Pros, Cons and Alternatives to Company Cars

Company cars can be a fantastic incentive for companies looking to attract the best staff. However, more and more business and their employees are instead using car leasing packages rather than traditional company car schemes. This approach can reduce the amount of Class 1A National Insurance Contributions that need to be paid and can take car tax liabilities away too. Car allowance schemes involve employers paying a little extra to their staff in lieu of a company car being offered.

Assess Your Options

Company cars can be provided via salary sacrifice schemes or contract hire leasing to offer vehicles not only to top-level staff but across the company too. These schemes don’t have great benefits for everyone though, so it’s worth assessing your circumstances before you go ahead and offer them. When a salary sacrifice scheme is implemented employers generally have to hand over less Class 1A NICs than they would if the salary was paid as normal.

Reduce Grey Fleet Problems

When company cars are used, mileage payments can be lessened too due to the Inland Revenue advisory rate. Whereas journeys in their own car can generate payments of around 45p per mile, the AFR translates this into costs of around 15-20p per mile, based on the engine size of the car as well as other factors. Offering cars via a flexible car hire scheme can help companies to meet various legal obligations, helping them to reduce their carbon footprint. Cars that exist out of the control of a company are referred to as the ‘grey fleet’ – and these cars tend to cause higher emissions than company-leased vehicles.

Duty of Care

Cars that don’t fall under the “grey fleet” umbrella tend to be more eco-friendly, better maintained and are business-ensured. Duty of care obligations mean that companies need to ensure that vehicles used for work purposes need to maintained and checked by the company on a regular basis. Committing to a commercial vehicle leasing scheme is a big choice for a company that is rarely taken lightly. It’s said that less than 10% of company employees are ever likely to sign up for a company car scheme, which means it may only be worth setting up such as initiative if you have at least 500 staff members to cater for.

Meet Environmental Legislation

There are many factors to consider before implementing a company car scheme and various risks to consider. Sick leave, redundancy and maternity leave can all reduce the efficiency of company car contract hire schemes, and tax issues can throw further confusion into the mix. Nonetheless, many companies have successfully implemented company car leasing after weighing up all the possible risk factors. Insurance can protect companies from the effects of redundancy, maternity leave and other risks. This insurance may be reflected by the level of salary that is sacrificed. The biggest draw of salary sacrifice schemes are that they save money on NI and tax for employees and employers and allow companies to offer a useful benefit even when a salary rise isn’t possible. They can also help businesses to meet their environmental obligations. Short term car leasing may also be beneficial for an independent flexible car hire service.