Inflationary pressures are driving organisations to reassess company car eligibility in a bid to manage costs.

Inflation has led to the reassessment of benefit offerings across the board

A fifth (22%) of UK organisations looking to review their company car policy in the next 12 months are planning to remove car benefit eligibility from selected roles and employee categories, according to research by Willis Towers Watson.

This may be influenced by inflation, which has driven the median budget per employee up by up to 12%, compared to the previous year and is impacting decisions on all employee benefits provision.

Lori Stokes, rewards data intelligence lead at WTW, said: “Inflation has, at least in the short term, become a high-priority consideration for most organisations, which has called for the reassessment of benefit offerings across the board.”

The research, carried out for WTW’s annual Company Car Benefits Survey Report, also reveals a slight decline in UK businesses offering company car/car allowance provision – down 3% for 2023 to 68%.

Although eligibility levels for company car plans remained fairly stable across all employee categories this year, sales employees were most impacted, as those eligible dropped from 73% to 70% compared to 2022.

But the research, carried out among 1,524 UK organisations across a broad range of industries, also shows a core shift to greener practices, supporting longer term ESG objectives.

Almost half of companies (43%) intending to review their policies say they’re planning to introduce more environmentally friendly policies and behaviours in the next 12 months.

Electric vehicles are a key focus and almost two-fifths of organisations (37%) plan to introduce more environmentally friendly vehicles, while a fifth (22%) plan to introduce CO2 emission ceilings on cars. Four in 10 (41%) of companies intend to change the make and model of vehicles on offer.

This is also leading organisations to explore other alternatives to the traditional company car and car allowances. More than a quarter (28%) of respondents provide access to bicycles, while 22% of companies have set up car-pooling among employees.

Lori Stokes added: “Inflation has, at least in the short term, become a high-priority consideration for most organisations, which has called for the reassessment of benefit offerings across the board.

“As the cost of vehicles and leasing has grown considerably in a short space of time, it’s raising questions around how to best manage company car benefit plans, whether that’s through reviewing those eligible, the type of vehicle on offer or budget optimisation.

“When coupled with objectives to introduce more environmentally friendly policies and behaviour, many organisations are looking towards alternatives to achieve these goals.”