Business car experts are unanimous in their view that if a fleet can reduce the amount of work miles driven by employees using their own cars and claiming back the mileage, then it’s a good thing.

The reasons for this are numerous: so-called ‘grey fleet’ miles are less safe, less controlled, more expensive and more open to abuse.

It’s all well and good highlighting these things, but how does a fleet manager go about cutting back either the number of grey fleet miles or the number of grey fleet drivers successfully without harming the business operation  and with the support of those drivers?

As ACFO chairman John Pryor points out: “The key issues for businesses to gauge if they are looking to reduce grey fleet use are: calculating the cost of own car usage versus the cost of alternatives; confidence that they have the duty of care issue firmly under control; and to ensure that every journey is business essential to keep costs under control.”

Fellow ACFO director Julie Jenner gives more detail, saying that reducing grey fleet usage, especially cash-for-car drivers, and encouraging employees back into company cars is usually primarily focused around cost: “Giving a driver a cash payment is one of the most expensive ways of providing a benefit as it automatically attracts a 13.8% National Insurance cost on top of the cash. Unless, of course, it’s provided via a structured scheme that utilises the tax-free AMAP rates.

“Additionally, the provision of either a company car, or cash, should be cost neutral – there should be no advantage or disadvantage to the company dependent on the choice made by the driver, but all too often cash schemes cost considerably more to provide.”

Jenner says that best practice also suggests the same principles and restrictions that apply under a company car policy should apply when an employee takes cash.

“If there is a CO2 limit on the car policy so there should be under cash. Such a policy maybe difficult to implement on existing private cars that drivers may have, but easy to give notice that when they change they will have to comply. It makes no sense, for example, to allow a driver to have a Porsche under a cash scheme if it’s not available on the company car policy – [due to] increased fuel costs, fitness for purpose, etc.

“Once the two policies are aligned it usually doesn’t make financial sense for the driver to opt for cash unless they genuinely are taking cash because they don’t need a car and use public transport. Of course, there will always be people that fall into this category, but if they can be the minority then a few don’t matter.”

Targeted approach

Ashley Sowerby, managing director of Chevin Fleet, advocates a targeted approach to cutting grey fleet.
“If you have a group of people who are using their own cars regularly, even every day, to undertake quite lengthy journeys, then these should be the first to switch into your alternative scheme, whether that be a pool fleet or using more daily rental,” he says.

“Over a period of time, you can move over more and more grey fleet drivers, although our experience is that eliminating the use of private vehicles altogether is very difficult and may not even be desirable. If you have someone who uses their own well-maintained and relatively new car once a month to complete a 10-mile business trip and has a clean licence, then they represent limited risk and little cost.”

Sowerby also raises the issue that some staff my be resistant to change: “Transferring staff from private to pool or hire cars can sometimes meet with resistance – some will inevitably have got used to having an additional income stream – but this is a move that you are making for sound managerial reasons, with staff safety at the top of the agenda, and this is how the policy should be framed.”

 

Resistance

This resistance is something recognised by Arval fleet consultant Paul Marchment. He believes it takes time to make the transition and that it is the right thing to gradually implement a change to the policy.
“For example, employees taking a cash allowance and using their own vehicle on business will have allocated this income to things like their mortgage or a holiday. As a result, it is difficult, and potentially unfair, to take this away overnight,” he says.

“However, there should be a process in place, which makes the transition as easy as possible. Cash drivers who need to change their vehicle should be able to opt in to a company car scheme easily. For shorter journeys, rental vehicles or pool vehicles can be used straight away, and in these cases an organisation can stop their employees using their own vehicles
on company business.”

 

Education

Marchment highlights the role of education in this process: “As with any change, you can expect to see some resistance from employees. The level will depend on the nature of the changes that you are making to address the grey fleet.

“Where they are completing a high grey fleet mileage it may be best to move the employee from a cash allowance and into a company car. This is a change to their benefits package, and depending on how they use the cash allowance, how much you are paying them, and how reliant they are on it, there may be some opposition. If you are simply asking employees to use a pool or rental vehicle rather than their own, it is less likely to meet resistance.”

Marchment continues: “In this area communication is key. It is important to manage employee expectations from an early stage, clearly explain the reasons for change and what it means for them, and answer questions.

“Educating drivers plays a major role. Many employees do not consider the running costs of their own vehicle – they only consider the gross amount of money in their salary. Once employees have taken a post-tax view of their cash allowance and have actually calculated how much their car costs to run per annum they may be surprised by how little of their cash allowance is left to fund a car.”

Management

Ogilvie Fleet sales and marketing director Nick Hardy highlights a different aspect – that of the time involved in managing grey fleet.

“Some organisations are finding that the burden of responsibility in managing the grey fleet is too great, even when introducing specialist grey fleet management software, which some companies view as the total solution, but it isn’t. Employers still have work to do in populating the system and keeping it up to date and accurate, and chasing drivers to update documentation.

“The cost of employing a third party to do the administration work is significant and we are finding that many clients and prospects are actually seeing that it is simpler, and perhaps better value to move back to company cars or introduce salary sacrifice,” he says.

“In addition, as an interim solution, while company car or salary sacrifice policies and procedures are being worked on ahead of implementation, employers are turning to hire cars for staff to make a business journey as and when required regardless of the distance. That takes away a significant chunk of administration responsibility, particularly in respect of duty of care issues around privately-owned vehicles used on business trips.”

Alternative solution

Croydon Council and Zipcar worked together to cut the amount of grey fleet miles by setting up a pool of 24 car-club vehicles at six locations across the council’s patch.

The vehicles are available to staff for business use between 8am and 6pm during the week. The council has negotiated a fee that’s two and half times less expensive than the standard rate because outside of the council work hours the cars are available to the public, and the profits from this time go to Zipcar.

The scheme was first introduced as a trial in 2010, but was made official in early 2013 and so far has saved the council a claimed £500,000. 400 staff now use the cars and grey fleet mileage has also reduced by 42% to 642,000 a year for the council, which is equivalent to a 36% reduction in emissions.

 

Putting a policy in black and white

While all experts agree that cutting grey fleet is good thing for any fleet or transport manager to do, it is often impossible to eliminate it, and in certain circumstances is the better option. In these circumstances, a fleet policy* is required.

.    Any comprehensive fleet policy will take into account an organisation’s grey fleet. The fleet policy should state that grey fleet drivers are responsible for ensuring that their privately-owned vehicle complies with road traffic law, is properly maintained, safe and roadworthy, and is ‘fit for the purpose’ when used ‘at work’. That responsibility extends to department heads, too, who must also ensure that the employee is capable of fulfilling the trip.

.    Additionally, the employee is responsible for ensuring that their vehicle has a current vehicle registration document, valid Vehicle Excise Duty disc, current MoT Certificate, vehicle insurance covering business use, and an up-to-date service handbook. All these documents should be available for checking by management on a regular basis – at least once per year. Best of all is to produce and have on file a document authorising use of a specified grey fleet vehicle covering the above, signed by the employee to confirm all is in order and up to date.

.    Furthermore, the fleet policy should state clearly that the grey fleet driver should hold a current driving licence valid in the UK for the type of vehicle used and advise the organisation of any endorsements. The employer should check driving licences at least once a year and preferably more regularly – ideally every quarter.

.    Today, it is increasingly recognised that the cheapest mile is the one never driven since the biggest fleet cost, after vehicle depreciation, is fuel. Therefore, in order to reduce fleet costs, the environmental impact of fleet costs, and the inherent risks associated with driving ‘at work’ (for most employees, ‘at work’ driving is the most dangerous thing they perform on behalf of their organisation), a robust fleet policy should seek to reduce all ‘at work’ journeys, especially grey fleet ones, to a minimum by conducting a series of pre-journey assessments.

.    Once the fleet policy has been agreed, it needs to be put into action and reviewed on a regular annual basis. The person responsible for fleet policy needs to ensure that department heads and line managers are familiar with it and are challenging whether grey fleet journeys are necessary and have assessed risk in relation to them.

* Extracted from the Leasedrive ‘Essential Guide to Grey Fleet Management’