28/08/08

By John Maslen

One of the biggest debates over the past few years has been whether companies should allow employees to opt out of their company cars and take the cash instead.

Employees receive a cash lump sum or a monthly payment and freedom of choice to drive what they want.

This has proved a popular option with tens of thousands of drivers, especially since the launch of the carbon dioxide-based company car tax regime, which penalises drivers who run high-emitting cars.

It has also proved a cheap way to finance business travel for many companies, as the only additional costs they face are payments for the work mileage covered by employees.

However, in recent years there have been a wide range of health and safety concerns about just what impact this move into private car ownership is having on fleet risk policies.

Industry research has repeatedly found that where employees have opted out, the company has effectively surrendered control of risk to the driver.

Companies don’t know what cars employees are driving, whether they are properly serviced or insured for business use and even whether their employees have a driving licence.

Employees often want to feel like individuals which is why they come out of schemes in the first place, but the company has a duty of care to its employees and must ensure that the car that is being used for business meets stringent safety requirements.

The company must also be able to demonstrate that it takes all reasonable precautions to make sure that the driver and vehicles are safe, such as regularly checking service or MOT records and tyres.

In fact, it is now a common view throughout the industry that an employer is just as responsible for drivers in private cars, if they are covering business mileage, as they would be for company car drivers.

As a result, a new term has been coined to summarise this key sector of the market — grey fleet.

According to one of Britain’s biggest vehicle management and leasing companies, Arval, most companies have a lot of work to do in this area.

It found that 34% of companies do not check the licences of grey fleet drivers, and 52% of companies do not check if grey fleet vehicles have business insurance.

Furthermore, three out of every four grey fleet drivers are not required by their employers to produce a valid MOT certificate for their vehicle, while 83% of firms don’t check that grey fleet vehicles are regularly maintained.

This is a key issue, because about three-quarters of companies don’t have any restrictions on the age of grey fleet vehicles that can be used.

Some companies might assume this doesn’t matter, but if an employee has an accident in a private car while driving on business, the company will come under the spotlight in any police investigation and insurance claim.

A spokesman for Arval said: “In terms of duty of care, the only conclusion that can be drawn is that the policing and management of grey fleets does not, unfortunately, reach the high standards that many employers bring to their company car fleets.

“Many have wrongly assumed that all responsibility passes to the employee once that employee has opted out or is using their own vehicle for business journeys. Others have almost certainly chosen to use the cash option as an opportunity to wash their hands of the aggravation of running a car fleet.”