September 10, 2015

How to reduce your grey fleet risk

Employees’ own cars could be an Achilles heel

Grey fleet risk remains at or near the top of most fleet agendas, making it one of the most pressing concerns for managers. There are ways, however, of minimising this risk and managing it more effectively.

The term ‘grey fleet’ usually refers to those vehicles which are owned by employees but used regularly on company business. They may be acquired via company-provided cash allowances by drivers who qualify for a company car but who opt to take a cash alternative instead.

Latest estimates suggest that nine million privately-owned cars are regularly used on work-related business out of an estimated total UK grey fleet of 14 million vehicles.

Tackling duty of care

However, the grey fleet raises a number of issues for many businesses throughout the country, not least the duty of care the company owes to its employees who drive on company business, along with a responsibility to the public at large for their actions.

Current health and safety regulations stipulate that organisations need robust policies and procedures in place to ensure that every grey fleet car is fit for purpose, has a valid MoT, is insured for appropriate business use and that the employee has a valid driving licence.

If a grey fleet driver is involved in an accident and is found to have an invalid licence or incorrect insurance, a company could be held liable if the vehicle involved has not been kept in a roadworthy condition.

The costs involved can escalate in proportion to the seriousness of the incident. Ultimately there are sanctions that can be applied under the Corporate Manslaughter Act that can be punitive in the extreme, including unlimited fines and publicity and remedial orders.

Employers need to be able to demonstrate the steps they have taken to manage this duty of care and provide an audit trail showing that all reasonable steps have been taken.

Don’t underestimate grey fleet costs

Cost is another reason that companies and their fleet managers should have concerns about the grey fleet. Mileage reimbursement for drivers using their cars for business purposes creates a substantial cost centre that, like any other, needs to be managed effectively.

HM Revenue & Customs allows employers to pay grey fleet drivers up to a certain level of business mileage reimbursement tax-free. Under the current Approved Mileage Allowance Payments scheme, the rates are 45p per mile for the first 10,000 miles and 25p thereafter – which can quickly mount up if high grey fleet miles are being driven.

Combined with this level of mileage reimbursement, which may also create the incentive for additional travel, companies should also look carefully at the impact grey fleet travel has on total emissions in the light of the corporate environmental policy.

Statistics show that, on average, grey fleet vehicles are older and create higher emissions than company owned or daily rental vehicles and are less likely to be well maintained.

One way of effectively managing grey fleet vehicles is to treat them exactly the same as if they were company-owned. That means that, as with all other company vehicles, all records of ‘grey fleet’ vehicles should be kept online on a central fleet database.

This allows them to be accessed at all times and any changes to their condition, status or ownership accurately recorded so that they are up to date. Exception reporting can then be employed to flag up when any potential issues are identified, and these processes clearly establish the necessary audit trail.

Regular checks are crucial

At a pre-agreed frequency, typically weekly or monthly, grey fleet drivers should be required to undergo vehicle condition, electronic licence and insurance checks.

This involves drivers being asked to verify their vehicle condition, including tyres, glass, lights and bodywork, produce valid licences and business insurance and confirm they have not incurred additional penalty points.

Delinquency reports should be generated for any drivers that fail to abide by these conditions which can then be discussed with the drivers. Remedial action, up to and including driver training, can then be put in place.

Grey fleet drivers should automatically be sent annual reminders regarding Road Fund Licence renewals and, where appropriate on older cars, MoT reminders.

To ensure that driver-owned vehicles are serviced regularly and in accordance with manufacturer warranties, drivers should also be required to input their total mileage on a monthly basis via an online mileage reporting system, from which timely service reminders can then be issued as the service draws near.

And to ensure regular lines of communication are maintained with ALL drivers, both company and grey fleet, regular communications should cover topics such as winter driving checks, tyre tread depth checks and other key fleet issues.

Keep grey fleet risk to a minimum

There are some very sound financial and duty of care reasons for keeping employees in grey fleet vehicles to a minimum, and many companies have actually gone down the route of encouraging their grey fleet drivers back into company-owned vehicles because of the complexity of these issues.

In terms of administration, grey fleet vehicles can be more time consuming to manage than the company owned equivalent, especially when it comes to issues of servicing, vehicle condition inspections and mileage recording.

CLM’s advice to its clients is always to treat grey fleet vehicles exactly the same as if they were company-owned and apply the same rigorous tests and conditions to them to ensure they are legally compliant. That way, the grey fleet can be managed more effectively and the risk to the company kept under control.

You can read more about our Grey Fleet Management service, or if you would like to discuss how CLM can help you manage your grey fleet, please get in touch.