Despite experiencing “pump shock” from soaring fuel prices, businesses can take practical steps to minimise the pain at the pumps and strengthen the appeal of car benefits, says Paul Hollick of multi-marque car leasing company Alphabet.
The sharp increase in pump prices – fuel prices have increased by 40% in real terms over the last two years -has had a real impact on employers, company car drivers and private motorists alike.
High-priced fuel is now a fact of life, meaning that many businesses need to change the way they manage their fuel and mileage costs.
Mileage
One area where results can be achieved quickly is mileage reporting and payment.
Because drivers often report mileage via expense claims or through spreadsheets, which go against different cost centres’ travel and expenses budgets, it’s almost impossible for the business to understand mileage costs. And all too easy for drivers to routinely exaggerate distances.
But if employees report each business journey online via a mileage capture and audit service, all mileage data will be in one place where it can be checked and analysed.
And if the service also verifies drivers’ reports, they will take more care to report their trips accurately. Alphabet Mileage Audit carries out such checks and our customers typically see their fuel and mileage expense costs fall by as much as 24% in the first six months.
Buying fuel
Once you have full visibility over mileage patterns, the next step is to look at the way the business buys fuel.
Pay-and-reclaim fuel expenses are a bizarre way for businesses to acquire millions of pounds worth of essential supplies – businesses are effectively buying business fuel from their drivers. If the business also pays fixed pence-per-mile expense rates, such as the HMRC Advisory Fuel Rates (AFRs), no-one knows what each mile actually cost.
It makes much more sense to give every employee who gets a company car or car allowance a fuel card. Drivers then reimburse the company for the cost of fuel they use privately.
The big advantage of this is that the company sees how much fuel goes into its vehicles and what it costs. Go a step further by combining fuel cards with Mileage Audit and you have an extremely robust and functional process for monitoring and managing car travel costs.
For one thing, because you know what each driver spends at the pumps, you can pay for business fuel at actual cost (by apportioning the fuel card bill according to their private and business mileage). It’s a fair and open method that avoids the rancour often directed by drivers at businesses that use the AFR rates.
‘Free’ fuel
‘Free’ in the context of private fuel benefit is now such a misnomer with the high BIK and employer’s NI it attracts, that only very well-heeled organisations should think of persisting with it. The subject of buying drivers out of fuel benefit warrants an article in itself – but the longer that fuel prices go on rising, the harder it will be to persuade drivers to relinquish the benefit.
Letting them retain their fuel cards, albeit on the basis of reimbursing the cost of private travel, will at least soften the blow of losing the comfort blanket of limitless ‘free’ mileage.
Car strategy
The fuel price situation is by no means all bad news, though. Car manufacturers are increasing the fuel efficiency of their new cars in leaps and bounds, while continuing to improve comfort and performance. Getting a new company car is not just a badge of status; for a growing number of drivers it’s also a chance to keep up with fuel-saving technology.
Indeed, high priced fuel will strengthen the appeal of car benefits in the long run as employer-backed car provision becomes even more desirable to individual employees whose personal spending power has been eroded by inflation.
Car strategies based on Whole Life Cost calculations allow fleets to operate desirable, well-performing cars whose all-round operating costs are significantly lower than less-efficient models – even though the latter might come with a cheaper up-front price tag.
A complete fuel solution requires a combination of low-CO2 vehicle acquisition, fuel cards linked to mileage capture and audit, educating drivers to drive more economically (which will also help them to save money on their personal fuel), telematics and in many cases, changes to the expenses process.
With good advice and support from a forward-looking fleet management company, and emerging products like car salary sacrifice and mobility solutions, your business should be able to tackle rising fuel costs and increase its competitiveness in the employment market by providing cost-effective and highly valuable car benefits.
Paul Hollick is from car leasing company Alphabet.
