Written by Hejab Azam
19 July, 2019
Whether your employees require cars to carry out their job, or whether a car is given as a perk, company cars are a great way to attract new employees and increase employee retention. You might provide company cars to support your brand image – giving a good impression to clients. Many companies acquire new vehicles, often by buying them or financing with a leasing agreement. However, when it comes to providing vehicles for new employees, buying or leasing may not be the best solution from the outset. Nor could it be a good idea for new employees to use their own car (if it’s required for the job). A better solution would be to offer long-term rental cars for the duration of your employees’ probation period.
Probationary cars are a much better solution because:
What happens if an employee doesn’t stay on after their probationary period? If you’ve leased or bought a car, you’ll continue to pay for it while it sits idle in the car park.
Using rental vehicles reduces the company’s risk of being left with a costly unused vehicle if the employee doesn’t pass their probationary period. The other risk is that when the car is passed to the replacement employee, it may not to be suitable for them, as many company cars are also used outside of work and need to match personal or family needs.
Giving new employees probation cars still allows the new employee to have a car which is commensurate with their remuneration package from day one and aids satisfaction in their new role. If the employees’ probationary period is extended, the choice of long-term rental gives you flexibility by allowing you to extend the rental period month by month.
Renting a vehicle for a new employee is a much better solution than buying a vehicle because it’s much more cost effective and carries less risk.
Firstly, there’s no high capital outlay with rental, unlike financed purchase or leasing. So, you are minimising the use of valuable company funds or reducing borrowing. You’re also not transferring a depreciating asset to your balance sheet.
Secondly, for vehicles that are used solely for business, you can claim 100% of the rental costs against company profits if the CO2 emissions are 110g/km or less. And if you’re vehicle emits more than 110g, you can still claim 85% of your costs. Where personal use of cars comes in to play – which is often the case with company cars – you can still claim 50%.
Thirdly, many car rental companies include maintenance in the contract which means your costs are fixed. Another advantage of this is that you don’t have to deal with the admin and paperwork because the rental company will do that for you, often providing replacement vehicles when needed.
‘Grey fleet’ are vehicles owned by employees and used for business purposes – often funded with a car allowance. Even with privately owned vehicles, the company still has a compliance responsibility and duty of care to ensure they are safe and legal. According to a study, 57% of “at work” mileage was covered by employees in privately owned vehicles – which is 1.4 billion miles a year. These vehicles may not necessarily comply with the current law or may not be fit for purpose. However, most companies that offer rental cars also offer maintenance packages, ensuring that your car is always safe and in excellent condition.
Having a grey fleet can be problematic, especially if there is an accident. The Health and Safety at Work Act 1974 and UK Corporate Manslaughter and Corporate Homicide Act 2007 requires employers to ensure the health and safety of all employees. Employers can be liable if employees use an un-roadworthy vehicle on company business. Employers have a duty of care to ensure the vehicle is maintained, the insurance covers business use and the employee has a valid license.
If there’s an accident, and an employee has failed to follow the guidelines, the employer may face large fines or even prison sentences. All employers have a duty of care under the act to ensure safety of their workers. The Crown Prosecution Service doesn’t have to rely on an individual being found guilty of gross negligence, it just needs to prove that the fatality occurred from a gross breach of the relevant duty of care by the organisation as a whole.
If you give your employees a rental car for their probation period, you can avoid most of the risks associated with grey fleet.
Your employees may be very particular about the use of their car.
For field sales teams for example, being on the road is a critical part of their role. But with the use of their own car, they may spend more time on the phone and less time building relationships face-to-face with customers as they try to protect their car from high mileage. Opting for rental vehicles gives you a chance to offer them a better car. This ultimately impacts your brand image, especially when your employees are on client visits. Additionally, if employees aren’t using their own car, it can increase productivity because they aren’t worrying about their mileage.