Company cars are an excellent incentive to offer an employee as part of the terms and conditions of employment because the employee will enjoy the status and convenience that a company car brings. Employers will also benefit, by ensuring that their employees are turning up at clients’ premises in a vehicle with an appearance they wish to keep up.

Where you provide company cars to your employees, you should also issue a set of company car rules to each employee who will drive a company car. These rules are best provided in a document that is separate from the employee’s other employment documentation e.g. Statement of Main Terms and Employee Handbook. This way you can ensure that the employee is aware that such rules do exist in your organisation, and a signature to confirm receipt is also recommended. If the rules are tucked away in the rest of the paperwork given to the employee during an induction period at the start of his employment, they could potentially be missed and the employee could argue ignorance.

These rules will undoubtedly differ from organisation to organisation but should cover common themes, such as the necessity to produce, on an ongoing basis, a valid driving licence before a car is provided to prove capacity to drive. You should make clear whether the employee is permitted to use the car for leisure purposes as well as work purposes.

It is also advised that you set out what should happen in the event of damage to a company car. You are within your rights to make an employee liable to cover the cost of repairing any damage made to the car whilst they are driving, but you must ensure that you have this in writing and it has been agreed between the employee and yourself. If the employee is not aware that they are liable for paying for the repairs, and you deduct money from their wage, it may be possible for the employee to claim unlawful deductions from pay at tribunal. It is not advisable to apply a fixed penalty to an employee in such a situation, and any money deducted should be a true reflection of the cost to the company. Anything other may well be seen as a penalty clause.

Similarly, if there were to be an accident in which your employee was at fault, you may wish to include a rule which states the employee is liable for the payment of the insurance excess. Again, this must be expressly stated in a document between yourself and the employee.

You should also make clear that any parking or speeding fines are the employee’s own responsibility, and, if left to the company to pay, these will be deducted from salary as agreed.

You should bear in mind that if you supply a company car to an employee who then goes on maternity leave, the rules that apply to car usage when the employee is in work will continue to apply whilst they are on leave. This concerns leave taken as ordinary maternity leave, and additional maternity leave too after rules changed in October 2008.

For more information on any of the issues raised in this piece, call the Advice Service on 0844 892 2772.