The ease of making cash payments each month instead of looking after a fleet of company cars is tempting. But it’s not the best option for employee wellbeing, as we explain in this article.
Why cash doesn’t cut it
Company car cash allowances are usually offered to employees in roles that are considered senior enough to attract a company car benefit as an alternative option to a car. A single payment each month via payroll and the job’s done.
However, cash payments have a range of unintended consequences. One of which is the tax impact on company car drivers.
Following HMRC’s 2017 benefit-in-kind changes, employees are now taxed on whichever is the highest: the value of the cash or the car. If an eligible employee deliberately chooses an energy-efficient vehicle, they could be taxed on the cash allowance value instead making them worse off than expected.
Which will soon take the shine off their new car.
The other downside to cash is that it can be spent on anything. Which means your staff could be driving around in older, less safe vehicles that are more likely to break down.
Known as the grey fleet, your employees’ private vehicles are outside your organisation’s control. Not only might they be unsafe, but they could fly in the face of your firm’s green initiatives, corporate social responsibility aims and employer brand.
Why physical cars beat cash
Company cars are one of the most appealing employee benefits and they beat cash allowances for many reasons, including these:
Cars enable you to extend your car benefit offering
Footing the cost of company cars for more senior staff or for those who need a car to perform their job is an expected part of providing competitive total reward. Offering a cash allowance only means you can’t offer cars to more junior staff. But provide company cars to job need users and those in higher grades and you can make the same company car package available to other staff.
Enable them to take the benefit up via salary sacrifice and you’ll expand your offering and help employees stretch their pay further. And you’ll save employer national insurance contributions too.
Safety-conscious employers will want to know their people are driving the latest and therefore the safest models. By providing employees with access to brand new cars you can be sure your staff are well protected. Not something a cash allowance can do.
With the added benefits that an all-inclusive package brings - MOTs, maintenance, insurance, servicing and road tax - your staff and business will benefit from cars that are less likely to be involved in accidents and breakdowns.
Relying on a grey fleet can mean your business suffers as less reliable cars can result in employee mobility issues and missed meetings.
Improving financial wellbeing
With financial wellbeing high on many firms’ agendas, extending access to a car benefit scheme helps employees manage their finances with a single monthly payment. And, with maintenance and servicing covered, they won’t be hit with any unexpected, stressful bills.
Staff with a company car paid for by you their employer can also add younger drivers to the policy saving significant sums on expensive first-time driver insurance.
If you’re considering replacing a company car with a cash benefit, don’t! It piles a whole heap of stress on senior employees’ plates. From repairs and MOTs to servicing and unforeseen repair bills, they’re suddenly required to source trusted providers and foot unexpected bills on top of significant responsibilities at work.
For people who couldn’t afford a vehicle before, offering a car benefit via salary sacrifice can open up car ownership to more of your staff. Not only will this make commuting easier and potentially safer for shift workers but it supports a better work-life balance as people can shave hours off public transport journeys each week.
You can gain all these advantages by working with a tried and tested car salary sacrifice provider like Tusker. We’ll carry out most of the administration and provide online systems that make choosing cars and understanding costs a straightforward process for staff.