Girish Gupta reports on the
real cost of grey fleet to the public and private
sector.
Go deeper with GlobalData
With employees enjoying the
convenience of using their own car and claiming back the costs, a
so-called ‘grey’ fleet solution can appeal to companies. Primarily,
it frees them from the need to acquire or lease vehicles, and
appears to have little legal responsibility attached.
But grey fleet operators often find
that there are legal and financial obstacles lurking not far from
view.
“It is possible to manage grey
fleets effectively, but there is a vast wealth of evidence that
suggests many public and private sector organisations struggle to
do so,” says Julie Jenner, chairwoman of the Association of Car
Fleet Operators (ACFO).
Last year the Office of Government
Commerce (OGC) ran a campaign which aimed to bring grey fleet
management into line with established practice for company cars.
Grey fleet accounts for 57% of mileage in the public sector.
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By GlobalDataThe OGC campaign hoped to improve
efficiency within public sector fleets, to reduce exposure to legal
risks, and to reduce carbon emissions, working with the NHS and
other government organisations, as well as private companies such
as Barclays and Serco.
Cash savings
Case studies conducted as part of
the campaign showed that, for example, North Lincolnshire and Goole
NHS Trust reduced its annual mileage by 14% after introducing a
shuttle bus between its different hospital sites, and implementing
other initiatives.
Grey fleet claims fell to £650,000
in the year to April 2009, down from £750,000 the year before. In
June 2010, a shuttle bus alone saved the NHS Trust £12,100.
OGC fleet category manager David
Olima says: “The point at which it becomes more cost effective to
take an employee out of grey fleet and provide a lease car will
vary by organisation.
“Analysis of public sector
organisations shows that the point typically lies between 8,000 and
12,000 miles.
“If users travel more than 8,000
miles a year, organisations should review the cost of reimbursing
grey fleet drivers versus the cost of the alternatives.
“Grey fleet isn’t always the most
cost effective option, and organisations with large numbers of grey
fleet users travelling high annual mileages may find it cheaper to
find other alternatives.
Reducing grey fleet mileage by a
million miles could unlock an estimated £250,000 in cash
savings.”
Costs can be higher in some cases
because best practice is not always applied. For example, some
employees may be pocketing the government’s tax-free approved
mileage allowance payment as well as a cash allowance, effectively
being paid twice for their driving.
ACFO reports incidents of companies
giving both cash allowances for grey fleet vehicles as well as
paying 40p a mile, when they only need pay one or the other.
Duty of care
From a health and safety
perspective, practice for grey fleet was put more in line with
company cars when new legislation was introduced in 2007.
“Ten years ago quite a few
companies unwound their company car programme and gave their
drivers cash instead,” says Roddy Graham, commercial director of
Leasedrive Velo and chairman of the Institute of Car Fleet
Management.
“Then with the new duty of care
legislation, it became clear that an employer still has total
responsibility for the health and safety of their employee outside
of the office when on company business no matter who owns the
car.”
The Department for Transport and
Health & Safety Executive guidelines were issued 2003 but,
being guidelines, they were not taken with much conviction.
The Corporate Manslaughter and
Corporate Homicide Act 2007 later enshrined the 2003 guidelines
into law, creating a new offence of death caused by a gross breach
of duty of care by senior management.
Andy Price, practice leader for
motor fleet at Zurich Risk Engineering, says more could be done to
educate managers and staff about safety.
“The majority of organisations out
there are not doing anywhere near enough,” Price says.
“Some are doing the absolute
minimum, just to tick the boxes. Companies need to expend effort
with their communications strategy to drip feed safety information
to their drivers. Drivers may then realise they are not the best in
the world.”
Grey not green
Grey fleet may be detrimental to
the environment too. An ACFO survey found 30% of employees opting
out of company car schemes chose larger, less fuel-efficient cars
with higher CO2 emissions. Just 16% switch to a newer,
cleaner car.
“We found, on average, that cars
were seven years old, emitting 20% more CO2 than an
average new car,” Jenner says.
“Typically, employees take older
vehicles and pocket the cash. Most companies don’t allow
convertibles as company cars for safety reasons; neither do many
allow 4x4s for environmental reasons. Companies are now doing a lot
more work ensuring they have the right choice of cars for
employees.”
Graham goes as far as to suggest it
could take a fatal accident involving a high-profile company before
UK boardrooms recognise their inefficiency in grey fleet
management.
He says: “Until there is an
accident involving a FTSE 250 company and prosecutions at boardroom
level, senior managers will not address the issue.
“If anyone wants a good reason to reconsider, perhaps they
should speak to BP.”
