HR PERSPECTIVES: Do away with company cars

HR PERSPECTIVES: Do away with company cars
One of the most abused benefits locally is the use of company vehicles.

One of the most abused benefits locally is the use of company vehicles.

I have published this article before, but I thought is it important to revisit it again.
Remuneration is at the heart of most governance problems. There are various cases locally and internationally to support this assertion. Those charged with crafting remuneration systems consider their personal interest first before that of the organisation and its shareholders. Some local organisations are in an embarrassing situation where they have to cut salaries because they cannot sustain them. They have not bothered to seek guidance from those with experience in crafting sustainable remuneration systems.
One of the most abused benefits locally is the use of company vehicles. Ironically, company vehicles are allocated based on seniority rather than performance. Some of the poor performers are driving top-of-the-range vehicles. What message are we trying to communicate to our lower level employees?
In a survey we carried out we discovered that most companies provide fully expensed company vehicles to their employees based on seniority. All company cars are fully expensed, meaning the company bears all related running costs. However, most participants indicated that they were reviewing their policies with the hope of tightening any loopholes to reduce maintenance costs. While the option to buy on replacement is very attractive to employees, some companies indicated that they may be forced to review the replacement years upwards due to budgetary constraints. Those companies with an option to buy on replacement normally dispose the vehicle to the employee at book value while some dispose the vehicle at 20 percent to 40 percent of book value. A few companies indicated that they disposed the vehicles at current market values.
The average monthly fuel allocation for managers was 261 litres per month. The maximum fuel allocation cited was 600 litres per month. In the same survey, 34,8 percent of the participating organisations had no fuel limit for the chief executive officer or managing director. For the other levels fuel allocation varied based on seniority.
The question that has been troubling most organisations is whether this model is sustainable considering the current political and economic developments. While this model was sustainable in the past , it may not be sustainable in the current situation. Organisations need to tighten the loopholes in their company vehicles policies. While this benefit is one of the most attractive benefits for employees it is also one of the most abused employee benefit. Because employees got huge amounts of fuel they could afford to travel say to Bulawayo from Harare every week at a huge cost to the employer in terms of vehicle maintenance.
Organisations have a number of options to address shortcomings in their vehicle policies. In South Africa for example employee remuneration is treated in terms of total cost to employer. Whatever you get in total cash must be able to cater for your needs including the purchase of the company car at your own cost. However in South Africa credit is readily available such that employees can easily access credit to purchase their own cars. This model can be applied locally if a full cost benefit analysis of this model is applied. The easiest way would be for organisations to provide car loans to all the employees who were supposed to qualify for cars under the previous regime.
The loans will be payable over a period of say 10 years. This can start with the valuation of your current fleet which will be sold to employees at market value. After this stage all employees with company assisted vehicles will qualify for a vehicle allowance to cover fuel costs, insurance, and maintenance.
Vehicle allowances range from nine percent to 25 percent of monthly basic salary. If this model is applied there is going to be a drastic reduction in vehicle usage by employees. They will start to be more careful because all the money for vehicle usage and maintenance will be coming from their pockets. Some of the fuel allocations given to employees force employees to travel all over because the allocations are too high. If this model is applied correctly there is likely to be a reduction in company vehicle maintenance costs by over 50 percent. At the same time the company will recover the cost of the car loans through repayments. Employers may also consider giving an option to employees who currently qualify for company vehicles to opt for cash allowances.
Some organisations who are against scraping company cars have argued that company cars add to the company’s balance sheet. While this is true there is need to assess the value derived from such a policy. With most companies facing tight budgets it may be the time to rethink the whole concept of company vehicles.
Memory Nguwi is an occupational psychologist, data scientist, speaker and managing consultant – Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. Phone 481946-48/481950/2900276/2900966 or cell number 077 2356 361 or email: or visit our website at

  • Wilson Magaya

    Memory, You have hit the nail on the head. It is a killer of the brand new vehicle market as well as a total drain on the pocket especially for government. Companies should gives some form of allowance which employees can use to repay vehicle loans from the banks. Emphasis on BANKS here because that is why we have them. I hope your message will be taken HEED of and we will see performance based remuneration that rewards hard work and send clear message healthy competition is good for the nation as a whole….

  • Sagitarr

    Most companies have been forced to implement vehicle tracking to reduce abuse and manage vehicle running costs. Zimbabweans tend to assume that wealth is represented by “driving” or “possessing” a car, unfortunately, cars are looked upon as liabilities not assets. Which is why it is common to see some car-owners offering lifts to commuters just to get fuel to “get-to-work” (usually $4). If our transport system is overhauled and improves, an efficient public transport system can save the government and the people lots of money and headaches.

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