HR Pulse

COMPREHENSIVE SURVEY OF SA FLEET AND TRAVEL ALLOWANCE MARKET

Eqstra Fleet Management has completed the 2015 South African Fleet and Travel Allowance Benchmark Study with a response from 146 medium to large corporates, and is able to provide an oversight of how corporate travel is being managed in South Africa.
 

“Corporate companies are constantly requesting market information and trends when they are reviewing their travel policy, and by means of this annual survey we are able to provide meaningful insights that will assist in decision making,” said Murray Price, Managing Director of Eqstra Fleet Management. “These results will assist such companies to understand how the general market is treating the provision of business travel, and critically how the market is changing and evolving.”

The report comprises responses from medium to large corporates who collectively employ approximately 393,300 employees and operate 49 000 corporate vehicles. Responses were received from various formal sectors, including manufacturing and distribution, construction, retail and wholesale, business services and technology, mining, healthcare and pharmaceutical, transport and logistics, media and printing, professional and financial services. 34% of the companies interviewed are listed on the Johannesburg Stock Exchange.

Key indicators of the survey include:

• 81% of respondents offer a company car while only 19% offer a travel allowance. However there has been a sizeable shift (15%) in the past year of companies who have moved from a company car scheme to an allowance option. This reflects the current tough economic conditions with many companies looking for ways to outsource cost and risk.
• The majority of the companies (67%) make use of benchmark vehicles when determining their travel/vehicle policies. More and more companies are using a calculated method when determining various vehicle policy factors.
• 32% of the respondents outsource the procurement of their vehicles. This is largely due to the fact that companies leverage off the corporate buying power of fleet companies. 80% of the respondents consider alternative fleet funding options based on fleet practice/ changing trends/ cost reduction.
• 83% of the sample use a fuel card solution to manage their fuel requirements. Fuel is the single biggest expenditure in business travel contributing between 45 and 48% of all fleet related costs. Compared to 2014 results, fewer companies are offering unlimited private mileage on company provided fuel cards.
• More than 75% of the sample reimburse E-Toll fees for business travel. However 47% of employees are still required to claim back e-toll payments as their company does not have an e-toll solution in place
• Fines management - 62% redirect fines to their drivers account, 30% deduct fines from employees’ salaries. 8% pay business travel fines only.
• 43% of companies do not have a driver safety/awareness programme in place

In line with the European trend, more and more companies (52% of the sample as compared to 30% in 2014) are utilizing the services of fleet management companies to increase control and reduce costs. The real key is to have one view of total fleet spend to allow fleet managers to identify various areas where costs can be reduced by improving efficiencies.

“The first sign of good fleet and allowance management is to have a policy in place that protects not only the company but the employee as well” adds Price.

A well-constructed policy will be in line with the strategic objectives of the company which will state procedures and processes; cover limitations and exceptions; control employee responsibilities and driver behaviour and company responsibility; and will include benchmarking, grading and vehicle selection, vehicle replacement, health and safety and compliance.

95% of companies have a structured approach in creating a travel policy. This shows the focus in having controls in place to manage travel allowances and fleet related costs. 57% of the sample review their travel allowance policy annually, while 12% have outdated policies as their last review for their travel policy was over five years ago. It should be noted that a regular review of the travel policy could produce significant savings.

“For both company cars and car allowances, it is imperative to calculate benchmark vehicles within the company car policy. For company cars the best way to do this is to take a view on a Total Cost of Ownership / Operation (TCO) which should include lease costs or depreciation, repair and maintenance costs (tyres, servicing), insurance, tax on benefit, breakdown cover, fleet management costs, fuel and resale value” says Price.

“When calculating benchmark car allowance, we suggest that a company first establishes the outlay to the employee after tax, taking various factors into account such as employee bands, a selection of vehicles as per company image and employee benefits, full maintenance lease costs, fuel spend based on suggested business mileage and reasonable insurance costs. Once these figures are established, a car allowance benchmarking value per job category can be established.”

Company Car - Key Indicators

38% of the respondents operating their own fleet have a fleet size of >100.

The vast majority of the respondents (65%) makes use of leasing to fund their fleet.
(2014 - 47%). This reflects the limited cash in the capital market.

For the remainder, 47% of the respondents use less than 25% of their company operating/capital budget to purchase their company fleet. Reasons for using own capital include a strong financial position with a high cash flow and low IRR, and contract flexibility.

55% offer fuel cards and insurance as additional perks, while 45% offer maintenance and tracking.

• The vast majority of the respondents (49%) use cash to pay for their fleet’s maintenance expenditures.
• Only 20% allow employees to upgrade their company car.
• The vast majority of company cars (65%) are replaced every 4 years.
•  35% offer their employees an option to purchase their company car at a discounted price.
• 38% restrict private mileage for their company car users.
• 57% deduct any excess generated from the prescribed limit on private travelling from their employees pay.

Travel Allowance – Key indicators

49% (33%: 2014) of those corporates who offer a travel allowance state that cost to company is the main motivator for paying for a travel allowance.

• The majority of the sample (51%) provides a fuel card as an additional perk to their travel allowance users. This has increased substantially from the 21% in the 2014 SA benchmark study. However, only 32% of the sample limit the amount of fuel for their travel allowance users. This represents a massive opportunity to reduce spend.
• 16% of the sample offer maintenance as an additional perk but of these, only 14% limit the amount of vehicle maintenance for their travel allowance users. As there is no limit for 86% of the sample this places them under a severe risk of paying excessive amounts for maintenance on vehicles.
• 90% do not limit the engine capacity of the vehicle that the travel allowance user/(s) can purchase.
• 57% of the sample do not provide an increase in the travel allowance to users who travel excessive mileage. It would appear therefore that a company car is the option for excessive mileage travellers from an employee point of view.

“It appears that the general industry trend is that more companies are moving towards offering employees a travel allowance rather than a company car”, concludes Price. “This is in line with the international market and reflects the challenging market conditions in the South African economy with resultant pressure on cash reserves. Reducing fleet costs remains the major challenge facing fleet managers, and employers can assist employees to make better financial decisions around which vehicles to acquire and the method of acquiring a vehicle. We will shortly be introducing a new product, an Allowance Optimiser, which will assist both employers and employees in this regard.”