Our on-going relationship with GE Fleet Services means that we are able to offer an excellent choice of vehicles with a very high level of driver support.”The GE fleet deal allows Barclays staff to choose from a carefully selected range of cars from Audi, Mercedes, Saab, Toyota and Vauxhall. To provide best-in-class driver support to staff, a dedicated Barclays driver helpline and a unique Barclays on-line driver support facility, known as iDrive, is fully supported by GE.

Caroline Sandall, fleet manager at Barclays, says: “Part of the unique structuring of the Barclays Company Car scheme relates to the creation of a CO2 ceiling, designed to encourage drivers to opt for greener cars. Also central to our driver-centric fleet policy is our focus on safe driving through the provision of comprehensive guidance to all drivers. Rich Green, managing director at GE Fleet Services, adds: “We believe that our relationship with Barclays could be one of the most significant fleet relationships forged in the UK this year, both because of its size and because of the market trends that Barclays has been very early in recognising.”