Businesses are planning to cut eligibility to company car schemes from some roles over the next 12 months, new research suggests.

Insurance firm Willis Towers Watson (WTW) spoke to more than 1,500 UK businesses for its 2023 Company Car Benefits Survey.

Overall, more than two-thirds (68%) of respondents said that they offer either a company car or car allowance to employees, showing a slight decline of 3% on the previous year.

While eligibility levels for company car plans remained fairly stable across all employee categories this year, sales employees were most impacted, as those eligible dropped from 73% to 70% compared to 2022.

Half of employers said that they intend to review company car policies within the next year, with a fifth (22%) of those saying they are planning to remove eligibility for a company car from certain roles.

WTW claims this could be down to inflationary pressures, with the median budget per employee increasing by up to 12%.

Lori Stokes, rewards data intelligence lead at WTW, explained: “Inflation has, at least in the short term, become a high-priority consideration for most organisations, which has called for the reassessment of benefit offerings across the board.

“As the cost of vehicles and leasing has grown considerably in a short space of time, it’s raising questions around how to best manage company car benefit plans, whether that’s through reviewing those eligible, the type of vehicle on offer or budget optimisation.

“When coupled with objectives to introduce more environmentally friendly policies and behaviour, many organisations are looking towards alternatives to achieve these goals.”

Almost half of companies (43%) intending to review their policies, are planning to introduce more environmentally friendly policies and behaviours in the next 12 months.

Some 37% plan to introduce more environmentally friendly vehicles, while 41% of companies intend to change the make and model of vehicles on offer.

The objective to introduce more environmentally friendly policies and behaviours is also inspiring organisations to consider other alternatives to the traditional company car and car allowances.

More than a quarter (28%) of respondents are providing access to bicycles, while 22% of companies have organised car-pooling among employees.

The research from WTW comes as separate research from Fleet News shows that some employers are replacing company car schemes with salary sacrifice schemes for cars. 

More than a third of companies (36%) have introduced salary sacrifice, according to the latest Fleet200 Strategy Network (FSN) survey. Of those, 32% have used it to replace their company car scheme, driven by sustainability, cost and employee benefits.

Salary sacrifice schemes allow employees to ‘sacrifice’ part of their salary in return for a new, low-emission car. Employees have to pay benefit-in-kind tax but there are significant income tax and National Insurance (NI) savings, while their employer benefits from Class 1 NI savings.

Businesses can expect average Class 1 NI savings of £3,000 per electric vehicle (EV), meaning a salary sacrifice fleet of just 35 EVs would generate savings in the region of £100,000, according to salary sacrifice provider Tusker.