On the road: a 'how to' guide
- Katherine Craig
- 30 June 2009
Novated lease
An alternative to keeping a company fleet of cars is to offer your employees the option of a novated lease. It can be a cheaper way for your employees to acquire a car than if they were to buy or lease a car privately, since the cost of the novated lease is deducted from their pre-tax income.
The benefit of this option is that it removes most of the administration from the employer and the employee can choose the make and model of car they prefer within a set budget.
According to Dominic Natoli, marketing and products leader at GE Custom Fleet
and Equipment Finance, "A novated lease provides employees with choice and the ability to access the purchasing power of fleet management companies. One of the benefits to the employer is that they are not left with a
surplus of vehicles should employees choose to leave the organisation."
Car sharing service
Another relatively new option is to join a car sharing service.
These companies usually offer their service for a fixed membership fee and cars can be reserved for as little as an hour at a time. Car sharing companies usually charge an hourly and per-kilometre rate in addition to the membership fee, but this covers all the ancillary costs such as fuel and insurance.
Car allowance
A fourth option is to offer your employees an allowance to cover the cost of using their vehicle for work purposes.
Employees can choose how to spend the allowance. If they already have a car, they can use the allowance to cover fuel, servicing, insurance and general maintenance, or they may choose to put some of the allowance towards purchasing a new car. This is paid in pre-tax salary, subject to business usage.
Brand manager Rebecca McDonald opted to receive a car allowance as part of her remuneration package.
"My job takes me out of the office at least 30% of the time, so a car allowance is a much cheaper option for my company than paying for taxis to get me to and from meetings," she says.
Keeping your employees safe
As an employer you have legal and moral responsibilities to look after the safety of your employees. If their job requires any driving, this includes ensuring their safety when they are out on the road. The cost of a vehicle accident can be substantial in human and monetary terms.
The Transport Accident Commission (TAC), a Victorian Government-owned organisation that promotes road safety in Victoria, says road crashes are the most common form of work-related fatalities, injuries and absence from work in Australia.
According to the TAC website, this is in part because drivers are often under time pressure caused by tight schedules.
The TAC suggests implementing a road or fleet safety policy to reduce the risk of injury or fatality, and ensure that your employees know what is expected from them when they use a car to carry out company business.
Which option is best for your business?
Making a decision on which option to go with really comes down to how often your employees need to use a vehicle, the resources you have available to manage the administration and personal preference. It's a good idea to talk to your accountant about the tax implications, the company's cash flow and the payment style that works best for your business.
