As car technology changes and fleets include more Electric Vehicles (EVs), what will this mean for your company car policy? We take a glimpse into the not-too-distant future of electric fleets.
The company car policy sections that can remain unchanged
Electrification of your fleet doesn’t mean it’s all change. The aspects of your company car policy that will remain the same include:
- Eligibility for a car on the basis of seniority or mileage covered - however, if car costs come down with the introduction of EVs, could you afford to offer cars to people further down your grading structure? This is one to consider and will depend on your reward policy and where you aim to position yourself in the market.
- Personal use
- Accident procedure
- The company’s responsibilities - for example, providing insurance and retiring and replacing cars will remain the same but you might need to include a section about charging at work and on the road
- The driver’s responsibilities - items like paying parking tickets or speeding fines will remain the same but you’ll need to highlight the requirement to charge the car
- Delivery and return
Company driver rules - the updates you’ll need to consider
If your company car policy includes a section on car choice this will need a major overhaul. Including ULEVs in the selection, available by grade or as part of your salary sacrifice offering, will need additional guidance.
Choosing the right ULEV depends on people’s lifestyle and attitude to driving. And employees will need to be educated before choosing their car to help them make the best choice for them and your business.
For example, many pure EVs can now travel over 250 miles without needing to be recharged. This will cover most short daily journeys many times over before the car needs to be plugged in. Even for those who travel longer distances more regularly, rapid charging means their usual 20 minute stop at a service station simply needs to include plugging their vehicle in to charge.
Helping your employees to understand the capabilities of EVs and the reality of driving one means they’re more likely to select cars which work for them but also have the lowest emissions. Which means your business will reap the rewards of significantly lower employer NI contributions.
Where your policy applies to petrol and diesel cars, you’ll need an update to add the word ‘energy’ to any mentions of fuel. And you might need to provide guidance, either in your policy or as a standalone document, on how to charge an electric or hybrid vehicle.
Do you want to cap your emissions?
As you’re likely aware, HMRC’s new benefit-in-kind rates will provide significant savings for organisations and drivers operating zero emission vehicles. However, if you allow drivers to choose any vehicle they want, this opportunity could be wiped out. Which is why many organisations cap the emissions of the cars they allow their staff to choose from.
Research from Willis Towers Watson shows that 41% of EMEA businesses limit the CO2 emissions of the cars their drivers could choose. It’s likely that more organisations will choose this tactic to reduce their carbon footprint and reap the benefits of the tax breaks on offer.
Educating drivers on tax benefits
Another way to encourage drivers to opt for greener cars is to ensure they understand the tax benefits.
Your company car policy can play a key role by clearly setting out the advantages of reduced BIK rates. Include BIK rate tables that show the impact that car choice has on tax and provide some worked examples to demonstrate the savings available. By illustrating the impact of greener cars in pounds and pence, you’ll help drivers make the right decision for them and your organisation.
Whole-of-life cost savings rely on driver co-operation
Tax is just one part of the equation. You’ll also need to consider the whole-of-life cost savings associated with EVs and the importance of driver’s support in making the most of their new cars.
Because electricity is much cheaper than petrol or diesel, EVs will save significant sums on your business mileage bills. Even if you don’t go all-electric, hybrid vehicles also give your drivers the opportunity to use electricity alone for shorter journeys.
However, this relies on plug-in hybrid drivers actually charging their cars which is something that you’ll need to specify in your car policy. And don’t forget to let drivers know about your company’s charging club membership that enables drivers to access charging points all over the UK.
When it comes to overseas travel you might need to ensure your company has a facility to enable drivers to charge their cars while abroad on business.
Other car policy updates you’ll need to consider
If you include business mileage rates in your policy you’ll need to include the electric business mileage rates and those for hybrids. At the moment, HMRC’s guidance states:
- 4p per mile for pure electric vehicles
- Hybrids are to be treated in the same way as petrol or diesel vehicles
There’s pressure from the car industry for HMRC to introduce alternative rates for hybrid vehicles so keep a lookout for updates.
Other elements to consider for your car policy is who will pay for electricity when drivers charge their cars at work and on the road for business travel. You’ll also need to decide:
- Will you allow free charging for visitors? If not, how will you charge?
- Will your business incentivise EV adoption by subsidising electricity?
- Or will you consider making a profit?
- Have you got enough charging points installed?
- How quickly will you need to ramp up installation as you introduce more EVs?
These are just some of the questions you’ll need to think through as part of your company car and car benefit strategy. For a more detailed conversation about the future of your fleet, call one of our team today.