The company car is steadily being replaced by the car allowance, according to research from IRS Pay and Benefits Bulletin, published by Industrial Relations Services.

Few employers extend the benefit to their entire workforce; the majority allocate cars on the basis of job grade and job need, the study shows. But some employers continue to give employees a choice of the vehicle or a cash allowance.

The findings emerge from a survey of 255 organisations’ policies on company cars, car allowances, mileage rates, season ticket loans, and subsistence allowances.

Key findings include:

• 64 per cent of respondents have a company car or car leasing scheme in place.




• Six in ten respondents offer employees a cash allowance in place of a company car, with the majority of car allowances worth between £4,000 and £5,000 a year.




• 88 per cent set mileage allowances for staff travelling by car on company business. Many base their rates on those set by the Inland Revenue: 40p per mile for the first 10,000 miles per year, and 25p per mile thereafter, for travel by car.




• 37 per cent offer interest-free season ticket loans to assist employees with the cost of travelling to work by public transport.




• 67 per cent of respondents limit the amount employees can spend on subsistence when on company business. Typical allowances include £6.28 for breakfast; £7 for lunch; and £16.20 for an evening meal. Many employers, however, were keen to stress that they would cover any costs incurred, provided they were reasonable and modest.

IRS pay and benefits editor, Sheila Attwood, said: “Putting together the right package for employees can mean the difference between a motivated and engaged workforce, and employees who are not committed to the success of the organisation, or worse, planning a premature exit.

“Our research this year once again documents the increasing popularity of car allowances in place of company cars. Paying cash to employees so that they can choose and maintain their own car takes the onus off the employer.”

But, as HRZone has highlighted in the past, companies should take steps to ensure vehicles used for work purposes are properly maintained and insured.