Seven in 10 firms give employees the car or cash choice

Seventy per cent of companies offer employees the choice between a company car and a cash allowance, according to a survey by Mercer Human Resource Consulting.  

The average annual car allowance for company heads is £10,300. Senior managers, middle/junior managers and sales representatives receive respectively £8,200, £6,500 and £5,200 a year on average. Professionals get the lowest average allowance of £4,600.

The survey, involving 245 UK companies, focuses on the prevalence and features of car benefits, together with the related tax issues. 

For employees who opt to receive a car instead of an allowance, the typical purchase price varies significantly according to job role. For example, the average cost of a car for company heads is more than double that of a car for professionals – £32,800 and £16,000 respectively.    

Forty percent of organisations allow employees to purchase the car at the end of the replacement period.  

“Company cars represent one of the most expensive items in an employee benefit package,” said David Wreford, European principal at Mercer. “Company car policies now tend to focus on providing better value for both employers and employees.” 

Mercedes 320 is the most typical car for company heads, while senior managers generally opt for a BMW 5 Series. Typical cars for lower-ranking employees include Audi A4, VW Passat and Vauxhall Vectra.    

The survey found that car use also depends on workplace status. For example, 94% of company heads can use their cars for business and personal purposes compared with 47% of sales representatives and 35% of professionals.

“Both employers and employees tend to underestimate the costs associated with company cars and the value of the cash alternative.  As company cars become less and less tax efficient, more employees are likely to opt for the cash,” Wreford said.