The importance of alternative transportation benefits

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June 28, 2021

Nowadays, it seems like everyone is talking about sustainable living. Terms such as eco-friendly and earth friendly are just some of the buzzwords companies use to describe their efforts to “go green” and consider sustainability. But what exactly does it mean and why do it?

Accenture has studied consumer behavior extensively and continues to find that consumers are seeking out companies with a commitment to sustainability. According to Mercer’s Global Talent Trends 2020-2021, one in five HR Leaders “will step up the pace in implementing a business approach focused on environmental, social, and governance (ESG) goals.” And why are they doing that? Well, that’s quite simple.

Not only are consumers looking to spend money with organizations that they see as creating positive change, but in the same study one in three employees indicated that they prefer to work for organizations that demonstrate a commitment to creating positive change with all stakeholders in mind. That means going beyond shareholders and including practices that lead to positive change for our environment.

When you think about it, the list of opportunities for change is long. But one that you should prioritize today is your car benefit policies. With 29% of total US greenhouse gas emissions coming from transportation, anything you can do to encourage employees to use more sustainable transportation practices would be a step in the right direction.

In the 1960s, car benefits were used extensively as an attraction and retention tool, particularly for executive and managerial positions. Over the years there has been a decline in these benefits, particularly as executive rewards packages became more transparent.

Now, with the new shape of work, with many people traveling less and working from home more, and with companies looking to implement more eco-friendly practices, evaluating your car benefit is a must.

Shifting from car benefits to alternative transportation allowances

While a significant portion of US and Canadian companies still offer car benefits in one form or another, it’s safe to say that the criteria for eligibility as well as what is covered or the value of the benefit have shifted. At the same time, companies are introducing new alternative transportation benefits to demonstrate their commitment to sustainability and being good stewards of this earth.

Exactly how companies are making these changes can vary. For example, an organization could focus on ways employees can contribute to reducing the carbon footprint and emissions that contribute to air quality and climate change by incorporating only electric or hybrid cars into their fleets or by differentiating the car allowance offered to those employees willing to use only electric or hybrid cars.

In Mercer’s 2021 Car Benefit Policies survey, published in May, 40% of US respondents indicated that they have limited or reduced the number of company cars, which is up from 27% just a few years back, in 2019. In both the US and Canada, around 30% of companies reported promoting alternative forms of transportation, such as bicycles and carpools. This option has continued to grow since we started measuring it in 2017, when these options were only reported by 11% and 16% of companies in the United States and Canada, respectively.

Another action many US and Canadian employers are offering is promoting the use of public transportation. Around 30% of respondents in each country reported providing such a benefit. While very much dependent on location and the availability of public transportation, anything the organization can do to promote alternative or green transportation to its employees is a step in the right direction.

Is your car benefit policy ready for a tune-up?

With the looming increase in voluntary employee turnover as the world starts opening up and employees are evaluating their careers, it’s important to ensure your compensation and benefits policies are not only competitive in terms of value, but demonstrate your commitment to sustainability.

Have you looked at your car benefit policy, lately?

Here are seven things to consider as you review your car benefit policy.

  1. Manage the policy at the right level. Many times, organizations opt to manage car benefits locally, just given the amount of variation from one country to the next in terms of regulations and even cultural expectations. However, look for opportunities to standardize any aspects and manage or administer at a global level. Your already taxed local resources will thank you!
  2. Implement eco-conscious alternatives. Not only do your consumers want you to commit to developing sustainable practices and taking better care of our planet, but so do your employees. Consider where you can implement policies, such as:
    • Limit or reduce the number of company cars
    • Add hybrid or electric vehicles to the fleet
    • Limit vehicle options to those with lower CO2 emissions
    • Promote the use of public transportation by offering subsidies or allowances
    • Actively promote alternative means of transportation, such as carpools and bicycles
  3. Craft and communicate car benefit eligibility clearly and consistently. Few companies provide car benefits to all employees and geography often plays a significant role in eligibility. Articulate a business reason or the inclusion of roles, whether it be logistical efficiency (e.g., sales roles) or market competitiveness to attract and retain key employees.
  4. Determine which benefits to offer. Car benefits can take the form of an actual car or an allowance. If you are also incorporating alternative transportation allowances (e.g., public transportation allowances/stipends), consider how much variety you need to offer your population. When offering actual cars, be aware of the obligations and administration required versus offering allowances.
  5. Determine the program guidelines and ancillary cost coverage. Before picking the make and model or ownership model, determine when to replace the vehicle (miles or time), how to handle coverage of ancillary costs (e.g., fuel, maintenance), whether personal usage is allowed, and other management policies. Ensure that all program guidelines are communicated clearly.
  6. Carefully consider make and model and ownership versus lease. The make and model of the cars you select for a company fleet are part of your overall brand. Balance the desire for style with economic and environmental considerations. Leasing is more common than owning when it comes to company fleets, but consider how this affects the company’s financials.
  7. Make sure it fits into your broader employee value proposition and who you want to be as an employer and member of the community. Car benefits can be quite visible and valued by employees as well as your consumers and members of the community. It’s important to make decisions about the program based on how it fits into your broader total rewards strategy, retirement plans, flex working, and other benefits.

Looking for more information about car benefit policies? Check out Mercer’s Car Benefits Policies and Car Cost Reports or give us a call at 866-605-1031.