Fleet News

Changes at work boost short-term contracts

AN increasing number of fleets are negotiating short-term rental deals in answer to the growing trend of contract and temporary working.

Fleet management company Arval PHH says the trend means fleets should seriously look at the way they provide company vehicles.

The company claims Government statistics show the number of UK workers on short-term contracts rose by 36% from 1992 to 2001, to more than 1.6 million.

It added that many of these employees required company cars but that many providers still only offered contract hire or other forms of leasing on three and four-year contracts – not suitable for employees whose contracts might only last for six or 12 months.

Fleets which buy their own vehicles may also have to reconsider their options, the company added.

'The immediate loss in value when acquiring a new car is a major financial burden on any business, especially if it has to resell that vehicle only a few months later,' a spokesman said.

Instead, the company suggests, businesses will need to think about what they actually need, rather than just choosing standard solutions.

They will have to provide these workers with short-term vehicle solutions without the costs associated with extended daily rental. It adds that increasing demand for Arval PHH's Mini Lease service highlights this growing trend. Over the past three years the fleet has grown significantly to more than 2,500 units.

Vincent St Claire, managing director of Arval PHH's fleet division, said: 'European legislation is also threatening to change how companies offer vehicles to staff.

'Although the final wording remains under discussion, the new Agency Workers Directive from the EU currently states that after six weeks of employment, short-term employees will be entitled to the same benefits, or equivalent substitutes, as permanent workers of the same level. That means employers might have to offer company cars to contract staff if their full-time peers have them.'

The company also issued a word of warning for certain sectors such as IT and marketing services, where there is a much higher staff turnover than in more traditional industries. Many employees may not remain in their jobs long enough to complete a three-year contract hire lease.

If they have a company car this could leave their employers open to severe early termination penalties, it says.

These changing employment trends are not only putting more pressure on the contract hire market, but also on those companies that offer cash-for- car (PCP and ECOP) schemes.

St Claire said: 'The face of employment is changing across Europe. Not only is the number of contractors on the increase, but the Agency Workers Directive could also lead to a big increase in demand for company vehicles from short-term employees.

'When it comes to fleet funding, flexibility must be the watchword. Products like Mini Lease allow companies to offer vehicles to employees for periods of between one month and a year without the expense of an extended daily rental contract. The success of Mini Lease has been underlined by the fact that several other fleet companies have recently begun to offer similar services.

'In addition, by offering products geared to the needs of contract workers and employees who stay for less than three years on average, fleet companies could increase the appeal of the company car as a perk. Some technology and business service firms may be more inclined to offer their employees a benefit that they had not previously considered.'

Richard Hale, head of rental services at Hitachi Capital, said his company had also noted increasing interest in flexible products.

'We have definitely seen an increase in demand for short- term rentals, which we classify as two months or more,' he said.

'It has been one of our biggest growth areas in the last 18 months and partly explains why, taking into account all of our rental contracts, our average rental length has gone up to 12.5 days – far higher than the industry average.

'There are larger numbers of people now employed on fixed term contracts for whom a flexi-lease rental arrangement makes complete sense as part of the company's total fleet management contract with us.'

Kevin McNally, managing director of LeasePlan UK, added: 'We have explored the area of flexible short to medium-term vehicle provision with our clients through our regular product development forums.

'The feedback suggests the use of pool cars and daily rental vehicles are the most favoured options. Through our in-house daily rental service a client can initiate or terminate an agreement in days rather than being tied into longer-term contracts. There is also a wide choice of rental vehicles available, allowing clients to choose vehicles that are appropriate for the specific short-term needs of the company and the driver.

'Moreover, through our daily rental partners, we have been able to develop very competitive rates for longer term daily rentals.'

McNally continued: 'The value and flexibility that this service offers meets a variety of client needs ranging from pre-contract vehicles through to the provision of business need vehicles for temporary or contract employees.'

However, while some customers believe the future for the pool car is rosy, others have voiced concerns that it has reached the end of the road – particularly if they sit idle in company car parks.

Diarmuid Fahy, general manager for ProAct and rental services at Interleasing, suggested that if pool cars were idle for about 30% of the working week, then it was worth examining alternative options, such as daily rental (Fleet NewsNet August 26).

While a well-used pool car still has a future, it is suggested that more often than not it spends a lot of time out of action.

Fahy added: 'There is still a place for pool cars, as long as they are in use enough for them to be cost-effective, which would be 72% of the time.'

But the use of pool cars also raises concerns under the Health and Safety Executive's (HSE) new fleet guidelines, part of the Driving at Work report, when a relief vehicle is needed.

The report spells out what companies need to do to ensure their drivers are safe and was issued in September.

Lance Jenkins, sales director of Network Automotive Management, said: 'Fleets will always need relief vehicles but some of the sources they use, such as courtesy and pool cars, may not allow the fleet manager to demonstrably ensure that he or she is meeting their duty of care.

'In contrast, a rented vehicle supplied with detailed records to show that it meets the HSE guidelines will present an easy solution. We believe that many rental companies will soon start to do this for their fleet customers.'

Jenkins added: 'The added HSE responsibilities could prove to be a death knell for running spare or pool cars. Renting vehicles from a known, reliable company overcome all these difficulties for the fleet manager.'

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