Transportation-related benefits have evolved from a standard company car benefit to policies that include more eco-conscious alternatives, such as hybrid cars, public transportation, and even walking allowances. Understanding what is commonly offered and what trends are emerging, while balancing the cost implications of company policies, are essential.

As with other benefits, employers are moving toward allowances that can be applied in a more localized and tailored way to fit employee needs. When employers listen to employees and work to support their unmet needs, employee engagement strengthens, ultimately improving the working relationship and leading to company-wide success.

Growth in ESG fueling alternatives

Environmental, social, and governance (ESG) commitment is increasingly important to attracting and retaining talent. By 2029, the Millennial and Gen Z generations will make up 72% of the world’s workforce, compared to 52% in 2019. These generations place greater importance on environmental and social concerns than their predecessors do — and will expect more from employers on these issues.

According to the US Environmental Protection Agency (EPA), transportation accounted for the largest portion (27%) of total US greenhouse gas emissions in 2020. Employers participating in Mercer’s 2022 Transportation Policies survey indicated that they are taking steps toward a greener car benefit program. 45% of US companies and 43% of Canadian companies have or will add hybrid/electric vehicles to their company car fleet.

Continuing to shift from cars to alternative transportation options

In addition to adding cleaner cars to company fleets, employers are encouraging alternative transportation. Mercer’s 2022 Transportation Policies & Costs survey indicates that 33% of US respondents have limited or reduced the number of company cars, and another 19% plan to do so. The numbers are similar in Canada, where 30% have limited or reduced their car fleet, and 18% plan to do so.

Public transportation is a prevalent alternative to company cars, as 45% of US and 40% of Canadian companies reported using this type of subsidy or allowance. Most companies provide an allowance to cover or supplement employee transit costs. Some employers cover the full amount and provide annual or monthly transit passes. A smaller number of companies let the employee choose a pass or allowance.

For areas where perhaps public transportation is not available, 45% of US and 47% of Canadian companies actively promote other means of transportation (e.g., carpools and bicycles).

Delivering employee choice through allowances

Car and other transportation benefits can be challenging to manage and a significant expense. How companies choose to deliver transportation benefits is also transitioning away from a standard take-it-or-leave-it policy to more of an a la carte menu for employers to use as needed. Offering allowances provides transparency to company efforts to target specific needs that are most relevant to the employee at a given location.

How companies choose to deliver transportation benefits is also transitioning away from a standard take-it-or-leave-it policy to more of an a la carte menu for employers to use as needed.

Flexibility has been the name of the game over the past few years. Allowances and subsidies let employers stay flexible and adapt to workforce needs over time. They are also much faster to add and easier to track, and their customizable nature provides feedback to employers when employees choose options.

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

As employees continue to reevaluate their current employment and consider other options, it’s vital to ensure your compensation and benefits policies are competitive in terms of value and demonstrate a real commitment to bettering the world around you.

Organizations often opt to manage car benefits locally, given the amount of variation from one country to the next in terms of regulations and even cultural expectations. Company branding often plays a large role in car selection, as the cars are seen frequently as an extension of how well employees are rewarded.

Check out the full list of seven things to consider as you review your transportation benefit policy.

Changing lanes responsibly

Environmental stewardship is expected to continue to grow steadily over the coming years as climate change and sustainability remain a societal focus. ESG continues to take hold in company incentive plans, consumer buying patterns, and investor criteria. Review your current transportation policies to see what you can do today.

Start with Mercer’s Transportation Policies & Costs or give us a call at 855-286-5302.