17 September 2020
As an employer with employees who drive their own vehicles for work purposes, you have a duty of care to fulfil and must make sure you manage the ‘grey fleet’ appropriately.
As working practices and routines change following the COVID-19 pandemic, the ‘grey fleet’ is going to need even greater scrutiny to ensure you are meeting your obligations.
We look at some of the areas you need to address when managing your grey fleet.
What is the grey fleet?
The ‘grey fleet’ consists of a group of employees who use their own car for business, and typically are reimbursed for fuel, wear and tear and depreciation for the mileage they do while working.
The growth of grey fleet
The Covid-19 pandemic has resulted in many more employees working from home, and also wary of using public transport. In July, rail use was at only 18% of its normal level, according to the Department for Transport, for example. While many services are anecdotally reporting lower usage, post-lockdown, precise figures are yet to be collated after the summer holidays, which will give a more accurate picture of new working practices.
What this shift could mean though is an increase in the number of employees travelling for work using their own car, adding to the grey fleet numbers that already exist. In 2016, the British Vehicle and Rental Association’s extensive research into the grey fleet estimated that 12 billion miles were driven in such vehicles annually at a cost of around £5.5 billion in mileage claims and allowances.
Added to which, according to HMRC, there are around 50,000 less company car drivers year-on-year, a trend that could see more moving out of schemes into private cars, and joining the grey fleet.
Whether this shift will be exacerbated as a result of Covid-19 remains to be seen, but one conclusion can be drawn: the grey fleet is not going away, and it needs to be managed.
Why does the grey fleet need to be managed?
The first and most pertinent is duty of care. The Health and Safety at Work Act 1974 states: “It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all employees.”
The Management of Health and Safety at Work Regulations 1999 also requires every employer to carry out an assessment of the risks to the health and safety of their employees, and this includes driving for work.
This includes ensuring that private vehicles are fit for purpose, safe to use, maintained and insured. With potentially many new employees and cars joining the grey fleet as working routines change after Covid-19, it is important to have procedures in place to deal with managing the safety of this remotely managed workforce.
On a financial level, left uncontrolled, you could be at risk of considerably higher mileage reimbursement costs from grey fleet drivers.
The Approved Mileage Allowance Payment recommended by HMRC is 45p per mile for employees using their own car for business (and 25p per mile after the first 10,000 miles), and so if usage and journeys are left unchecked costs could very quickly spiral. The business case is clear for strict control over when private cars are used, for what purposes, and how those journeys are then reported and the mileage reclaimed.
As an example, the cost of only 20 drivers claiming back 5,000 grey fleet miles a year (at 45p per mile) is £45,000 – a significant sum. If those drivers habitually reclaim 15% more mileage through exaggerated claims or putting through journeys they should not have, the cost leaps to £51,750.
But there are other factors too, such the environment and business reputation. A knock-on effect of making sure that the vehicle an employee is using in good condition is that it is likely to be more economical, as well as being reflective of the values of the company it, and the driver, are working for. Having somebody turn up in a client in a smoky old banger is not usually a good look for any business.
Establish what is business travel
Key to managing grey fleet drivers is ensuring employees understand exactly what qualifies as business travel, so they do not claim for the wrong journeys, which could put you at risk of an inspection from HMRC for misreporting. There are three types of journey:
Only the first qualifies as reclaimable, but following Covid-19, the definition of what constitutes a business journey may have changed. An employee working from home, but visiting the office infrequently and irregularly in their private car, might now be able to claim that trip as business mileage, as it is no longer commuting. We have more in-depth advice on this subject here.
So you need to draw up very clear guidelines that leave your employees in no doubt, and ensure they do not claim for journeys that are ineligible – and you do not reimburse them for those either.
How to set up grey fleet management: benchmark
The first step to ensuring you are fulfilling your duty of care to the grey fleet is to understand the extent of its use, or whether there are anomalies within your workforce which need to be sorted out. So it is necessary to ascertain the mileage employees are doing in private vehicles, and the amount of money that is being reclaimed, and the accuracy of that mileage.
Post-Covid-19, these mileage figures could have changed significantly too, one way or the other. Working from home, they might be using their private car more that they would have when working in the office and borrowing pool cars. Or perhaps out of direct line of sight of managers, some might feel they can add more mileage to their claims than they would have when undertaking those journeys from the office.
It might be that with the rapid spread of online communication, they are using their vehicles a lot less to visit clients and customers. But that doesn’t mean they can be any less vigilant around maintenance or accurate mileage reporting.
It also might be the case that for some, a company car starts to look like an expensive benefit (and possibly for your business too), and they might want to move out of the scheme and take cash instead.
Only once you have captured data for all of the various scenarios within your organisation can you start to formulate, or revise, a grey fleet policy.
How to set up grey fleet management: Create a policy
In order to create a policy, you need to work with management and any other stakeholders involved in business travel, so you can set out what it expected. This includes defining what is business mileage, any plans for reducing mileage, setting out how claims are made and checked and the penalties for making inaccurate claims.
It also pays to come up with a set of protocols that allow an employee to understand when they should be using their car, or when they shouldn’t. Post-Covid-19, this may be more complex, because these tend to promote the use of public transport, car sharing or pool car usage, as well as rental. But it may be simpler, with online communication far more accessible and acceptable than previously.
How to set up grey fleet management: Implementation
Crucial to the implementation is self-declaration and communication. While the business itself cannot be absolved of responsibility, making sure that the employee is also responsible is important.
At the very least they should be asked to, on a regular basis, declare:
- The vehicle is taxed and, if necessary, has a valid MOT certificate.
- They have insurance for business use.
- They have a valid licence for the vehicle they are using.
Then, there needs to be clear communication with every employee and manager, and a system whereby you can track that everyone has read, understood and agreed their obligations and will follow them.
The result of all these actions for managing the grey fleet is you can be more certain of a range of upsides: reducing mileage and therefore cost, as well as ensuring the safety of your drivers, and probably understanding better how your company operates, too.