MANAGING a grey fleet correctly could save a company up to 25% compared to paying out mileage claims automatically under the Approved Mileage Allowance Payments (AMAPs) scheme.
Mercia Fleet Management, the fleet management division of EV salary sacrifice specialist Fleet Evolution, which calculates that it can save around a quarter of the cost of reimbursing grey fleet drivers under AMAPs – as well as managing all the administration involved in running the grey fleet.
“Grey fleet remains a huge area of potential risk but few businesses manage it effectively, meaning they not only expose their employees to unacceptable risks but also waste huge amounts of money,” said Andrew Leech, founder and managing director at Fleet Evolution and head of the Mercia Fleet Management division.
According to the BVRLA, there are an estimated 14 million grey fleet vehicles on UK roads, costing £786 million in the public sector and £5 billion in the private sector through mileage reimbursement.
Where employees use their own vehicles on company business they can then reclaim business mileage at up to 45p per mile under the AMAPs scheme for the first 10,000 miles, falling to 25p per mile thereafter.
For businesses with significant numbers of grey fleet drivers, the reimbursement costs can be considerable while the risk factor is one of the highest an organisation faces.
To bring these costs under greater control and scrutiny, Mercia Grey Fleet Management assesses the need to use privately owned vehicles and evaluates the cost efficiency of using AMAPs, based on a mileage-based decision tree within a dedicated client portal.
If under five miles, a typical recommendation might be to take a taxi, bus or cycle where appropriate. At 15-25 miles, the advice would be to use employee-owned vehicles with checks carried out on vehicle condition and relevant business insurance before allowing use.
From 25-100 miles the decision tree recommends taking the train or consider a taxi, comparing the costs of these alternative means of transport to those likely to be incurred under AMAPs.
And at over 100 miles, the recommendation would be to use a hire car as the most cost-effective option, with all bookings handled by Mercia Fleet Management administrators.
“It’s easy to see how money can be wasted and employees put at risk. Imagine a scenario where an employee is asked to make a 150-mile round trip for business in their own car,” said Andrew Leech.
“Firstly, you have the risk implications of asking an employee to take what is likely to be on older car, typically over eight years old, which may or may not be correctly insured or maintained in line with manufacturer guidelines, on a motorway trip during peak times of the day.
“Secondly, on top of the potential risks involved, the company is reimbursing that colleague with £67.50 for the journey – without considering any of a number of less expensive and risky possible alternatives.
“For a journey of over 100 miles we would recommend using a hire car, which would be pre-authorised within a dedicated client portal. The driver would simply book the car, have it delivered to home or office and use it on company business.
“The company has peace of mind that the employee is in a brand new vehicle with all the relevant safety checks and latest driver assistance systems. They would be charged around £30 for the car hire and around £20 for the fuel, based on that mileage – giving a total cost of around £50 and a saving of 25% against the AMAPs reimbursement.
“As well as arranging the vehicle hire and the associated logistics, we can then factor these savings back into our rates which make for a more efficient and cost effective for the client all round,” he said.
“Good risk management should, after all, save you money as well as managing your risk exposure. Our key objectives with Mercia Grey Fleet Management are to mitigate risk, as well as assessing cost effectiveness to the business,” added Leech.
The Mercia fleet management division offers a comprehensive portfolio of services, including fleet policy provision, vehicle acquisition advice, licence checking, risk management, fleet service scheduling, vehicle logistics and daily rental, plus wider mobility services.
The aim is to provide high levels of personalised customer service where the needs of the customer are paramount, rather than simply ticking boxes and providing basic levels of service as some fleet management providers do.
Leech said: “The division was borne out of demand from existing salary sacrifice clients who want deeper levels of bespoke customer service. So successful has it been, that we are now rolling it out on a wider level.”
