The pandemic has drastically changed the way people travel for work. More employees are working from home, fewer in-person business meetings are taking place and public transport is being utilised less and less. It’s estimated that more than a third of employees would consider using a company car after the pandemic as a means of avoiding public transport. Moreover, only one in three employees expect to return to pre-lockdown travel behaviours, accorind to FleetNews.
It’s clear that businesses need to adjust their company car scheme to match the changing times. This article will review the different kinds of company car schemes, how they benefit employees and how businesses can easily manage their evolving car fleet.
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Company Cars vs. Pool Cars
Before jumping into the various types of company car schemes, it’s important to note the differences between company cars and pool cars.
What is a company car?
By definition, a company car is “a vehicle used by a single employee that is leased or owned by their employer.” A company car can be used for business or personal reasons, and employees are subject to Business in Kind (BIK) taxes for any miles driven for personal reasons.
What is a pool car?
A pool car is a vehicle that’s made available to more than one employee. Pool cars are viewed as a company asset and are subject to fewer taxes.
What is a Company Car Scheme?
There are a few different types of company car schemes. At their core they are all benefit schemes that aim to foster employee loyalty and encourage potential hires to work for the business in question. The most common company car schemes are outlined below.
1. Traditional company car scheme
Through a traditional company car scheme, businesses buy or lease cars for employees to use. A primary benefit of this type of car scheme is the low initial costs and fixed monthly payments, which makes budgeting easier for businesses. In the UK, the most popular car scheme arrangement is called a Contract Hire. Another popular option is a Contract Purchase.
2. Employee car ownership scheme
In an employee car ownership (ECO) scheme, the employee pays a monthly fee to use their car rather than the business. The title of the car is often in the employee’s name, so it’s not technically considered a company car. Therefore, the vehicle is not subject to company car tax.
3. Company car salary sacrifice scheme
This type of company car scheme involves an employee giving up a portion of their salary to pay for the car. Employees can afford to drive a new car at a much lower cost, and maintenance and servicing costs are typically included in the monthly fee. Additionally, with this type of car scheme employees are exempt from paying National Insurance contributions for the money they sacrifice to pay for the car.
4. Pool car scheme
A pool car is available for use by more than one employee and must be kept on business premises overnight, not at an employee’s home. Employees using company pool cars are not subject to BIK tax, but they still reap the benefit of having a company car for business travel. Moreover, pool cars cost the business less money since fewer vehicles are being used overall.
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How Car Schemes Benefit Employees
Company car schemes benefit employees in a multitude of ways. Because of Covid-19, more employees are avoiding public transportation and value being able to travel for work in a safer, more sanitary environment. Plus, certain car schemes save employees money on taxes and National Insurance contributions, all while letting them drive a new car at a more affordable price. VAT can also be reclaimed on fuel that’s used solely for business purposes.
Tracking Company Cars
The easiest way to track your company cars is with a digital fleet tracking system like Fleet Geo. Vimcar’s fleet management system makes overseeing company cars smoother and less stressful on the administrative side.
Note that trackers are often not allowed in company cars, only in pool vehicles, as a means of protecting the privacy of the driver. However, vehicles currently being used as company cars can easily be switched over to pool cars.
Managing an Evolving Car Fleet
The current pandemic is continually changing the way employees travel for business. As such, businesses should consider revising their company car scheme to meet the needs of their employees. With so many car schemes to choose from — plus the option to invest in pool cars rather than company cars — managing your business’s fleet may seem like an overwhelming job.
Vimcar can help ease the burden of vehicle management and be a benefit to both your business and your employees.