The front page news story on the 23 July issue of BusinessCar blew the cover on a simultaneous reaction from a swathe of local authorities, all of which, as part of cost-saving measures, had wised up to the higher mileage rates (i.e. those employees being paid in excess of 45p a mile for the first 10,000 miles) and car allowances paid to some public sector drivers using their own cars for business trips.
The moves, and similar cost-saving measures impacting grey fleet Government workers, have created a furore among employees and unions, and made life difficult for employers.
This comes following regular reports of public sector organisations moving more towards rental or pool car solutions in an effort to better manage their business car operations and save money, and noises from the occasional politician that rental is a more sustainable alternative. While we’d never claim that grey fleet is dead, it certainly seems as though it is being increasingly viewed as, if nothing else, cost prohibitive. And if that argument against grey fleet has now percolated through to local authorities, then it stands to reason that its usage could be declining across the public sector as a whole.
So has the tide finally turned when it comes to the use of employees’ personal cars for business trips? Nick Hardy, sales and marketing director at leasing firm Ogilvie Fleet, believes organisations are now waking up to the amount of money they’re spending on mileage reimbursement.
“I’m not surprised people are looking at it and thinking, ‘how much are we spending on this?’. It seems to me that there are very few rules in place.
“It’s seen as an income boost in that environment and I wonder how far ingrained that is. That’s the reason why costs are so high; it’s so easy – too easy – to fill in a form and claim your 45p [or more].”
In addition to these more radical, recent moves, chairman of the Association of Car Fleet Operators, Damian James, points out that there has also been a more gradual lessening of grey fleet across the public sector: “There has been a gradual reduction over the years of mileage completed and payments given out. So there has been a general contracting of grey fleet anyway, some of which has been a result of budget cuts and people being made redundant. There’s also a greater emphasis on journey planning – people are being questioned more about why they’re making a particular journey, and they’re having to justify it.”
James also points out that there are not only cost benefits but also time and admin savings in sticking to the default mileage rate, rather than using a more expensive one.
“It’s more viable for whoever’s paying the rate,” he says. “Everything over 45p is then taxable for the individual, so you have a P11D on it. You’re paying a tax on that benefit. In terms of admin it makes it easier because they don’t have to have a P11D.”
Even if you know grey fleet isn’t your best option, there is still a catch to ditching it in favour of other methods. If you’re going down the rental/pool car route then there’s an admin and accessibility element that goes with it. Your employees won’t have their car keys in their pockets – they’ll have to book a car in or reserve one from a limited fleet, which brings its fair share of organisational and managerial issues with it.
There isn’t a one size fits all solution either, but doing your homework, knowing how many vehicles you have out on the road at any one time and what you can get away with is a good start, as you can look to implement an alternative system from there.
Hardy thinks it’s a fairly straightforward affair to swap from personal car use to a more cost-effective alternative: “If you can put a system in place that says ‘I know I need a car on Thursday’ then that works, and someone with authority can approve that. I’d be gobsmacked if rental companies can’t handle that. I’m sure they can.
“If there’s a need for cars on a regular basis then rental companies should have a number of mini reservation vehicles on site. Something like always having four vehicles on site for you.”
Adrian Bewley, director of business rental at Enterprise, admits that there is an issue with moving to a rental or pool car-based scheme, but it’s one that forces your hand as an organisation into better managing staff travel.
“It is a problem, but it’s one that helps the overall authority yield better cost savings,” he says. “If a driver is not thoughtful about travel planning, then by moving people onto a managed travel plan those obstacles exist, but they’re managed, and the total amount of mileage drops.
“One example is that grey fleet usage is based around that employee’s particular requirements, but the solution is more courteous – they have to use maybe a pool car and they do two journeys a day instead of three.
It regulates people and they have to plan much more.”
Government unity
Given the recent moves among local authorities (see ‘Grey fleet in the public sector:?five key points to consider’ for details on some, above) to clamp down on grey fleet – or at least make it a less attractive option – it would seem logical for the Government to adopt a stricter approach and rule out the use of personal cars on business for all of its own employees. As radical a measure as that sounds, it’s one that would be welcomed by some industry heavyweights and something that Enterprise’s Bewley thinks isn’t beyond the realms of possibility.
“I do [think it will happen]. I think it will pan out through pilot groups within central Government. When a couple of large Government groups trial it, they’ll set the benchmark,” he says. “There are plenty of central Government authorities that are already looking at other options and it will be a snowball effect. It’s an easy win from a financial point of view for local authorities and central Government.”
Others are behind the idea but think it’s too big a task to become a reality. James adds: “It would be nice to have, but I can’t see it ever working that way. There would be some financial benefits if that were possible.”
Meanwhile, Hardy surmises: “I think it’s a fantastic idea, but I think it would be an extremely hard thing to control. It’s a huge thing and they all operate autonomously. It’s too big a beast to try and tame.”
Grey fleet isn’t necessarily something that needs to be eradicated completely. Like anything, the most important factor and the thing that makes the difference is whether it’s properly managed or not.
James explains that, despite all the voices to the contrary, it’s sometimes the easiest and most appropriate solution for the job in hand: “[Other methods are] never going to be as convenient. There are some roles where you’re accessing a car three or four times a day. With rental, you’ll book those journeys either on an internal or on an external platform and there may be times when rental vehicles aren’t available. Our mileage can be very local, so if we had to hire from a depot that’s 20 miles away, it wouldn’t work.”
He adds that having a system of alternatives in place – but not ruling personal car use out completely – is the most effective way forward for a working fleet: “You need alternatives. Can you offer cycling opportunities, for example? Public transport, taxi contracts, etc.? Grey fleet is just one solution.”
This is a view that’s shared by others in the industry, that you can run grey fleets quite effectively as part of an overall business transport policy without having to resort to a single alternative method. It’s managing them properly that’s the crux of it.
Amanda Mullans, operations director at Total Accident Management, says a half-decent grey fleet management system will, at the very least, cover your bases from a risk perspective and is also likely to cut your overall costs.
“You need a robust system in place to ensure you’re aware of what sort of vehicle [employees] are driving, their documentation is up-to-date and that you’ve got copies of those documents,” she says. “Also making sure you’ve got driving-for-work policies in place to allow employees to understand what they should be doing and that they’re agreeing to it. If that’s in place then it’s your safety net.”
Hardy agrees, arguing that there’s no excuse not to implement such a system:?“You need a strong management system in place – and they do exist. It’s no different for the corporate sector or the public sector. You can store MoT and insurance certificates etc.
“If [firms] aren’t doing simple stuff like collecting insurance certificates then they’re so exposed. It’s not hard to put a grey fleet management system in place and there are no excuses whatsoever not to. If an authority is not controlling this then it’s sinful.”
Grey fleet in the public sector: five key points to consider
- Anglesey, Stoke-on-Trent City, Windsor and Maidenhead, Nuneaton and Bedworth, Bridgend County Borough and Lancaster City councils have all slashed higher-than-average mileage rates and/or car allowances for grey fleet drivers as cost-cutting measures.
- Rental and pool cars are generally seen as cost- and risk-effective alternatives and have proved effective within the public sector, but they won’t work in every case.
- Grey fleet usage has contracted in the public sector, but is unlikely to dry up completely.
- ACFO’s Damian James advises viewing it as “just one solution”, and considering other, practical transport options as part of an overall mix.
- Good management is the best way to deal with it. A decent grey fleet management system will help.
