While cash allowances should always be non-pensionable, experts recommend that cash allowance sums paid are reviewed annually in line with company car policy.

Cope says: “Businesses should continue to monitor the cost of providing a company car. If that cost reduces, then the equivalent cash allowance should also reduce.

"Similarly, if the cost of providing a company car increases then so should the cash allowance sum paid to employees.

"Employees in receipt of a car cash allowance need to understand that it is a flexible and fluid structure”

Matthew Walters, head of LeasePlan consultancy services, adds: “Cash can become quite expensive for employers to provide and allowances are often out of kilter and far above the equivalent car benefit.”

That, he says, is because while there should be a direct link between the value of the car benefit and the cash benefit over time the relationship has broken down as one is managed by a fleet department and the other by an HR department.

“Cash allowances have increased with salary but the real value of the benefit of a company car in cash terms has decreased,” he says.

“While it is possible to reduce a cash allowance, from a staff morale viewpoint it needs to be thought about carefully.”

Whyte adds: “Employers have made a commitment and employees have made an investment based on that promise and they don’t expect it to be broken. Logically, the cash allowance should be fixed for a period of time – three or four years – but newcomers to a cash allowance scheme or staff ‘renewing’ the cash allowance agreement after a period of time could be subject to an increased or reduced allowance.”

However, HR bosses may recoil at the thought of reducing an employee’s cash allowance and Whitcombe suggests employers should consider ring-fencing the sum paid and introducing a lower rate for new starters.

“The cost of running a company car is reducing due to the improved efficiency of vehicles so in practice the cash allowance should also be cut.

"But how can a company take cash away from an employee? By introducing a lower allowance for new starters, the popularity of cash allowance will reduce over time,” he says.

An alternative is to make the company car proposition more attractive than the cash allowance – a trend that is becoming increasingly popular in the wake of health and safety concerns over employees driving their own cars on business trips, difficulties in accurately capturing business mileage, concerns over the type of vehicles some employees acquire and administration issues.