How to write a company car policy

We explain how to write a company car policy...

If you are a business and you are providing an employee with a company car, or several employees with a fleet of company cars, then you will have to write a company car policy.

This is essentially where you set out the rules that your employees have to abide by when they are driving their company car.

But, how do you even go about writing a company car policy?

That’s where we come in. In this article, we are going to talk about how to write a company car policy and what you sort of things you should be thinking about when you give your employees a company car.

What things should I include in my company car policy?

We’re going to look at the sort of things you should consider including in your company car policy when you write one;

Provision of company car

This essentially outlines the fact that you have given your employee a company car as per their contract of employment.

You will state whether you are giving your employee a specific make and model or a vehicle of a certain value. You will also state whether this is purely for business use or if the employee can use their vehicle for personal use as well.

It is also at this point that you confirm that you will pay for the following;

  • MOT
  • Maintenance
  • Repair and servicing of the vehicle
    • As long as these repairs are not due to driver negligence
  • Licensing
  • Insurance
  • The cost of fuel for business use
    • Any personal mileage that will have to be paid for by the employee.
person with white gloves on and a clipboard inspects the engine of a car

Essentially, it sets out the bottom line for the company car. So what you pay for, what the employee can use the vehicle for and the make/model or the maximum price of the vehicle.

What the car can be used for

You will have to outline whether your employee can use the vehicle for personal use, or if it is only to be used for business mileage.

If they are using it for personal use then you can also dictate whether their spouse, civil partner or co-habiting partner can drive the car (provided they have a full UK driving licence and is insured to drive it).

You will also have to state that the company car cannot be used for the following;

  • Any business purposes other than that of the company
  • Driving tuition
  • Towing
  • Racing or rally driving
    • Or any competitive event really
  • Hire or reward

o   This can be either goods or passengers.

It is also here that you state that they are not permitted to make any modifications to the car. This includes things such as stereo equipment or roof racks. Remember, if you are leasing your fleet then you cannot make any modifications as the vehicle is not yours. It belongs to the finance house and you will face charges.

Driving licence

It does need to be said that all employees that are being provided with a company car need a full and valid UK driving licence at all times when they have their vehicle.

Your employees will have to present their driving licence to you when they get their company car and will have to show you their licence on an annual basis afterwards. They should also give you a copy if they change their details on the licence.

Find out more about each driving licence category here

Income tax liability

By accepting a company car, the employee agrees to bear income tax liability as assessed by HM Revenue and Customs. It is important that you note this in your company car policy.

Roadworthiness and Car Tax

When you lease a car, you are contractually obliged to keep it in a good condition. This condition has to be in line with the BVRLA Fair Wear and Tear Guide. The responsibility of keeping the vehicle in good condition will fall onto the person driving it, the employee.

You will have to stipulate that the employee is responsible for the cleanliness and safe-keeping of the car as well as the equipment and fittings that come with it. As per the leasing guidelines, the employee is also responsible for ensuring that the vehicle is serviced at the recommended intervals and regular maintenance checks are carried out in between servicing.

Want to know what you can do at home to maintain your car? Learning these tips could save you money over time 

It is also down to the employee to make the decision not to drive the vehicle if they suspect that there is a fault or that it is not roadworthy.

Insurance

When you lease a car, regardless of whether you go through your business or you lease a car personally, you have to get fully comprehensive insurance. This is because the vehicle isn’t yours and therefore you are a higher risk.

You will need to state this in the company car policy. You will also state that you, the Company, may recoup any losses in the event of damage caused by employee negligence. The employee is also responsible for the excess required should the car be involved in an accident, regardless of who was at fault.

The Company is entitled to deduct the reasonable cost of repair to the vehicle from the employee’s wages.

You should also state that all personal valuables are left in the vehicle at the employee’s own risk and the Company is not liable for any theft or damage.

woman in a white shirt and blue jeans with a black car in an accident with a man in a shirt and trousers with a white car

Fines and Penalties

The employee is responsible for paying any fines or charges that have been due to a motoring offence committed whilst driving their company car. This includes parking fines, congestion charges, toll fines and speeding fines.

The Company are entitled to deduct this cost from the employee’s wages.

Reporting requirements

Your employee must report to you if;

  • There has been any damage to the vehicle
  • The car has been stolen or lost
  • There has been a road traffic accident
    • Regardless of where it took place or who was at fault
  • Any fixed penalty notice or any order of any court to endorse the employee or to disqualify the employee from driving
  •         Any event that results in the employee being unable to drive the car

Carrying of passengers

If your employees are making a business journey, they are not allowed to carry personal passengers. They are, however, allowed to carry passengers that are business-related. This includes customers or fellow employees.

Mobile phones

It is of course against the law to use a mobile phone while you are driving, and you must state this and state that it is against the company policy also.

If the employee has to use their mobile phone, then they must pull over and stop the vehicle in a safe place to do so.

distracted driver using mobile phone - distraction when driving

Safe standards of driving

All employees, and everyone in general, must drive within the law and abide by all road traffic laws and the Highway Code. This includes;

  • Traffic signs and speed limits are followed
  • The vehicle is parked properly and doesn’t violate any road traffic regulations

The employee is fully responsible for their own safety and passengers that are in the vehicle. Seatbelts must be worn at all times and under no circumstances should an employee drive the car while under the influence of alcohol or drugs.

Should the employee be taking prescription drugs or other medication that may cause drowsiness then they should inform their line manager prior to making a business journey.

Suspension from duty

If you suspend the employee then they will not be able to use the vehicle during that period of suspension.

Breach of the company car policy

If any employee breaches this policy then you are within your rights to take disciplinary action as per the company procedure.

Returning of the vehicle

The employee is required to return the car and deliver the keys in the following circumstances;

  • Termination of employment
  • The employee ceases to have a full UK driving licence
  • During any period of extended leave
  • If the employee is convicted of reckless, careless or dangerous driving
    • This is at the discretion of the company
  • If the vehicle is involved in an excessive amount of accidents whilst being used by the one employee
    • Again, this is at the discretion of the company
  • If the employee fails to observe the terms of the policy or if the employee fails to use the vehicle in a reasonable manner
    • Determined by the company
  • If there is an unacceptable increase in the insurance premium for the car as a result of an increase in penalty points.

If the employee fails to return or account for the vehicle then the Company is entitled to withhold any outstanding wages.

Young couple is smiling while buying a car, middle aged worker of a motor show is giving keys, close-up

Vehicle tracking

You as a company reserve the right to install monitoring devices in company cars to track your vehicles during business use. These devices can track and transmit information such as the location of the car, the distance it has covered and its speed. The employee will be notified if a monitoring device is to be installed.

The device will also come with a privacy button or similar to ensure that the personal journeys are not tracked. However, it must not be disabled at any time when it is being used for business use.

There are many purposes of vehicle tracking, including;

  • To help prevent accidents by monitoring driving speed and habits
  • Ensure drivers are not breaching the Working Time Regulations of 1998
  • Maximise driver performance and productivity
    • This, in turn, improves customer service
  • Improve fuel economy
  • Protect the welfare and safety of lone drivers
    • Particularly if they are making long journeys

In conclusion, there are many things that you will need to include when writing a company car policy. These sorts of things including outlining that the employee is responsible for keeping the vehicle in a good condition, that they have to abide by road safety and traffic laws and how to report penalty points. You will also have to outline whether they can use the vehicle for personal use and whether their spouse can drive their company vehicle. You will also use the company car allocation policy to outline the regulations regarding the tracking of your company vehicles. The benefit of writing this policy is so that it is clear for both employer and employee what the terms are. It is also beneficial for you to write your own policy so it is tailored to your business and employees specifically. Hopefully this has cleared a few things up in terms of how to write a company car policy. We help businesses with this every day, so if you have any questions don’t hesitate to contact us.

Car Jaguar XJ staying on the road on dramatic clouds background
Rachel Richardson

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