Employers review car benefits to manage costs

by 23 Jul 2010

Many employers are reviewing their car benefit policies to contain costs as a result of the economic downturn and low corporate income growth.

Car benefits are an important component of employee pay packages and a powerful tool for attraction and retention.

But according to Mercer’s study, factors such as prevalence of company cars, purchase price, annual allowance paid in lieu of a car or to subsidise care-related expenses, eligibility and frequency of additional benefits such as fuel, maintenance and insurance are benefits that vary from country to country.

David Wreford, principal in Mercer’s Human Capital business, said that providing company cars for business use and as part of the benefit package for key employees has been a perk among executives for a long time.

“The need for employee mobility, the globalisation of benefit plans, competitive pressures, business control and relative tax advantages have added to the popularity of this benefit. However, as a result of the economic downturn, multinational organisations have been reassessing their car policies along with other benefits as they continue to struggle to manage costs.”

Mercer’s International Car Policies report summarises regional car policies and practice information that helps multinational organisations assess patterns and differences among countries. In addition to prevalence of company car policies, eligibility by level of employee and car value by purchase price, it covers prevalence of supplemental benefits, allocation policies, cash alternatives to cars and associated tax regulations in 76 countries.

In general, car benefits are most prevalent in the Americas and least in Asia Pacific. They are also prevalent in Europe, the Middle East and Africa, but eligibility for the benefit differs by employee level.

In addition to the prevalence of car benefits, purchase price of company cars differs by region. The median purchase price for heads of organisations and executive-level employees is the lowest in the Americas. The Middle East and Africa rank the lowest for management, sales professional and non-sales professional employees. The highest car purchase prices for all career levels are in Europe.

Among the countries that provide car benefits in Asia Pacific, Pakistan has the highest prevalence at 90 per cent followed by South Korea (81 per cent), New Zealand (77 per cent) and Thailand (72 per cent). Most company cars in Asia Pacific are used for business and personal use. Status and seniority remain the top criteria for determining whether executives and managers get company cars, while business need is the main criteria for lower level positions.

 

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