Whether you allow your employees to use company vehicles for personal use is a big decision. If you do allow set up a policy to manage the personal use and a reasonable process to monitor whether that policy is being followed. If you prohibit allow personal use, you will need to establish a secure lot to store the vehicles while not being used for business purposes and methods to enforce this. In doing so, you may be creating some inefficiencies for your employees if they have to drive to the secure lot each day to pick up the vehicle before heading out on business.
Personal use may include using the vehicle to commute to and from home, run personal errands between work activities, or use the vehicle at night or on weekends. If you decide to allow personal use of vehicles, here are some of the considerations to include in your company policy:
Who besides the employee is allowed to use a company vehicle?
If employees are allowed to take a company vehicle home for a weekend or at night, do you allow their spouse to drive the vehicle? What about their children? For many companies, a company vehicle is an effective recruiting tool to attract top talent. There is a balance between what you want the policy to be and what is reasonable.
Regardless of who you allow to drive company vehicles, they should go through a qualification process before they are permitted to drive a company vehicle. If a spouse is allowed to drive the company vehicle, a copy of their driver’s license should be kept on file. A Motor Vehicle Record (MVR) should be obtained on a regular basis and drivers should be required to report any convictions for moving violations or accidents involving company vehicles.
A copy of the company’s company vehicle policy should be provided to non-employee drivers. Annual acknowledgment of the policy is a best practice. A signed receipt indicating that they have received these policies should be kept in the employee’s personnel file. Any company driver evaluation and training requirements should apply to additional drivers.
Your insurance company should have a clear understanding of your driving policies to ensure you have adequate coverage and are abiding by their requirements.
What conditions are approved for personal use?
When personal use is allowed, establish clear guidelines around personal use. For example, establish restrictions on the how far the vehicle can be driven without written authorization.
“We once had a client that allowed unlimited personal use and their staff took vehicles from the Midwest, where the company is based, to California to visit family several times per year.”
– Adam Berger of Doering Fleet Management
To avoid excessive miles, place limitations on the maximum number of miles allowed for personal use. Some other rules that they should follow while driving the company vehicle include:
- No driving under the influence of any substance that impairs driving ability
- No picking up hitchhikers
- No towing campers, trailers, or boats
- No overloading the vehicle or having too many passengers inside
- No transporting any illegal substances
- No travel to foreign countries
- No loaning the vehicle out for monetary gain or otherwise
- No using the company vehicle for any other purpose than has been approved by you
- No towing
- No smoking
Other Important Requirements
Aside from those important basic guidelines, you should also require your employees to sign a statement which lists all of the restrictions and rules that they are to follow while driving your company vehicle. You must also include a clear warning that failure to abide by this signed statement and the rules therein could mean disciplinary action including revocation of auto privileges or potential termination of employment.
You should inform your employees that you will be conducting regular inspections of your company vehicle so you can discover the cause of any damage and monitor condition of exterior and interior. Another priority is to let your employees know exactly what they are to do in case of an accident or vehicle malfunction.
To save money, many companies offer company vehicles versus reimbursement plans that cost over $.50 per mile. Fleet vehicles can typically be operated for $.25 – $.40 per mile. To encourage drivers to adopt and abide by the company care programs, companies can offer less than IRS reimbursement rates. Many companies offer 1/2 or less to discourage personal use and also encourage compliance with personal use policies.
Calculating Personal Use
When it comes to calculating the personal usage of your vehicles there are a few different methods used by most companies:
- Competitive benchmarks or the industry average
- Cost to your company
- Fuel benefit
- Annual Lease Value (ALV)
- IRS reimbursement rate
- Commuting charge
These are the main methods companies calculate the personal usage of their employees, which can all be effective. Experiment to find out which is the best method for your company.
Allowing employees use your company vehicles for personal use can be a good tactic for increasing morale and recruiting and retaining top talent. As long as you follow all the right procedures when it comes to implementing your usage policy, tracking usage of your vehicles and insurance, you should be able to keep your employees happy and minimize risk and cost to the company.