29 September 2021
Your business could soon be incurring expenses from a new source: employees’ homes, as they charge their vehicles overnight. We explain how to manage this.
With fleet management of electric cars and vans there is one area which will fundamentally change from how petrol and diesel vehicles are run, and that is paying for charging. Quite simply, the places where EVs are filled up are likely to be entirely different and more varied than the current fuel stations.
Indeed, for some drivers, the main source of power for business vehicles will be the home, certainly whilst the public network grows, and for employers trying to understand the costs of charging, and for employees looking to reclaim business mileage, this presents a new set of challenges.
Fortunately, they are not insurmountable, if the correct technology and processes are put in place. In this article, we look at some of the issues fleets will encounter, and potential solutions.
The cost complexity of home charging
When a petrol or diesel vehicle fills up, the cost of the fuel can vary from one station to another, but there is a limited number of suppliers and the price delta is relatively small. With electric, the cost variables can be greater and more difficult to make sense of because there are a greater number of suppliers and tariffs available.
The cost to the employer of an employee charging a car at home is ultimately underpinned by the choice of electricity provider and tariff of the employee. So, the reference point of the costs of charging is much harder to pin down: somebody on a higher tariff is going to cost your business more money in vehicle charging than one who is on a cheaper rate.
The issue here is that it is more difficult to influence that choice. With a petrol of diesel car, you can use various systems to ensure drivers only use preferred networks, but an employee may have very specific reasons for choosing a particular energy supplier - and not always because they are the cheapest. As an employer you may have to accept this.
The time of day
An employee who charges their car overnight, during off-peak hours, is likely to be able to do it for less money than one who charges during the day. These can be from 4.5p per kWh for dedicated overnight EV charging schemes, to more than 16p per kWh during the day.
But again, for various reasons they might not be able to charge at night, even if you want them too: they might have more than one EV and only one charge point for example. So, at time you may have to accept a much higher cost than you were expecting.
The time of year
Just as with petrol and diesel, electricity prices can vary throughout the year depending on demand and other factors. Usually winter requires higher demand, and often with this come higher prices, but other external factors can influence prices, such as global politics and how that energy is being created at any one time.
As an example, wholesale prices for electricity have risen through the summer due to a global supply shortage of gas, and will continue to do so: Ofgem has said wholesale electricity and gas prices have increased by over 50% since February.
Could you just pay the AER?
You could use the HMRC-issued Advisory Electricity Rate calculated based on current prices and average efficiency. This is a flat 4p/mile rate for all battery-electric cars, and can be used by employers to reimburse drivers for expenses incurred while driving company-owned vehicles for business, or for drivers using a fuel card or company credit card to repay employers for private mileage in their company car.
However, as we have shown, there are far more variables in the costs of electricity and some businesses and drivers may view a flat rate AER as a blunt tool for what is a complex and changing situation with many different prices: home charging averages around 14p per kWh while the fastest public charging can be nearly 70p per kWh – five times more expensive.
What about pay and reclaim or paying up front?
You may decide that employees pay up front for home and public charging, and then reclaim the costs at a later date, just as with pay and reclaim. However, a home electricity bill is likely to increase and the employee will have to bear this cost until they can claim the money back which can have an impact on their finances and cashflow.
Alternatively, some companies have looked at paying for all home charging, then deducting the cost of logged private milage afterwards, often in employees’ salary.
Either way, there is significant extra administration needed, not least because while EVs maybe cheaper to fill, they need to be charged more often than most petrol or diesel vehicles need filling. So more work is going into managing a smaller cost base: the epitome of reduced productivity.
Then there is the issue of reclaiming VAT. It can be very confusing to work out for EVs because employees charging at home an electric vehicle, which is used for business, cannot recover the VAT. This is because the supply is made to the employee and not to the business. But they can recover VAT on charging not taking place at home. This needs to be added into the cost equation.
Can technology solve this?
More payments, a wider variety of tariffs, many different types of location and a wide selection of providers: understanding the costs associated with charging for electric vehicles, and then being able to apply them to fleet whole life costs in any meaningful way, could be a highly complex job. But there is technology at hand to help.
Automated reimbursement solutions are available, where you receive a single invoice for all charging at home, work or on the public network. For the home element of the charging, smart systems integrate with each charge point to monitor usage and report exact costs back to the employer automatically.
It means drivers don’t need to pay a penny for any business mileage, and if the selected system is ‘hardware agnostic’ it integrates with all smart charge point manufacturers, so there is no need for employees to change energy providers.
This means far less administration and the ability to see quickly and easily what has been paid for, tariffs, what VAT can be reclaimed and the efficiency of each vehicle.
Combined with cards such as Allstar One Electric, drivers can also easily charge on the road across a multi-brand electric charging network and receive one invoice for all energy used. And your drivers don’t need to pay a penny for any business mileage.
There is full visibility of charging data, and cost and kWh reports at fleet and individual driver level, meaning the heavy lifting has all been done for fleet managers in the transition and running of EVs.