Company car allowances overtaking cars in popularity, says research

A survey by XpertHR’s also revealed that UK employers give both out to senior directors as a perk or to employees that need a vehicle to do their job.

While the provision of company car allowances is on the up, the picture for company cars themselves is more mixed due to the cost of running a fleet and tax changes, according to research.

The 2017 ‘Company cars and car allowance survey’ by analyst company XpertHR’s also revealed that UK employers tend to give company cars and allowances to either senior directors as a perk or to employees that need a vehicle to do their job.

While 71.3% of organisations indicated they had company cars on their books, they indicated that a mere 8.2% of staff had access to them. In just under three quarters of cases, decisions here were based on job roles and were focused on sales/client-facing posts, technical/servicing/engineering or maintenance/facilities/property positions.

Car allowances, on the other hand, were offered to a mere 6.1% of workers by a huge 85.1% of employers, although the provision of this kind of benefit appears to be on the rise.

Over the last two years, while the number of staff deemed eligible for a car allowance has remained static among 44.2% of the 303 organisations questioned, it increased at 38.8% of companies and fell at just 7.8%. The reasons given for the jump included wanting to provide employees with more flexibility and choice; larger headcount; reducing or ending company car schemes and/or replacing company cars with car allowances for tax purposes.

But the situation regarding company car entitlements was more mixed. While eligibility remained static at 45.4% of organisations, it rose at 28.2% and fell at 20.4%. Reasons given for these increases included a rise in headcount and company growth, while decreases were attributed to removing the benefit entirely, the cost of running a fleet and tax changes.

Sheila Attwood, managing editor of XpertHR’s pay and HR practice, said: “Environmental concerns and tax changes could impact company car and car allowance provision as well as the type of cars offered. Some organisations are already responding to the tax benefits of ultra-low emission vehicles, with one fifth planning to offer more ultra-low emission vehicles in future.”

Over the next two years, however, just over one in five companies expect more employees to become eligible for company cars or allowances, while a third expect to make changes to their policies over the next 12 months.

“Companies are keeping a close eye on any legislative and tax changes that may be introduced and will adapt their care benefit policies accordingly,” Attwood said. “We expect more companies will be moving to encouraging employees to opt for car allowances in place of a company car in future.”