Allowing employees to use their own cars for business trips and claim back mileage reimbursement may seem like the easiest option to keep employees mobile. But the truth is that this so-called ‘grey fleet’ is actually costing businesses money and rendering them liable to risks over both employee safety and the sustainability of their business.
In fact, there are some very good reasons to look for alternatives:
- The 75-mile break-even point
To start with, mileage reimbursement affects the bottom line. Even if you only pay the bare minimum pence per mile reimbursement rate (and many companies pay more), a longer business trip can really start to rack up the pennies.
Once employees are undertaking journeys of 75 miles or more, it might actually be cheaper to hire a car for the day and just pay for petrol. So it makes sense for businesses to have those calculations carried out and see where their particular break-even point might be. It might also be worthwhile to consider a dedicated car club, which can be a viable option for shorter journeys.
- Mileage over-claim
Because per-mile reimbursement is greater than the value of actual costs like petrol, some employees might make unnecessary business trips or exaggerate their claims as a way of supplementing their income. Offering an alternative such as rental or car club membership – or just getting people to teleconference instead – can actually reduce the number of business miles they drive.
- A less sustainable fleet
But it’s not just a question of finances, though. Employees’ privately-owned cars are usually older than rental or company cars, so they often have a higher CO2 emissions level as well. Businesses who use their employees’ vehicles as their de facto ‘fleet’ may seriously affect their carbon footprint.
Organisations with an eye on sustainability may want to ensure people drive newer, greener vehicles – or even have access to electric cars, as offered by a number of car clubs.
- Health and safety risks
Perhaps the key issue with the grey fleet, however, is health and safety. A company is legally liable for every vehicle being used for a business journey, whether it’s a refrigerated truck, a van or a car – and regardless of who owns it. So if your employee gets into his or her old, poorly-maintained runabout for a work trip and causes an accident, your business has the duty of care and could be held legally accountable.
Think about it. Do you know what cars your employees own? Do you know how often they’re serviced, if they have a valid MOT and how old they are? Do you know if their tyres have the legal level of tread and whether the brakes work? Do you know if your drivers have business-use car insurance or points on their licence? If they drive those cars for work, the answer to all those questions had better be yes.
Have a travel policy
As with a lot of business issues, what looks simple at first glance is actually far more complicated. With employees putting in a blizzard of individual expense claims for mileage reimbursement, do you actually know how much it’s costing you? Are people taking trips they don’t have to? Are those cars green enough and safe to drive?
It’s not easy to answer these questions, but it certainly can be done. And in a lot of cases, you might find that there are cheaper, cleaner and safer options out there.
You can’t always assume your employees will make the most suitable travel choices. So any company, no matter how small, needs a sensible and well thought out travel policy so that employees know the best way to get from A to B and stay mobile.
By Adrian Bewley, director of business rental UK & Ireland at Enterprise Rent-A-Car