Company Car Policy

  • Pay & Benefits
Peninsula Logo

Peninsula Group, HR and Health & Safety Experts

(Last updated )

Read our article: 'Company Cars: What Rules Do You Need To Put In Place'. Contact us today for more information about our Employment Law, Health & Safety, and HR services.

As an employer, you may choose to provide your employees with a company car. If you're taking this option, then employees must understand the rules and regulations.

The best way to do this is to create a company car policy. This policy makes it clear to both parties what is expected whilst the employee has a company vehicle. Failure to do so can lead to accidents and serious injury.

In this guide, we'll discuss what a company car policy is, the benefits of having one, and what to include in yours.

What is a company car policy?

Also known as a company vehicle use agreement, a company car policy is a comprehensive guide to the rules surrounding company cars. It explains who qualifies for them and how employees can get one.

The policy applies to all employees who have a vehicle. The rules of which are in place during and outside working hours.

You need to make it clear if company cars are for personal use as well as business purposes. In most cases, allowing company cars for personal use is standard practice.

Is a company vehicle policy legally binding?

Yes, a company car policy is legally binding. This means that you as the employer have a strong case if it is broken.

It's vital that you make this known to the employee when they sign the agreement. This can be used against you in the future if conflict arises surrounding the us of their company vehicle.

Why is it important to have a company car policy?

Having a company car policy helps make sure that your employees act legally and safely in their company vehicles. It also makes clear what is expected of both parties throughout the time the employee has their car.

The Working Time Regulations 1998 sets the limit of how long employees can drive for when they are working. This includes the use of their company cars.

What are the benefits of having a company car policy?

If you're thinking of implementing a company car scheme into your business, then you need to have a policy. There are many benefits that come with having a company policy in place, such as:

  • Employees are aware of all the rules and stipulations surrounding company vehicle use. 
  • Vehicle tracking can be introduced legally, this will help to ensure your employees are where they need to be at all times. 
  • Allowing your employees to use company vehicles for personal use is an attractive benefit. This may lead to an increase in employee retention and morale.

What does a company vehicle policy need to include?

As an employer, it's important to understand what to include in your company car policy. Doing so means you'll create a great policy that works for both you and your employees.

The policy should include a wide range of issues, such as who qualifies for a vehicle and all the rules they must stick to.

Let's discuss what to include in more detail:

Qualifying for a company vehicle

It's important you make it clear in your company car policy who qualifies for a vehicle. Not all employees do as they may need to meet some criteria such as holding a valid driver’s license.

Although it is preferred, employees don’t need to have a clean driving record. But you may want to consider any previous points or spent convictions. A clean record means they must not have been at fault for a car accident or been arrested for violating vehicle and traffic laws.

You should think about providing company vehicles to employees whose job entails:

  • Driving daily for the business.
  • Driving a certain number of miles per year.
  • If when they took the job the use of a company vehicle was negotiated (failing to provide this could then be considered a breach of contract).

Choosing a vehicle

It should be made clear in your policy what make and model of cars an employee can choose from. For example, you may provide more luxury cars for your senior staff. Whereas new starters may be able to choose from more standard vehicles.

You should also make clear any additional extras the employee can choose from. This is a benefit, especially if you're allowing them to use the vehicle for personal use.

Getting a company fleet vehicle

This is arguably the most important section that needs to be included within your policy. You should make clear the details of how your employees get their company car.

The employee must be made aware of who to contact if they have a query or want an update on delivery time. When their car arrives, they should check it for any damage and be familiar with how the controls work.

If you have any new starters, you should consider providing them with a temporary car until their new vehicle is delivered.

Company car tax

Your policy should include enough information for your employees to fully understand the tax implications of having a company vehicle.

Employees must pay tax if they use their company car for personal use, this includes commuting. The amount of tax they pay depends on the type of fuel it uses and the value of the vehicle. The value of the car is reduced however if:

  • If they have the vehicle part-time.
  • If they paid something towards the original cost.
  • If the vehicle has low CO2 emissions.

Fuel and mileage payments

Your policy should clearly explain how employees can reclaim business mileage and what the paid rates are. If you're choosing to provide them with a fuel card, they must be made aware of where it can be used.

This is an important part of the policy so it's important you get it right.

Car insurance information

You should insure company cars with a reliable insurance provider, and give all the details of the policy to the employee. They must be provided with details of the insurance company in case of an accident or theft.

If an employee doesn't have a clean driving record, it may be more difficult to get them an insurance policy for company vehicles.

Considering employees with disabilities

Include how you'll consider disabled employees and make reasonable accommodations to facilitate their company vehicle.

For example, they may need modifications made to their company car. You should do all you can to accommodate these

Vehicle safety

Your policy must make clear that all employees must follow all safety rules. Such as:

  • Always ensure the doors are locked when they leave the vehicle.
  • Ensure both the driver and passengers wear seatbelts.
  • Drive safely at all times.
  • If they feel something is wrong with the vehicle, they should contact the company.

Rules employees must follow

Your company car policy should clearly state the rules that your employees must abide by when using their company car. Such as:

  • Driving safely and sober at all times.
  • Follow legal guidelines for driving, for example not using a mobile phone.
  • Wearing glasses or contacts if applicable.
  • Documenting any driving-related expenses such as for fuel and tolls. 
  • The employee must check their company car regularly for tire pressure and other car fluids.
  • Any problems or damages to their assigned vehicle must be reported to the company as soon as possible.
  • Keep the vehicle clean and tidy at all times.
  • Do not smoke inside of their vehicle.
  • Do not lease, sell or lend their vehicle to family members or friends.
  • Avoid traffic violations, blocking entrances and parking on double-yellow lines.
  • If the employee feels their driving ability is impaired due to illness or injury, they shouldn't drive.

You should make it clear that if any employees on the scheme have their license revoked or suspended - the company must be made aware straight away.

Vehicle maintenance/wear and tear

Another important part of policy is making the employee aware that they're responsible for maintaining the vehicle and ensuring it stays roadworthy. This includes taking the vehicle to any scheduled maintenance appointments.

It's the responsibility of the employee to service the vehicle in line with the manufacturers' recommendations. You should provide them with contact numbers in order to do so.

Disciplinary action for misuse of company cars

Your company car policy should also include the disciplinary actions you may take if the employee misuses their vehicle. This can include revoking the car if they fail to stick to the clear rules you've set in place.

For more serious offences, you may be required to take legal action. For example, if the company car is being used for dealing drugs.

Accident procedures

The policy should include the procedure an employee should follow if they are involved in an accident.

The procedure is:

  • Report the accident to local police if required.
  • Contact the HR department immediately.
  • Follow the legal guidelines when exchanging information with other drivers involved.

Employees shouldn't accept responsibility or promise to make a payment to the other driver without authorisation of the company.

Responsibilities of the company

You should include your responsibilities in your company car policy. It's even more important you stick to them, failure to do so can lead to a serious accident for your employees.

Below are the company's responsibilities:

  • You must provide a vehicle that is safe to drive and quickly replace any car that isn't deemed safe.
  • Schedule frequent vehicle maintenance appointments.
  • Handle car insurance, and provide the employee with the provider and details of how to contact them.
  • Make sure there's someone available for the employee to contact during driving hours in case of an emergency.

What the company is not responsible for

You must make it clear within your policy what you're not responsible for when it comes to company vehicles. This includes not paying for any fines from traffic offences.

You should make this clear to your employees when they take the vehicle.

How long an employee can drive for

For the employee's safety, you must include the legal time they can drive for in the policy. Not making them aware can make you liable if something was to happen to them.

The  states that if an employee is working less than eight and a half hours, they must take a break after five and a half hours of driving. This break must last 30 minutes.

If their day is longer than this then they must not drive for more than seven hours and 45 minutes. These breaks must add up to at least 45 minutes.

What is a company car policy template?

A company car policy template is a template that you keep either as a hard copy or online to use and modify when you're providing employees with a company car.

You should make changes to it when new rules or legislation come out regarding a company vehicle.

Get expert advice on company car policies from Peninsula

If you're choosing to provide your employees with company vehicles, it's important both parties understand the rules and regulations. It's not just a case of giving them a car.

Having a company vehicle policy is a good way of ensuring the safety of your employees, and ensuring you avoid legal trouble.

Peninsula offers expert advice on creating your company car policy. Our HR team offers unlimited 24/7 HR employment services which are available 365 days a year.

Want more information? Seek advice from one of our HR advisors. For further information, call our telephone number 0800 051 3638.

Related articles

  • tribunal


    HMRC refuses to stand down on £470k giant marshmallows case

    After losing a £470,000 VAT case at the Upper Tribunal over whether giant marshmallows are confectionery, HMRC is taking the fight to the Court of Appeal

    Peninsula TeamPeninsula Team
    • Employment Tribunal
  • working


    Employers asked what help is most needed to get people back into work

    With the Government considering a number of welfare-to-work reforms, the Recruitment and Employment Confederation (REC) decided to ask employers for their views on what is most needed in order to find, recruit and retain the right people.

    Peninsula TeamPeninsula Team
    • Employment Contract
  • staff rates falling


    April sees staff rates falling but pay growth on the up

    The latest KPMG and Recruitment and Employment Confederation (REC) report on UK jobs has found the number of workplaces is still slowly dropping while salaries are increasing

    Peninsula TeamPeninsula Team
    • Pay & Benefits
Back to resource hub

Try Brainbox for free today

When AI meets 40 years of Peninsula expertise... you get instant, expert answers to your HR and Health & Safety questions

Sign up to our newsletter

Get the latest news & tips that matter most to your business in our monthly newsletter.