Case study: Major review

The findings of a major review by one leading organisation into company car and cash allowance entitlement and the nature of entitlement is due to revealed in the autumn.

A cash allowance has been in place at the company for more than a decade and is available to any perk driver, but is not available to ‘high-mileage’ drivers, categorised as travelling more than 10,000 business miles a year, who have to take a company car.

Currently, the company has almost 1,400 company car drivers split 50/50 between perk and ‘high-mileage’ drivers and about 400 cash allowance drivers.

The cash allowance is calculated to be cost-neutral to the business against the wholelife cost equivalent of the benchmark car available within an employee’s band.

The cash allowance element of the review will take account of a combination of the wholelife cost of the car offset against the benchmark for the equivalent type of business and appropriate job role.

A spokesman told Fleet News: “Cash allowances have a role to play in the business and will continue to have a role to play after the review. We are reviewing whether our employees are getting the right level of cash allowance and checking that it is applicable to the right people.”

Many employees opting for a cash allowance live close to the company’s offices and do not clock up business mileage, with eligibility for a car being linked to their job function.

However, if employees clock up even just one business mile their driver and vehicle documentation must be registered with the company’s fleet department.

Case study: technology specialist

A major technology specialist has amended its cash allowance scheme for both executives and essential users.

The company has offered a cash option for 20 years and until mid-2010 executives were able to take the allowance, which was placed in their ‘car benefit fund’.

Employees were then able to lease a car from one of the company’s panel of providers.

However, since mid-2010 the cash allowance – now known as a ‘car payment’ – has been included within an employee’s ‘flexible benefit fund’, which means the money could be used to help fund a range of benefits.

Prior to the introduction of a company car benefit-in-kind tax system in 2002, approximately 30% of executive car scheme members opted for cash, but in the past decade the number has risen to about 60%.

However, a company spokesman told Fleet News: “In recent times we have seen a consistent drift back from cash to car.

"We don’t want to dictate how employees spend their money as we want to give them flexibility.

“But our first choice is to provide a car, which is why we call the allowance a ‘car payment.”

The organisation tightened up its essential user company car scheme two years ago, switching to a more restricted vehicle choice.

Simultaneously, the cash allowance option, which had about a 25% take-up, was closed to new starters.

Meanwhile, the employee option to take cash or car is ‘renewed’ every four years but now if opting out of cash into a car the decision cannot be reversed at a later date.

Want to know more?

Leasing provider GE Capital recently produced a grey fleet guide including the day-to-day operational
management of the grey fleet and the structure of cash-for-car schemes.

To download a copy, visit fleetnews.co.uk/GEgreyfleetguide