Staff retention, health and safety and financial pressures are just some of the factors that are complicating the running of car and van fleets

1 Beware false economies

An attractive benefits package is central to staff retention. And that means sometimes what appears to be the cheapest option in fact isn’t. Car choice is a great example of an area where more is most definitely more.

That was the lesson learned by high street retailer BHS, which operates 220 company cars and offers 300 of its staff cash allowances for a car. It reviewed its fleet policy to see where improvements could be made both to enhance the attractiveness of its scheme to employees and to increase administrative efficiency.

“We felt employee car choice was limited and there were things we could do to make the package more attractive,” says Mike Smith, reward and benefits manager at BHS. Result? A new car affinity scheme which lets staff take out a personal contract plan at a discounted rate through vehicle provider Lex.

Vehicle choice was extended from just Ford to include Jaguar, Volvo, BMW, Volkswagen, Audi and Renault – and employees have the option of supplementing their allowance to upgrade their car through BHS’s flexible benefits package. “Employee feedback has been excellent,” says Smith. “The new package is a lot more attractive.”

2 Big Brother in the dash

Imagine all your vehicles are equipped with a “black box” that transmits every single aspect of each journey back to base, whether it’s vehicle location, braking distances, speed or stop/go patterns. That’s pretty useful data – and could be essential if you’re looking to prove duty of care under new legislation.

The Places for People Group, a leading housing and regeneration specialist, has equipped its fleet of 200-plus light commercial vehicles with ALD Automotive’s ProFleet2 telemetry system. It means the company can comply with working time regulations – and with manufacturer vehicle servicing schedules – more easily.
“It’s particularly useful for scheduling driver workloads,” says FD Steve Binks. “It helps us manage the distances they have to travel, so we’ve been able to target resources more effectively. PF2 has also removed the need for staff to provide odometer readings and arrange vehicle servicing, which is now all handled automatically by our leasing provider.”

3 Turn your drivers into mechanics

Self-induced faults (SIFs) are to blame for thousands of vehicle breakdowns each year. SIFs cover a multitude of problems including flat batteries (117,500 AA call-outs last year), keys locked in car (66,360) and flooded engines (37,245). But it’s misfuelling – putting petrol in diesel or vice versa – that causes the most angst because of the huge costs involved. The AA attended 44,000 misfuellings in the UK last year. The bill, excluding engine repair, was £24m, or more than £500 per vehicle.
Now, AA Business Services is urging companies to run “get to know your car” clinics to avoid costly breakdowns. The classes involve the car provider showing drivers everything from how to lift the bonnet to what to put in the fuel tank. You could even impose a penalty for failure to attend that could result in staff having to foot the bill for their own SIFs if and when they occur, suggests the organisation.

4 “Can I see your licence?”

Of all the vehicle checks you could and should be making in this era of heightened corporate responsibility, making sure your employees have valid driving licences is one of the most obvious – and overlooked. It is a problem that has been addressed at GlaxoSmithKline (GSK).

The company’s HR and environmental health and safety departments work with fleet provider Masterlease to ensure employees understand the importance of validation and grant permission for DVLA checks. The scheme covers 5,000 employee car ownership (ECO) drivers and applies to the company’s remaining 14,000 UK employees if they use their own cars on business.

Licence checking helps identify high-risk drivers, monitors accident history and feeds back information that may increase a driver’s individual risk-related insurance or, more importantly, identifies drivers that need training. Validations also reveal licence status, expiry date, and what vehicles staff are qualified to drive.

“Recorded endorsements and accident histories help us to understand the risk profile of our drivers,” says Harsha Modha, manager of benefit programmes at GSK. “We set up a driver risk mitigation team to track and measure the success of our programmes to reduce accidents. Driver licence validation is an essential tool because it makes sure we are up speed on our duty of care obligations and that we have a clearly defined risk audit trail.”

5 Outsourced maintenance

Many of you aren’t too bothered by costs, but find fleet admin is a real headache. Faced with exactly that problem, Prudential UK outsourced vehicle maintenance authorisation and management to Inchcape Fleet Solutions. Additionally, IFS handles vehicle service maintenance and repair bookings for all drivers across the Pru’s 800-strong fleet. “Value for money was crucial, but so was the requirement for tighter authorisation procedures and taking away the hassle of maintenance management administration from the fleet department and service booking from our drivers,” says fleet manager John Wills.

“We’ve made savings of about £50,000, or eight per cent, within our vehicle maintenance budget, which is significant,” says FD Kieran Coleman. “That’s down to both tighter authorisation procedures and the excellent technical knowledge of IFS’s maintenance management controllers who ensure vehicle downtime is kept to a minimum.”

6 Tyres: tread carefully

Around 800,000 company cars and vans could be on the road with illegal tyres, says Kwik-Fit Fleet, which has seen rocketing corporate demand for its tyre safety checks as government, police and Health and Safety Executive (HSE) pile on the pressure over occupational road risk.

The fine for driving with illegal tyres is £2,500 and three points per tyre. But the cost to your company if a puncture causes an accident while drivers are on company business could be much higher. Drivers should check their own vehicle’s tyres for pressure and wear and tear at least monthly (see point three, above). But it has also become an increasingly common third-party service. Kwik-Fit Mobile is now checking 36,000 company cars and vans each month, about a third more than 12 months ago. Checks undertaken in company car parks initially result in about 20 per cent of vehicles requiring attention. Kwik Fit’s service is available to all staff, not just company car drivers.

7 Rent for flexibility

Vehicle rental, as opposed to long-term leasing or outright purchase, is seen mainly as a short-term solution, such as when a car or van is temporarily off the road. But when Chris Potter launched HNT, a Bristol-based transport and distribution company, three years ago, fleet flexibility and reliability were the key factors underpinning an ambitious business plan. So all but one of his 26 vehicles, from a Vauxhall Astra van to an Iveco 18 tonne truck, is rented from TLS Vehicle Rental.

“A lot of our business is time-sensitive and we work for blue chip companies, so reliability is very important to us,” says Potter. “Renting allows us to run a fleet of young vehicles. If anything does go wrong, getting a replacement is relatively easy. And because we are a growing company and our strength is adapting to market conditions, renting means that we can quickly add to, or change, the vehicles on our fleet to accommodate new business.”

Sean Welham, marketing director at TLS, claims renting is now price competitive against long-term leasing or outright purchase. There are solid reasons for his cost assertion, such as being able to hand a vehicle back, keep it for longer or change it for another vehicle without financial penalty. According to Datamonitor, that’s one reason why demand for short-term leasing in Europe has been on the rise over the past few years. “In conditions of fragile economic growth, it is hardly surprising that short-term leasing has emerged a successful proposition,” said the firm in a recent report. “It helps companies to rationalise fleet expenditure and avoid funding an unnecessary number of vehicles, thereby releasing funds for other activities.”

Based on the HMRC’s tax-free mileage reimbursement rate of 40p per mile for the first 10,000 business miles, a daily car hire cost of £30, fuel costs of 96p per litre and the car performing at 35 mpg, Masterlease calculates that employees would only need to clock up 130 miles a day for employers to save money.

8 NIC – the missing figure

According to David Rawlings, senior manager for automotive tax at Deloitte, most companies ignore the cost to the company of Class 1A National Insurance, which is paid at the rate of 12.8 per cent on the taxable benefit to the employee. “Companies have an idea of the type of car they want to offer employees based on whole-life costs or purchase price,” he says. “But they frequently leave benefit-in-kind tax out of the equation because they view it as a driver, and not a corporate, matter.

“But a company’s NIC charge is based on an employee’s benefit-in-kind tax bill,” Rawlings continues. “FDs who fail to take NIC into account when compiling car choice lists can find their company is on the receiving end of unexpectedly large NIC bills despite believing that employees of a similar grade were choosing a similar value of vehicle.”

For example, an employee choosing a BMW 320d ES Touring costing £25,135 will face a 2006/07 tax bill of £2,097. But a colleague choosing a BMW X3 2.0i costing £25,285 – just £150 more – will pay tax of £3,107. The NIC bill for the company will be £994 on the X3 and £671 on the 320d, a difference of £323.

9 Residual risk management

The vagaries of the used car market make the realisation of residual value (RV) tough for companies owning their own fleets, which is why so many don’t. But in some businesses, a degree of ownership still makes sense, and that means someone has to handle disposals, and it pays to hire specialists.

Day Group, a Brentford-based supplier of aggregates to the construction industry, operates a 130-strong mixed fleet from ten locations across the UK. “While we work closely with ING Car Lease, which provides us with company cars and light trucks via contract hire and contract purchase, we buy our substantial fleet of HGVs via hire purchase,” says FD David Churchill. “But we have our own technical department that understands the market and is well placed to sell on our used heavy goods vehicles to hauliers that work with us.”

10 Easy green

“Understanding fuel spend is the foundation for action to address car costs,” says Mike Waters, head of market analysis at the UK’s leading fuel management company Arval. “With this information, they can develop policies to manage fuel purchasing, modify driver behaviour and mitigate rising costs. Analysing where, how often and at what price fuel is bought can help determine not only purchasing patterns, but also act as a guide to driver behaviour.”

So it’s not all about alternative fuels and hybrid vehicles. “Making your vehicles work more efficiently should be the big focus,” says David Barnes, product development manager at LeasePlan UK. “Driver training can help ensure employees aren’t wasting fuel through bad driving habits, while effective travel planning can cut needless journeys.”

Ashley Martin is a former editor of Fleet News

Corporate manslaughter

Under current law, a company can only be convicted of corporate manslaughter if there is enough evidence to find a single senior person guilty. To date, only seven small organisations have been convicted. The Corporate Manslaughter and Corporate Homicide Bill, published this July and due to become law towards the end of next year, aims to change that.

According to Home Office minister Gerry Sutcliffe it will mean “companies who have dismally failed to pay proper attention to people’s health and safety are brought to justice”. Directors and fleet managers are no longer at risk of going to prison, but companies will still face unlimited fines and a heap of highly damaging publicity for breaches.

“The proposed new law will enable the courts to consider the overall picture of how an organisation’s activities are managed by its directors, rather than focusing on the actions of one individual,” says leading fleet industry solicitor David Faithful, a consultant to both law firm Lyons Davidson and the Essential Risk Consultancy.

You need to undertake a risk assessment of all at-work drivers, including employees driving privately-owned vehicles on business, resulting in an audit trail for driver training and vehicle inspection. You’ll also need to start driver training for “high-risk” drivers. The Health and Safety Executive has published guidance called Driving at Work: managing work-related road safety (http://snipurl.com/HSEcar1). “A company that has an audit trail will escape prosecution under the forthcoming act, as they will be seen to be ‘managing’ the risk,” says Faithful.

Case study

Manchester-based HSB Engineering Insurance provides cover and inspection services to industry and runs a fleet of 300 vehicles. Three years ago the company outsourced fleet management to GE Commercial Finance Fleet Services and 12 months ago it decided to contract hire all vehicles from GE on a four-year/100,000 mile replacement cycle.

“The move will be cost neutral,” says FD Garth Murphy. “But the time and admin savings we’re making in terms of handling driver queries, which are now
referred to GE, are huge.”

HSB switched its car policy from one based on vehicle purchase price to one based on whole-life costs linked to carbon dioxide emissions and a maximum of insurance group 15, a move now considered to be “best practice”.

“Our employees now have much improved vehicle choice giving them access to more prestige-badge vehicles and cars with a high spec,” says Murphy. “Overall costs for the business have remained unchanged.”

But new employees are only provided with a leased car once they’ve completed six months with HSB. “I didn’t want to be left with a newly leased car that I couldn’t place or early termination charges if a new employee decided that the company wasn’t for them,” says Murphy. “We’re holding onto any vehicles in good condition when they’re defleeted to provide a pool of our own cars for new employees.”

In November, a year into the new car policy, Murphy will be asking what the drivers think. “I believe it is a good policy, but I want to know their views,” he says. “The cars are to some extent an employee benefit, so we need to know whether the employees are happy. That’s important.”

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