Driving change in fleet management
Environmental concerns are changing in the role of the fleet manager. But tighter emissions laws, tax schemes and safety regulation could provide an opportunity rather than a threat, says Paul Harrop
The CO2 emissions-based Benefit in Kind (BIK) company car tax reforms, introduced in 2002, have had a fundamental effect on diversifying the profile of company fleets.
Employees finding themselves financially penalised were attracted towards cash-for-car options to reduce their BIK liability. So fleet administrators are frequently tasked with the management of both company cars and employees driving their own vehicles for work.
As companies introduce further initiatives to reduce the environmental impact of their operations, fleet administrators may become involved in other areas of travel management.
Since 2002, company car tax has been based on the list price of the car, its options and its recorded CO2 emissions. The previous system was perceived to encourage more miles to be driven on business in order to gain tax benefits.
Tax is calculated a sliding scale. There are exemptions and adjustments for vehicles using, for instance, biofuel. But, as a general rule, every company car driver has incurred a liability in 1% increments of between 15% and 35%.
The lowest threshold of 15% has been applied to progressively reduced CO2 emission levels, namely:
- 2002/03 165g/km
- 2003/04 155g/km
- 2004/05 145g/km
- 2005/06 140g/km
From April 6, 2008, the government is introducing a 10% banding for BIK tax for vehicles with the lowest levels of CO2. The new band for the tax year 2008/09 will cover vehicles emitting CO2 at 120g/km or less.
HM Revenue & Customs (HMRC) also stipulates that hybrid and bi-fuel cars with CO2 emissions up to and including 120g/km will be taxed at 10% and not be subject to further discount. Those with higher fuel emissions will be subject to the current discounts. Electric cars will retain a 9% rate.
The new reduction is another step by government to persuade company fleets and employee drivers to reduce CO2 emissions.
Companies moving towards greener fleets need to plan carefully to establish the practicalities of change, its financial outcomes and effect on HR strategies. Getting strategies right helps companies meet environmental objectives by reducing fuel consumption, savings excise duty and national insurance, and reducing drivers' BIK liability.
Significant savings on the congestion charge can also be achieved for businesses whose employees frequently drive into central London. Account should be taken of vehicle emission charges that, according to Transport for London, several boroughs plan to introduce by 2010.
Along with choosing conventionally fuelled low-CO2 vehicles, fleet administrators are giving increasing consideration to including at least some alternative-fuel models. The most successful of these are hybrids, which combine conventional fuel with an alternative energy source, usually electricity.
The alternative-fuel network in the UK is sparse, and electrically powered vehicles have a restricted travel range before a recharge is required, so hybrids currently offer the best option.
The Toyota Prius, using petrol and electricity, is the current leader in terms of volume of cars sold. And 80% of Lexus's RX range comprises hybrid versions. Year-to-date results for the hybrid market show an increase in sales from 3,117 to 6,568 cars - or 111%. While the numbers are small in comparison with overall fleet acquisition, the percentage growth is significant.
One of the factors to consider when greening the fleet has been the risk of alienating employees through restricted vehicle choice. But this is becoming less pressing as the range of desirable hybrid options expands. The Lexus GS450h, for example, is designed for the executive, and brings hybrid technology into a new market.
In an increasingly complex business transport environment, administering a changing fleet can be a challenging task. This is particularly true with those for whom the task is not a core responsibility - finance or human resource professionals.
Establishing greener fleet policies can positively effect a company's competitive edge and assist in attracting and retaining staff, as long as the strategies to gain commitment throughout the organisation.
With an increasing range of low-emission vehicles, fleet administrators can now seriously consider this sector when formulating their car policy strategies as it can help then gain the benefit of the new 10% BIK band.
Managers should also evaluate fuel expenses reimbursement. HMRC has set advisory fuel rates for employers to utilise when compensating company car drivers for mileage driven on business. These include levels of 10p per mile for drivers of cars with 1.4l engines.
The company's duty of care responsibilities can also assist green fleet policies. Whether vehicles are administered in-house or externally, companies have a legal obligation to ensure the safety and roadworthiness of vehicles used for business, both company cars and those privately owned by employees.
There are many practical benefits for business, since safer driving and responsible vehicle care saves operational costs. Fuel consumption can be reduced, with consequent environmental benefits.
Duty of care
The duty of care regulations affecting work-related driving have created a range of new responsibilities for the fleet administrator. This is in addition to their traditional health and safety remit of ensuring that company vehicles are correctly serviced and maintained.
- Implementing directives on mobile phone use in vehicles
- Recommending regular rest breaks when driving for business
- Checking employee licences
- Offering advice on safe driving practices
- Ensuring medical checks and eye tests are undertaken
- Monitoring driving performance and instigating driver training where necessary
- Enforcing the smoking ban in business vehicles, which is a health and safety issue because of the distraction it causes to drivers
For companies outsourcing their fleet management, a wide range of useful advice and support can be available to assist in implementing strategies. Fleet administrators should take advantage of their operational and risk management expertiseto gain support for meeting their expanding responsibilities.
Paul Harrop is sales and marketing director for DaimlerChrysler Fleet Management