For any business, a car allowance is a great opportunity to provide flexibility for your employees when it comes to commuting to work or for work-related travel. It’s a great fit for many businesses, whether it’s a monthly car allowance or a one-off payment—there are perks to having it for both parties.
With that in mind, this article will explain car allowance policies in more detail. It’s useful to understand how a policy is drafted together and how it might differ from one employee to the next.
With more and more remote workers and traveling employees than ever before, a car allowance policy is a must when considering employee contracts and business needs.
A company car allowance policy details the structure of the car allowance that’s offered to the employee by the employer.
Car allowances can be great for staff retention and for giving your workforce the cash sum they need to buy a car for work. Whether they have some level of personal use or it’s used for business purposes only, it can certainly be a helpful perk to provide.
With that being said, there are certain questions to ask before you create the policy.Different companies demand different requirements from their car allowance policy—it’s important to tailor the policy to your specific business needs. After all, no two budgets are the same and related expenses such as vehicle depreciation, wear and tear, and car insurance also need to be considered.
The policy itself is made up of multiple sections and will typically be in the travel section of an employment contract. Having a structure to the policy will make it easier to set-up. These sections include:
There are many different templates for car allowance policies online. As long as you follow the sections mentioned above, then you should have no issues with missing anything out. We’ve broken down the sections into more detail to help, along with some brief examples.
The introduction to the policy will outline what the document entails and the company’s values that are deemed appropriate to mention. This may refer to how the organization values its employees and the fairness they provide to each and every staff member.
Depending on the business, not every employee will get an allowance. For some, it’s simply not necessary and so there’s an eligibility process in place. Plus, employee positions within the company will usually dictate how much someone receives in car allowance.
For example, you may have executive level individuals that will receive $15,000 whereas a middle management role will get $10,000. There’s usually a number of categories into which the employee will fall.
There may be certain conditions you want to introduce if the employee decides to lease a car. Leasing a car can require sticking to a certain number of miles and insurance premiums can vary depending on the driver. All these vehicle expenses will be included within the car allowance offered, so it needs to be a suitable choice for the business and the budget available.
that can be added to the car allowance provided. The provision of the car explains how it’s the employee’s responsibility for the maintenance and general upkeep of the vehicle.
For example, a company may choose to offer $10,000 to cover the cost of the car whether bought outright or financed. This cost also covers maintenance whenever necessary, fuel, and wear and tear.
There’s always a need to put a clause in the policy that details the process for making changes to the contract in case of termination. As a business, it may be important to cover your back in the event that a car allowance is no longer required. This might be because there’s no longer a need for it or it’s proving a financial strain on the company.
These terms are critical to include in the policy in the event that changes need to be made.As a business, an employer has a certain amount of responsibility when it comes to ensuring the safety and care of the workforce. When an employee is given a car allowance, there should be guidance on safety and how to handle the vehicle in a manner that reduces the risk of injury or accidents.