Taking away a company owned vehicle

KathyA

We are reorganizing our fleet program due to so many folks receiving company owned vehicles based on arbitrary reasons. What is your experience/comments with taking away a company car (which of course the employee considers as a bump in their salary)? If they were hired with that expectation, I would consider a salary adjustment. If they were not hired with that expectation and just given a car during their employment, how would you handle this? Thank you.

marc

I have gone through this exercise a couple of times. The way I liked best was replacing the car with a car allowance. Lots of hidden costs when you have your own car, such as insurance, maintenance, license and registration to take into consideration when you are calculating how big the allowance should be. Paying the allowance is almost always more than you would pay if you were reimbursing business miles - thus the perk part of the deal. Those receiving a car allowance will have an income tax consequence - the allowance is all taxable (except for unreimbursed business miles), while only the commuting miles are taxable when the company provides the car.

If they have a car with no business justification, and are paid at a market rate that cannot justify an increase - you will have an unhappy EE. Be ready for their production to tank and their morale to tank. Anyone around them will have to hear how terrible you all are - so be ready to discipline and perhaps to terminate those folks.

LindaE

How about if we can justify taking a car back due to performance? There are some project managers here who constantly visit jobs and customers. There are others in the same position who use their cars to commute and go on vacation. They do not do the site visits or travel enough to need a vehicle, in my opinion. Couple that with the company paying for the insurance, gas, maintenance and repairs, and whew! Can you say OVERHEAD?!

HRGirl

My company just recently did this. We gave them the option of buying the car from the company or we took it back and sold it. Then to compensate for not having the car any longer we now give them a car allowance. I'm sure our liability and overhead have dropped drastically.

LindaE

What reason did you give the employees? How did you approach them and what was their reaction? I'd appreciate hearing more on this, because I see this as an immediate partial remedy to our massive overhead problem.
Linda

HRGirl

We advised them that it was to cut overhead, liability, etc and this savings would be passed on to them via our incentive plan bonus. We showed them that they really weren't loosing anything, because they were getting a car allowance. If they kept the car and bought it from the company, their payments were just about covered by the allowance (some had expensive cars, it all depended on what they had).

No one had any problems with it, as far as I know or heard. My company is very generous and try very hard to keep employee's happy. I guess that's why we were voted the #1 Best Mid size company to work for in Pennsylvania.

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marc

Last time I did it, I just explained we were getting out of the car business - as suggested by HRGirl, the allowance we gave in lieu of the car, covered most of the car payments - the EEs did usually end up eating some of the other costs though.