Car benefit policies: reduce costs & go green

January 07, 2019

When it comes to your company car benefits policy, there is a lot to consider. From broad global trends to regional and industry-specific norms, it's important to understand all the potential implications when establishing or updating your car benefit policy. It's also important to bear in mind that your policy will need to be adjusted or reflect local practices and regulations once implemented across international and/or geographically variable workplaces. Because of this, it's crucial that your overarching corporate car policy is scalable and adaptable.

With all these moving parts in play, it's no wonder that 54% of companies only review their car benefit policy on an ad hoc basis. If you are considering adjustments to the car benefit policy within your own organization, make sure you're aware of the many ways you can cut costs, while also moving your organization toward a more modern "green" status. But, before diving into any cost-cutting or green-focused initiatives (or leveraging the robust US or Canada Car Benefit Policies Around the World), you should take the time to ensure that your company car benefit policy is appropriately structured and managed. Here's how you can do that.

Setting up your car benefit policy

Any company with a car benefit policy needs to first determine who will oversee the program as well as how often that program will be reviewed and possibly updated. If the entire policy is managed only at the corporate/parent level, policy updates might make perfect sense in your home location, but not so much in other regions where cultural or transportation infrastructures differ. Multinational businesses may need to consider local practices, regulations, and local market trends relative to company vehicles and car allowances and develop plans with the required level of flexibility for local implementation.

Here are two examples showcasing some of the variables you might have to consider when adapting your policies to different cultures or countries:

  • Only a quarter of organizations operating in the Middle East offer company car benefits.
  • 96% of organizations (that provide vehicles to employees) in Western European allow employees to use their company car for business and personal reasons. Conversely, only 76% of organizations in Asia Pacific markets allow employees to use their company car for business and personal reasons.
Mercer Select Intelligence car benefit policy infographic image

Because of the wide variation in local practices, you may want to structure your company car policy in a way that empowers your local or regional offices to manage policy specifics. In fact, that's exactly what the 82% of companies who give their local offices autonomy to create or manage car policies are already doing. But, before they get to this point, half of these same companies rely on their parent organization to set up the major aspects of their company-wide car policies.

Regardless of where your policy management occurs, there are many ways to make the policies friendlier for both your bottom line and the environment. Here are some tips.

Tip #1: Set limits

One of the most common ways that companies are cutting costs and becoming greener is by limiting their number of road-ready company cars. As a matter of fact, 23% of organizations around the world are currently reducing their total number of company cars. In the US alone, more than a quarter of companies are taking steps to limit the number of cars offered to employees.

As far as industries go, 7 of the 10 major industries reporting data for the 2018 Car Benefits Policies Around the World survey indicated that limiting or reducing their company cars is the primary way in which they are cutting costs and working toward a greener future. Across specific industries, the global trend is also still evident, but the rate of change seems to differ. For example:

  • More than half of participating healthcare organizations indicated that they are currently, or are planning on, limiting the number of cars in their company fleet.
  • While in the energy sector, where SUVs are the most common type of car found in a company fleet, only 32% of companies are setting limits or reducing the number of cars.

Tip #2: Require eco-friendly automobiles

More and more, companies that offer vehicles to their workforce are no longer stocking their fleet with large, gas-guzzling or otherwise inefficient vehicles. Many organizations are starting to offer eco-friendly alternatives by limiting their vehicle options to automobiles with lower carbon emissions. This is particularly evident in both the life sciences and the consumer goods sectors where more than 20% of organizations are taking this initiative.

Tip #3: Promote and subsidize alternative forms of transportation

Some company car policies are unique in that they aren't actually about using cars at all. Instead, under the policy umbrella of "car allowances," some organizations are incentivizing employees to use public transportation, carpools, or bike to work, among other options. The banking, financial services, and insurance industries are particularly fond of encouraging public transportation where 41% of organizations are promoting the use through employee subsidies and car allowances. By implementing a car allowance, rather than providing a vehicle, organizations can more easily promote alternative forms of transportation. Within the retail and wholesale industry, 80% of companies do not require employees to use their car allowance towards the cost of a car, which allows employees to use these funds to offset other costs, such as public transportation.

Tip #4: Add hybrid or electric vehicles to your company fleet

An obvious way to make your car policy more eco-friendly without limiting fleet size or car availability is to increase the use of hybrid or electric vehicles. The US is becoming a bit of a trendsetter compared to the rest of the globe; 20% of US organizations already have hybrid or electric vehicles included in their fleets, compared to just 14% globally (and only 9% in Canada).

As more hybrid and electric cars trickle into consumer markets, you can expect more alternative-energy vehicles to make their way into company fleets internationally. And, if your organization already owns a fleet of company vehicles, maybe it's time to consider adding some hybrid or electric automobiles.

Creating a car benefit policy most commonly offered green alternatives infographic image

Updating your company car benefit policy

If you're revising your company's car benefit policy, it's helpful to leverage some of the above strategies to cut costs and support a greener infrastructure. However, you must first factor in the challenge of creating an adaptable, scalable car benefit policy that works across your vastly different markets, especially at the corporate or executive level.

Mercer's US Car Benefits Policies Around the World or Canada Car Benefits Policies Around the World contain the most up-to-date company car benefits data available. Using this data, you can customize a policy to meet your unique organizational needs, break down complex benefit trends by industry or by geography to get a true market representation of the locations where your policy is used, and so much more. Start planning for the future of your company car benefits today by accessing Mercer's 2018 Car Benefit Policies Around the World to further explore these and other trends and considerations.