Audi A6 and Mercedes E220 are the most popular cars for company heads, while senior managers also generally opt for the Audi A6, according to a survey by Mercer Human Resource Consulting.  The most popular cars for these employees in last year´s survey were the Mercedes 320 and BMW 5 Series respectively. Typical cars for lower-ranking staff this year include the Audi A4, VW Passat and Vauxhall Vectra.  

The survey, which involved over 100 UK companies, focuses on the prevalence and features of car benefits together with the related tax issues.  The data is part of an international study which is used to help companies set their car benefit policies, both nationally and globally.

Car allowances

Company heads receive an average annual car allowance of £10,530, a 2% increase from last year. Senior managers receive £8,450, up 3%, while the average allowance for middle/junior managers increased by 2% to £6,650.  Sales representatives receive £6,450, 24% higher than last year´s allowance. Professionals continued to receive the lowest average allowance, at £5,280, despite a 15% increase.

"Company car allowances are one of the most expensive elements of an employee benefit package, so employers are generally trying to manage costs by keeping increases in line with inflation,"said David Wreford, UK Head of Human Capital Product Solutions at Mercer Human Resource Consulting. "However, the increase in sales representatives´ allowances suggests companies are under pressure to attract and retain this group of employees, due to demands for these skills."

Across all employee groups, on average staff took between 10% and 20% below their entitlement when leasing a car. "Many companies pass on any car lease savings to employees when the full entitlement is not used. Even where the company does not, employees still tend to take a lease below their entitlement because lower-cost cars tend to be more fuel and tax efficient and are more environmentally friendly," said Mr Wreford.

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 nearly double that of a car for professionals - £36,495 and £18,500 respectively. "Purchase prices have increased consistently with changes to car allowances," noted Mr Wreford.

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

Cash allowances

Nearly 8 in 10 companies (78%) offer employees the choice between a company car and a cash allowance, an increase of eight percentage points from last year. 

"Over the past decade companies have increased the flexibility of their car packages as a way of offering attractive benefit choices to their employees while at the same time managing costs. Some organisations have chosen to only offer a cash allowance, largely due to legislative changes which have made company cars less tax efficient," said Mr Wreford.

He added: "The government´s policy of taxing cars according to their CO2 emissions has resulted in many companies offering their staff more environmentally cars, which can represent good value for both the individual and the organisation."

These results are part of an international survey involving over 6,000 companies in 49 countries.  Copies of Mercer´s 2006 International Car Policies Reportcost €750and are available from Client Services, Mercer Global Information Services, Geneva at +41 22 869 3000 or www.imercer.com/carpolicies 

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