You provide company cars to employees for a specific reason: they should use the vehicles to complete the required work tasks. For example, you run a delivery business, and you provide cars, vans, and trucks for drivers to load up and take orders to customers. You could also have some company cars for people to drive to meetings as a way of keeping up appearances.
Either way, these cars should be used for work purposes. Employees should not use them for personal journeys. This will create all kinds of problems for your business, so how can you clamp down on this behavior? Don’t worry – it’s easier than you think and mainly involves two key tips. We’ll explain them later in this guide, but let’s begin with why this is an important boundary to set.
The Dangers Of Letting Employees Use Company Cars For Personal Journeys
All business owners should strive to make their company as successful as possible. The secret to success often revolves around minimizing issues surrounding your business. If you can reduce risks that can cost your business a lot of money, you’ll be a bit more successful.
With that in mind, you should never let employees use company vehicles for personal journeys. It has the potential to lose your business a lot of money in the following ways:
- Accidents – Employees who drive company cars for personal journeys will be at an increased risk of auto accidents. It’s a simple matter of averages; the more journeys you take, the more chances there are to get in a crash. If this happens, you’ll have to spend money repairing the car or dealing with insurance claims. Even worse, because the car is legally tied to the business, you assume all liability for any accidents in these vehicles. It can mean all the legal fees come out of the company’s pocket, forcing you to spend even more money.
- Taxes – When company cars are used solely for business journeys, the IRS lets you deduct the expenses from your tax return. In other words, you’re slashing the annual tax bill by a good few thousand dollars. However, if employees use business cars personally, then the IRS may not let you deduct the expenses. They’ll say this vehicle isn’t solely used for business purposes, so it doesn’t count as a business expense. All the savings go down the drain!
How To Prevent Employees From Using Company Cars Outside Work
Clearly, letting your employees use company cars outside of work is a bad idea. It can cost you a lot of money and cause disruptions throughout your company. If we’re being completely honest, hardly any businesses will straight up let employees use company cars for personal journeys. It’s very rare. Instead, what happens is the employees sneakily use these vehicles without the employer knowing. It’s only after there’s an incident or the employer sees far too many miles on the clock that they realize what’s happening.
Your task is to prevent this from coming true – and it requires a couple of simple ideas:
- Track The Vehicle Usage – First of all, install tracking software in all of your company vehicles. As noted in this guide titled Fleet Telematics 101: Definition, Best Practices, And Tips, it’s a legal requirement for businesses to record driver’s service hours through electronic logging devices in cars nowadays. You should also call upon more telematics to constantly track where the vehicle is and when it’s being used. Surveying this data helps you understand if an employee is using the vehicle outside of working hours or for unsolicited personal journeys.Moreover, the presence of tracking technology should be enough to dissuade employees from taking advantage of company vehicles. They’ll know their habits are being tracked, so they’re less likely to take a risk and do something silly.
- Implement Company Fines – Despite most drivers being deterred by tracking software, some will still find ways of getting around this by using company cars personally. This could include making personal journeys within company hours. To the tracking system, it looks like the employee is doing a normal job, but they could be running personal errands on company time.We suggest implementing strict fines for drivers caught using company vehicles for personal journeys. A chunk of their salary will be removed if this is the case. It’s an extreme situation, but it drives home the importance of only using these vehicles for business tasks. As such, you’d hope it would prevent any drivers from taking the risk.
In summary, letting employees use company cars for personal journeys is bad. Make sure your business implements the right measures to keep your company vehicles strictly for company purposes.