Stewart Whyte, director & membership secretary of ACFO, stresses the importance of strategy and tactics for business travel
Anyone – everyone – involved in business mobility will recognise the huge range of choice in just about every area of the supply chain. And that’s after they recognise that they are on the demand side of a big, big business.
The range of demands for business travel is enormous, since every business or organisation will have its own products, customer interface strategies, territorial coverage and employee aspirations. Not to mention the quantum of business travel required at individual employee and at corporate-wide levels.
For every type and level of demand, there are several potential supply solutions. For structured situations there are conventional company car schemes, and also cash allowances, Employee Car Ownership Schemes (ECOS), Personal Contract Purchase (PCP) schemes and Salary Sacrifice deals. There are also several unstructured formats – many of which are variations on what happens in the majority of the rest of the world, where employees with a need to travel simply make their own arrangements to use public transport and/or their own vehicles, against a simple scale of some form of mileage payment.
Over recent years the UK fleet market has changed quite dramatically in terms of so many schemes, so much choice on offer. Many schemes claim market superiority simply because they are “new” while also claiming specific advantages in terms of costs to employers and/or drivers, the tax situations and so on.
It cannot be denied that most of these schemes do represent an optimum solution to particular sets of circumstances – but mostly these are niche situations, where the client fleet operator understands the various bits of the overall requirement. The market is full of “products” being sold on the basis of the pretty wrapping, without a clear picture of how the claimed advantages actually work to produce any given result.
And it is clear that some schemes are designed to exploit fleet operators’ lack of knowledge about the realities of their own demand, the overall market-place and the intricacies of the UK tax system.
Demand for business travel
It is obviously pretty essential that the employer – the fleet operator – has a clear idea what the fleet is actually for. Depending on business circumstances this could be anything from 100 per cent business use to 100 per cent private/perk use – and anything in between. So it is clearly necessary to understand what the actual form and size of the demand for business travel is, and build the policy and delivery to meet that demand properly. It is essential to remember that the fleet serves the business need – not the other way round!
In looking at the scope of the demand the operator needs to collect accurate data about the current situation and assess that against what should be happening. Before you consider any new scheme based on the HMRC tax-free mileage reimbursement rates (AMAPs), there is obviously a need to have a very clear picture of what business mileage levels are being covered (or claimed) – and exactly why. It is pointless looking at a scheme which assumes a cost benefit for average mileage levels of 8,500 business miles pa if your fleet is only averaging 5,000 pa.
Similarly the assessment of carbon reduction opportunities must be based on what employees might select under the allocation policy. It is important to recognise the value of low fuel consumption as a cost and tax reduction support, but there needs to be a mechanism to get people into these high-efficiency models. This can be difficult if the allocation policy makes it easy and attractive to drive a larger model with relatively poor consumption.
One major issue is the fact that most employers no longer have an experienced “fleet manager”. The job is now often a part-time role with the day to day operation handled under an outsourced arrangement with a fleet management or contract hire company. However, given the complexity and choice in the market, it is still vital that someone in the organisation has an external point of reference to deal with this highly expensive – and often highly emotive – part of corporate operations.
ACFO (formerly the Association of Car Fleet Operators) has, since the 1970s, provided a clear, unbiased forum for “fleet mangers” to come together to network and exchange ideas and techniques. Membership is open to any organisation with a “fleet” interest although nowadays many members deploy alternative schemes like ECOS, cash allowance or mixed strategies.
Regional meetings provide a friendly and non-threatening environment for delegates to mix and mingle, talk or just listen to industry buzz. It sounds very mundane – but in reality the quantity, quality and value of the information being exchanged is very high. The natural flow of information is from people representing the larger fleets down to those with small fleets – but it’s not totally one-way! Many innovations and techniques have come from enthusiastic fleet managers with just a handful of cars and/or vans.
Key issues in fleet
Currently the three key topics across the fleet market remain:
• Control of the fleet budget
• Duty of Care/road safety
• Green fleet agenda
One of the characteristics of any fleet operation is the range of purposes of travel, often blended with the benefit aspects of private use. Every fleet operator will be looking at different priorities. Cost control is a long-term and on-going issue for all fleets: other factors tend to come and go depending on the national environment. So there are no specific quick fixes for these: the priority needs to be set depending on where the fleet is currently. And that naturally needs an awareness of how the fleet performs both in absolute terms and against similar fleets with similar patterns.
A significant part of the debate includes ways to collect and use operational data to help gain better control of the whole “fleet” envelope. ACFO members know only too well the old adage “You can only manage what you measure”. Clarifying the really useful statistics has already helped many operators to cut costs and more recently, fuel use (therefore the CO2 output) and accident rates.
ACFO has a huge body of expertise across its membership of all these areas and indeed many member fleets have been used as Best Practice case studies in Green Fleet and Road Safety studies. All of this information is accessible by members both at regional meetings and online at our website (www.acfo.org).
So much for the “advert” for ACFO membership. What readers should be considering is their ability to manage all the various aspects of “fleet management” to the right degree. This has to be much more than outsourcing the daily fleet management to a leasing company: control of all the policy aspects needs to stay as an in-house responsibility, as does the whole business of “managing on-road risk”. Buying in some driver training might appear to put a tick in the box for “Duty of Care” – but is it enough?
Increasingly, traffic police investigations of serious and/or fatal road traffic collisions asks about the purpose of the journey – and if it was a business journey then they are likely to follow through with an investigation into the employer’s policies and practices. In addition to any criminal investigation – which will of course extend to include top management – the effects of the no win/no fee legal system means that employers face ever-increasing risks of claims from injured 3rd parties (or their survivors) on the basis that pursuing an employer is always much more likely to be productive than chasing a driver.
ACFO tries to support members in several very practical ways. Internally we collect and publish Best Practice guides in specific areas of fleet management. Our latest Guide was developed specifically to support public sector employers in how (and when) to carry out checks of drivers’ documentation. Health & Safety regulations make it pretty clear that “if an employer commissions a journey on the public roads, the employer carries the Duty of Care” – irrespective of the ownership of the vehicle being used. We have templates for Driver Handbooks and Driving at Work Policies, all based on very practical information from within the membership.
The challenges of change
Retaining ownership of the fleet policy also helps to clarify when it is time to change the fleet organisation.
Business patterns change. Tax rules and allowance thresholds change. New car models change and evolve. Employee expectations change – and budgets get severely challenged. In short, this is a fast-moving environment and what was the ideal policy four years ago may be wide of the mark in your fleet, today.
By examining the current market, the types of models on offer and employee travel patterns, such schemes evolve to optimise the overall fleet/business travel market. The next new thing might not be suggested by a current supplier – if they don’t yet offer such a deal. That is why it is absolutely essential for the business to retain some level of contact with and even expertise in the fleet market – to provide a counterbalance to even the best suppliers in terms of what’s best and when to change.
It is pretty fundamental that the vehicles in use are actually capable of meeting the expectations of clients, employees and the fleet budget. “Free choice” for user-choosers may be a good system in some car fleets – but certainly not in all. In the van market, fitness for purpose is even more important, with payload weight and volume much more important than driver preferences. Again, the Duty of Care issue is an important consideration.
Given the size of some member fleets, there are usually several members who have some experience of just about every make and model on the market – and can offer an opinion tempered by direct knowledge.
In the same way, most new systems coming to market have been tested by several prominent members, who can advise on the specific circumstances where any new scheme might – or might not – work well. One current consideration across all ACFO regions is the debate about ‘Salary Sacrifice’ schemes that seek to optimise fleet costs and provide softer employee benefits. In some ways this tends to reverse the “get rid of company cars” philosophy that was prevalent just a couple of years ago.
Nationally ACFO works with several government departments and agencies to ensure that the needs of “fleet operators” are properly represented when new rules and legislation is being framed. Our input, covering the whole spread of public/private and charity sectors/large and small fleets and range of operating circumstances has been very valuable in protecting employers from excessive administration and red tape; and drivers from clumsy taxation layers.