A total of six out of 10 employees say they drive their own cars for work, but more than 15% do not tell their insurance companies.
If those drivers have an accident on a work-related journey, they will not be covered.
The results come from a survey of 500 firms carried out by Enterprise Rent-A-Car, in conjunction with the Federation of Small Businesses. It also revealed that many employees do not maintain their own cars, or even know how to.
One in five employees admitted only checking the oil and tyre pressures when the car was serviced and 7% said they did not know if their car was checked at all.
The findings show that many smaller firms are not carrying out simple insurance and maintenance checks on staff cars.
If there is an accident during a work trip and employees or their vehicles are at fault, the company could face massive fines, negative publicity and even prosecution for corporate manslaughter, the survey says.
The driver could also face criminal prosecution for not having the correct insurance cover.
The results also show that while two-thirds of employees said their employers never asked them to carry out safety checks, only a third of businesses admitted as much.
A total of 38% of employers said they always asked employees to carry out vehicle safety checks but only 10% of drivers said that this actually happened.
Brice Adamson, UK and Ireland managing director at Enterprise, said: ‘Many SMEs could be putting themselves at risk because they don’t know enough about the cars their employees are using for business trips.
‘Drivers, meanwhile, must have the correct insurance cover if they are driving their own cars for work.
‘Companies have a legal responsibility to keep their employees safe, which is that much harder when the latter are driving personal cars over which their employer has little or no control.’