Ask a roomful of private sector organisations at what rate they reimburse drivers for business mileage in their private car and the answer is likely to be 45p per mile (for the first 10,000 miles, 25ppm thereafter).
It’s a different story in the public sector. Research from Fleet News in 2009 found that some councils were paying as much as 58ppm.
The TaxPayers’ Alliance also investigated mileage reimbursement rates and found that the average council rate was 56.45p per mile in 2010-11, with some councils paying 65ppm.
At the time, 80% of councils paid above the AMAP rate (then 40ppm).
So why the disparity in rates? According to the TaxPayers’ Alliance, many local authorities pay mileage rates that are nationally agreed by Local Government Employers (the body which represents local authorities on the National Joint Council (NJC)).
These rates were 65ppm in 2010-11.
“It’s not compulsory to follow the NJC rate, it’s just a guideline, but organisations often revert to the default guideline without questioning it,” says Watts.
Complicating matters further is the fact that some organisations pay grey fleet drivers lump sum payments in addition to the base mileage payment.
Even at the same organisation, grey fleet drivers may be on different rates, depending on seniority.
NHS organisations also follow different guidance. The NHS Staff Council has agreed to a new system, which took effect in July this year.
The system includes:
- Removal of the ‘regular’ and ‘standard’ user categories.
- Removal of ‘regular user’ lump sums and all allowances linked to engine size.
- Standard rates of reimbursement for staff using their privately-owned vehicles to make NHS business journeys. Currently, this is 67ppm for the first 3,500 miles and 24ppm thereafter.
- Twice-yearly reviews for rates of reimbursement in line with changes in motoring costs.
- Updated guidance on local leased vehicle policies.
However, this is not a blanket policy.
Very senior managers are still paid according to their local policies and contracts of employment, and the arrangements do not apply to staff within the remit of the Doctors’ and Dentists’ Review Body.
The mileage reimbursement rates are based on the AA motoring cost guides.
The potential savings depend on how many grey fleet drivers you are paying in the first place, but could easily run into thousands of pounds.
Watts suggests it also depends on how many of the grey fleet journeys are unnecessary and whether employees are exaggerating their mileage claims.
“If journeys are unnecessary and employees are inflating mileage, then the potential is huge,” he says.
However, necessary journeys don’t simply disappear. They may now happen in a pool car or daily rental car with a cost attached or still in the employee’s own car – albeit at a lower rate.
“I’ve seen a 10-15% reduction in costs,” says Watts. “But this isn’t by reducing the mileage rate alone. It is the result of a package of measures.”
Sarah Tooze is a former managing editor of sister title Smart Transport. Prior to joining Smart Transport she worked on Fleet News for more than 10 years, latterly as deputy editor, and won the ‘automotive business journalist’ award in the 2017 Newspress Awards.
Alastair.kendrick - 26/09/2013 11:41
Sorry but this article seems to over simplify the issues and gloss over the tax position. Public sector workers operate what is called the fixed profit car arrangement so they provide a list each year of the taxable element of the allowance paid which gets coded out in most instances. The question is does the AMAP rate give enough to reimburse costs incurred on business travel. This comes down to if figures are on marginal or apportioned costs. If on the latter ( which is the basis adopted by HMRC in setting the rates) then the current HMRC rates are unlikely to cover the drivers costs unless employee is driving a low emission vehicle.