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Three company car policy considerations to drive cost savings 

Beyond Data

By Lisa Grunditz | July 8, 2020

During this time of economic upheaval due to COVID-19, company car benefits are arguably some of the most complex benefits for human resources to manage. 

The immediate concern might be to ensure the current fleet is properly secured and maintained, but now might also be the time to reshape the benefit policy to align with new budgets as well as future business needs.

As companies manage through the crisis and look for ways to preserve cash, one option not to ignore is reviewing car policy programs and their effectiveness for the future. Cost consciousness has been high on the agenda for quite some time, and its importance is only expected to increase in the pandemic’s aftermath.

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To address cost consciousness, organizations should look at the following areas:

  1. 01

    Negotiate with your current leasing provider.

    The first thing to look at carefully during these turbulent times is how the overall fleet is affected by changes in the workforce, both in the immediate and short- to mid-term. To avoid any costs related to parked vehicles that no one is using, examine the options for managing the vehicles of employees who have been furloughed or laid off. This of course will require negotiation with leasing companies, and organizations will be bound to the contractual terms and level of flexibility already established. Keeping an eye on possible insurances that can be adapted for long-term parked vehicles is also worthwhile. For organizations where no immediate effect on the head count is foreseen, it is preferable to stay close to the leasing company and ongoing contracts. COVID-19 has drastically affected the supply chain and delivery of new vehicles; therefore, organizations should look for ways to optimize access to required vehicles either by extending current leases or modifying terms for new ones.

  2. 02

    Consider work-from-home arrangements

    According to Willis Towers Watson’s 2020 Returning to the Workplace Survey, the percentage of full-time employees working from home is expected to increase from 7% to 22% post-COVID-19. What is needed in terms of mobility to execute a job is therefore very much challenged and being reinvented at this time. The crisis has forced organizations to rethink the way business is done. With mobility being reduced, sometimes to zero, many organizations have reconsidered or will reconsider what “business need” really means, which can influence the eligibility or the availability of the car benefit.

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  3. 03

    Maintain car policy competitiveness

    Often, and not only just during times like these, organizations welcome cost savings linked to decreased benefit eligibility; however, understanding how these and other changes to the policy affect the ability to retain and possibly attract talent in the future is paramount. The emotional impact of a car should not be neglected. There are many examples where a wrong make and model or the absence of a car benefit has been a recruiting deal breaker. Aligning with market best practices and remaining competitive have been the top objectives for organizations in all regions, and they are unlikely to go away despite the pandemic circumstances.

    In many countries, car and car allowances are provided for a better take-home salary, and this factor should not be ignored. Tax efficiency absolutely needs to be looked at on a country level. In some countries, cash is preferable; in others, a car purchase is better, while in others still, leasing low-emission cars might be the best option, as it could reduce the tax burden for both the employee and the employer. The phrase “Go for what is most effective” should govern the choice you make.

What does HR need to do?

Monitoring car and mobility policies will affect how well an organization manages costs and navigates toward a new normal. HR and Fleet Management can use market data to understand the practices that drive the mobility landscape and to benchmark budgets in a given country. Also look out for changes in tax legislation or general regulations, as well as changes in employee preferences. Review and modify existing car/mobility programs to ensure they are keeping pace with changing business requirements.

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