'Company cars are the greatest benefit to staff'

The recession has hit some industry sectors harder than others.

House building ground to a halt while banking’s trouble s have been well documented, even before the economic downturn.

But the sector with arguably the most to lose during a recession is recruitment. Over the past 12 months few companies took on staff; most were making redundancies which created a massive surplus of people looking for jobs.

The highest unemployment figures for close to a decade does not making happy hunting ground for professional recruitment firms like Pertemps, although recovery is now under way.

The Meriden-based business – headquartered at the imperial Meriden Hall in Warwickshire – saw its fleet size shrink last year.

It started 2009 with 1,000 vehicles; it ended the year with 450.

Around 300 cars went when the group sold one of its operations. The remaining 250 were down to what fleet manager Adrian Harris dubs “natural shrinkage”.

However, he adds: “It’s starting to grow again now that business is good. By the end of three years we expect to be back up to 600 vehicles.”

Harris, whose fleet office is a somewhat less salubrious Portacabin out the back of the hall, is a consultant to Pertemps, but on a full-time basis.

He’s been doing it for 10 years, previously working on an ad hoc basis alongside a career in petrol retail. The two roles came together in 2008 with the launch of Midas, a fuel management product that Pertemps uses and sells to other fleets.

The company offers its cars on a flexible benefit: if employees wish to go above their allocated vehicle they can contribute to a vehicle upgrade.

As the tax allowable and National Insurance is paid on the net BIK, it’s an efficient benefit for staff.

“The right vehicle as part of the employment package is good value for the company and the end user,” Harris says.

“The company vehicle is certainly not dead, neither is the perk vehicle – run properly, it’s the greatest benefit to the employee and company – but it depends on the choice structure and how it’s managed.”

Although the cars are leased, Harris organises vehicle supply internally, and negotiates all discounts.

Then he goes out to tender to his three preferred suppliers – Arval, Fleet Hire and Hitachi.

“This gives good benchmarking for the prices,” Harris says.

“It also shows that we are fairly distributing contracts between more than one supplier – if we get too comfy with one, we can see the rates creep up. We used to be solus and the service wasn’t as good – once we introduced the competitive element, the service improved.”

Cars are kept on a mix of three and four-year contracts. Harris gets quotes for both – if the difference is marginal, he opts for three years.

However, like many fleet operators he extended contracts last year to give the company breathing space during the recession.

Around three-quarters of the fleet was extended for around 12 months, saving on average £25 per vehicle per month. Pertemps saved around £50,000 based on not changing 150 vehicles in 2009.

Last year was all about stripping out cost.

Mileage reduced through a mixture of economic reasons and zoning staff. Pertemps exploited its journey management system to ensure staff were working in their local area and some roles swapped as a result.

Line managers, who are empowered through the fuel reports provided via Midas, took firmer action last year on unacceptable mileage, such as overstated and unnecessary journeys.

Business fuel for both company car and grey fleet drivers is refunded via pence per mile

The company moved away from advisory fuel rates because it was costing too much money. Introduced four years ago, this change in policy saved £90,000 in the first 12 months.

“I fail to understand why this is not advocated by more people,” Harris says.

Pertemps has reduced its SMR bills by only repairing cosmetic damage at the end of the contract. It has a high insurance excess, effectively making it self-insured, which keeps annual premiums low, and records accident damage on its Jaama Key2 fleet management system.

At the vehicle handover the company assesses the damage. Any unreported costs are charged to the driver, although this is a rare occurrence.

“The message gets around quickly,” Harris says. “But it needs buy-in so we can charge it to the employees.

"Before 2009, the company tended to pay for the cost rather than risk upsetting the employee. It’s taken the credit crunch to change that.”

However, it’s not all about cutting costs and slapping charges on to staff.

Perhaps inevitably as a recruitment company, Pertemps (the name is an fusion of permanent and temporary staff) recognised that it still needed to reward its employees, particularly as they were working harder for less.

“We rewarded work ethic by offering staff a better car when they change and a quicker change cycle,” Harris says.

“Cost is not the only consideration – the intangibles are also important.”

This philosophy also underpins the company approach to vehicle budgeting.

“Would we choose a vehicle on wholelife costs? No,” says Harris.

“There are other elements, such as the mpg achievable – wholelife costs use the manufacturer’s figure – the emotional element and the suitability of the car for the job.”

He bases his decisions on the best rental price, suitability and low CO2 emissions. Those are the fixed costs; the variables are fuel costs and vehicle damage.

“There’s lots talked about wholelife costs but you can simplify it a lot and take into account other elements,” he adds. “If you purchase your fleet then perhaps wholelife costs are more appropriate.”

Pertemps outsources fleet operations where it makes sense – where it doesn’t have the skills to add value; most functions are managed in-house. However, Harris believes this approach will soon be consigned to history.

“The traditional fleet manager is a dinosaur and will not be replaced. Everything will be outsourced and there will be growth for contract hire companies in fleet management,” he says.

“Fleet is now too complex for most people; it’s a baptism of fire – you can’t go to college to learn it, the function will cease. The role will be more for a contracts manager.”

This won’t necessarily benefit the company, however.

“The downside to outsourcing is the personal contact for the company car driver, particularly on disputes and resolution issues.

"It’s easy to disenchant drivers and they are the ones that make the money and keep us in a job. It makes sense to keep them happy,” Harris says.

Midas helps Pertemps manage fuel costs

Midas – mileage input data access system – enables companies to empower line managers to make decisions on fuel usage, according to Adrian Harris.

The fuel and journey management system measures both private and business, identifying where savings can be made.

“It has given power and authority to our managers to control fuel costs,” Harris says.
“They have started to reject unacceptable business mileage, such as overstated and unnecessary journeys. That becomes
private mileage.”

Although developed and used by Pertemps, Midas is contracted to Shell which sells it to other fleets.

There is no upfront charge, and Harris says the monthly user fee should be easily offset by the savings, which could potentially run into tens of thousands of pounds.

Every driver is on the system, whether company car or grey fleet, although Pertemps has very few staff driving private cars for business.

“I don’t understand why companies have a grey fleet – we treat them the same as a company car with the same indemnity form, insurance and other processes,” Harris says.

“Only people on our system can reclaim mileage. We also have contigency liability insurance for anyone that slips through the net.”

Pertemps allows occasional users or staff on short-term contracts to drive their own cars, but anyone else travelling more than 50 miles per week will go into the company car scheme.