The popularity of company car and car allowance schemes continues to grow according to a new report from Towers Watson, a global professional services company. The Company Car Benefits Survey 2012 shows that in the UK almost 80% of managerial staff remain eligible for car benefits and that companies are far more likely to offer employees the choice between cash and a car, or only offer a cash allowance, than they are to offer only the option of a car.

The UK differs from the rest of Europe in this respect with only 12% of companies in the UK providing a car-only option. In contrast, direct provision of a company car is still largely the norm in the rest of Europe. Across the region the value of car schemes has increased faster than salaries as organisations keep tight control of salary budgets and the cost of providing and maintaining cars – including fuel – has steadily increased.

Darryl Davis, Senior Consultant in Towers Watson’s Data Service division said: “Company car and allowance schemes are still proving very popular across Europe as a sizable part of many people’s employee benefit packages. In the UK, the option of a car or cash allowance remains the most common policy across almost all categories of eligible employees.

“We have seen a steady year-on-year increase in the value of car schemes per employee but the trend has been for more Western European schemes to move from company cars to cash-based car allowances, or to offer employees a choice. Companies are looking at ways to reward key employees and, with pressure to keep salary increases and bonuses to a minimum, company car schemes and car allowances provide an alternative option for awarding total remuneration increases.”

Tax efficiency
Across Europe, tax efficiency is one of the most important factors for companies deciding whether to offer a car scheme of any sort. In countries where there is greater tax effectiveness for company vehicles, employers are more likely to make car-only benefits the norm for employees.

“Across Europe the proportion of employers offering a car or cash alternative has gone up due to companies trying to introduce a degree of flexibility to their offerings. Despite this choice, some European countries still maintain tax advantages for company vehicles which means many employees opt for a car in order to get the most from the benefit.” said Davis.

Green Initiatives
Half of the companies included in the report indicated that one of the changes they had made to their company car scheme was to introduce more tax-efficient, environmentally-friendly cars.

“The growth in green car options has been driven by the increased tax burden that many countries have placed on higher carbon dioxide (CO2) emitting vehicles. Several countries, including the UK, Belgium and France have implemented vehicle tax policies based exclusively on carbon emission levels. The impact of this has meant that lower-emitting, or environmentally-friendly, vehicles have become more affordable than higher-emitting alternatives.

“It is becoming more expensive in many countries to own heavily polluting vehicles, whereas environmentally efficient vehicles can be subsidised with tax breaks. We anticipate that this will become a distinct trend in company car schemes over the coming years.”