Corporate manslaughter – The company car versus cash issue
The introduction of the Corporate Manslaughter and Corporate Homicide Act 2007 has caused much concern for organisations whose employees drive on company business. If you are responsible for the running of your car fleet you will no doubt have seen in the media a range of fleet products and services advertised under messages such as “Get this wrong and you risk going to jail”. The task can be made more difficult by the fact that there is much misunderstanding of what the new legislation actually means in practice. Chris Bolan, a leading employee car scheme specialist, gives an overview of the key points.
The current climate
The change to a CO2 emission based method of taxing company cars (introduced in 2002) has had a very significant effect on the structure of company car fleets. Many employees have moved away from the company car option and chosen to fund their own vehicle by way of a cash alternative offered by the company. The result has been anestimated fall of more than 25% in the number of company cars on the roads today compared to 2001. Further developments suggest employee ownership will continue to remain an attractive option. Recently, following the Government review of Approved Mileage Allowance Payments (AMAPs), an announcement was made in the 2008 Budget that there would be no changes to the current system. AMAPs provide tax relief for employees who drive their own vehicle on company business and have been an important factor in encouraging employees to move away from company cars.
However the introduction of the Corporate Manslaughter Act has caused much uncertainty about how companies should safeguard against potential prosecution so what will this mean in terms of how organisations structure their car fleets and will we see start to see an increase in the number of company cars?
Let’s take a look at the facts.
The legislation
The new legislation increases the power of the courts to impose fines and also there is the possibility of a Gross Negligence Manslaughter charge being brought against directors and senior managers.This could lead to a prison sentence if it is decided that the way in which the organisation’s activities were managed and organised resulted in the death of an employee and amounted to a gross breach of a relevant duty of care owed by an organisation to the deceased.In other words, the new legislation increases the powers of the courts in terms of severity ofpunishment.However, what the new legislation does not do is raise the bar in terms of Health & Safety requirements. Best practice remains the same and has always been of the utmost importance.
So what does this mean in practice? An employer needs to show that its policies and procedures clearly demonstrate that it takes its responsibilities in relation to the Health & Safety of its employees seriously and it expects its employees to do so as well. The courts will take account of the fact that there is only so much an employer can reasonably do. Ultimately it is the employee who will be out on the road driving on company business and it is vital for organisations to have policies and procedures that emphasise the responsibilities of both the organisation and its employees.
So is this likely to affect the structure of car fleets in future?
Firstly it is important to emphasise that any planning in relation to employee car schemes should have employee safety as of paramount importance. This has always been the case and applies equally to employees who have a company car and those who use their own car on company business.
However, in practice, there is often misunderstanding regarding the driver safety implications of both the company car and the cash alternative. All too often employers who offer a cash option do not have proper controls in place regarding driver safety which has resulted in employee owned cars being referred to as the “grey fleet”. However there is no reason why effective controls in relation to driver safety can’t apply to employee owned cars. Also in terms of company cars, a word of caution is needed. As an employer, if you use an outsourced fleet provider, the responsibility for the Health & Safety of your employees remains with you irrespective of whether a fleet provider takes on some of the administrative tasks such as vehicle inspections.
The key point is that, irrespective of whether your employees use company cars or their own cars on company business, best practice in terms of driver safety remains the same.It is not the purpose of this article to look at best practice in detail but controls such as regular vehicle inspections, the keeping of employee driver files (with regular updates and checks including driving licences, insurance documentation and maintenance records), driver training programmes and accident monitoring can and should apply equally to employee owned cars as well as company cars. In recognition of this, a number of Health & Safety advisers are starting to introduce driver training and vehicle inspection programs that apply to both company and employee owned cars. In addition, policies can be structured so as to make employee failure to comply a disciplinary offence.
In summary, I would advocate a balanced view. The company car is a valued benefit for many and it will no doubt remain an important employee benefit in future. However a well structured cash alternative can be an extremely efficient way of providing this benefit. Surveys suggest that the majority of organisations who offer a cash alternative do not get the best out of the AMAP tax and NICrelief available, so there is stillscope for many fleets to achieve significant cost savings. In future it is likely that we will see an increasing number of mixed fleets with company cars for some and well structured cash allowances for others. Effective driver safety policies and procedures can and should apply to both.
Chris Bolan
Compass Reward Consulting LLP