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Benefits and allowances 2010: travel and subsistence
Source: IRS Employment Review Date: 25/06/2010 Publisher: IRS

AUTHOR: Janet Egan

We look at the provision of cars and car allowances, mileage rates and subsistence
benefits.

In this report:

Chart 1: Travel and subsistence benefits and allowances

Cars and car allowances

Company cars

Chart 2: Provision of company cars

Car allowances

Chart 3: Value of car allowance

Mileage allowances

Company car rates

Personal car mileage rates

Bicycle/motorbike mileage rates

Subsistence benefits

Overnight stays

Additional resources on XpertHR

Key points

• Free car parking and mileage allowances are the two most
popular travel and subsistence provisions in 2010, on offer for at least
some employees in 73.4% and 69.5% of organisations respectively.
• While the travel and subsistence package seems to have borne up
relatively well there are signs that the economic climate has affected
budgeting, with the proportion of employers that provide subsistence
allowances for dining out or hotel stays dropping to 45.1% in 2010.
• The provision of company cars continues its pattern of long-term
decline over the past decade, falling this year to 44.7% of employers.

This 2010 IRS survey of benefits and allowances article focuses on the travel and
subsistence provisions on offer in 443 organisations.

Benefits & Allowances 2010 Travel and subsistence 1

It is important for reward practitioners to draw a distinction between the role played
by "allowances" and "benefits" - with the former compensating employees for
expenditure necessarily incurred in the course of their employment duties, while the
latter is part of the reward package designed to help recruit, retain and motivate
employees. However, the two concepts can overlap and the terms are sometimes
used interchangeably.

Chart 1 summarises the proportion of employers offering each travel or subsistence

provision covered by the 2010 survey. More detailed analysis of the key
arrangements is set out below.

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Benefits & Allowances 2010 Travel and subsistence 2

Cars and car allowances

Company cars

There has been a continuing decline in company car provision, down from 46.9% in
2009 to 44.7% in 2010. While data presented in this analysis is not based on a
matched sample (the same companies did not necessarily complete both years'
surveys) and should therefore be treated with caution, the latest reduction is in line
with a long-term downward trend over the past decade - prompted by changes to
the company car tax regime around the turn of the millennium.

Where company car provision exists, it is extremely rare to offer this benefit
universally to employees. Rather, there is a clear link with seniority. A company car
is most commonly available to directors (in 35.9% of organisations) and managers
(32.3%), while just 10.6% make it available to other staff. Chart 2 sets out the
figures for these employee groups broken down by broad employment sector -
illustrating that this benefit is particularly popular in manufacturing and production
but much less prevalent in the public sector.

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Click on the chart above to open the interactive chart. This requires the Adobe
Flash Player plug-in.

Most organisations offer those who receive a company car some choice over the
model. Directors have the greatest degree of choice: 66.5% of those granted some
discretion are able to choose freely within a specified value band, and the remaining
33.5% are limited to a defined range of models.

Benefits & Allowances 2010 Travel and subsistence 3

Employers often make a distinction between employees who need a company car in
order to carry out their job, and those who receive a car as a "perk" (or benefit).
More than three-quarters (109, or 76.8% of the 142 organisations providing details)
allow employees with "perk" cars to trade in the benefit for a cash alternative if they
wish. However, only 38.4% allow those that need a car to do so.

Some respondents encompass both "perk" and "need" cars in their policy. At Molson
Coors Brewing Company UK, for example, senior managers and higher grades
receive a "perk" car, while managers and lower-ranking employees must drive at
least 6,000 business miles a year to qualify.

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Car allowances

It is now more common for employers to offer a car allowance to employees than to
provide a company car directly. More than half (54.6%) offer the option of a car
allowance to at least some employees. Nevertheless, this represents a slight decline
on 2009's figure of 58%.

As with company car provision there is a link with seniority, with car allowances most
commonly made available to managers (44%) and directors (43.3%) rather than
other staff (13.1%).

There are significant variations in the value of car allowances paid to employees.
Among organisations providing details, allowances stand at a median of £7,500 a
year for directors (as against the £7,200 figure recorded in 2009); £6,000 for
managers (£5,400 in 2009); and £4,000 a year for other staff (£3,830 in 2009).
Chart 3 sets out the mean average payments for each of these three employee
groups broken down by broad sector of employment. As the chart shows, payments
tend to be slightly higher in manufacturing and production than in private sector
services, with considerably lower figures recorded in the public sector.

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Benefits & Allowances 2010 Travel and subsistence 4

Click on the chart above to open the interactive chart. This requires the Adobe
Flash Player plug-in.

In respect of the eligibility criteria for car allowance schemes, responses can be
grouped predominantly into one of two categories:

• car allowances paid as a "perk", linked to the seniority or role of the

employee; or
• car allowances for essential users - those who need to drive to fulfil their
employment duties.

While a range of criteria exist for defining which employees are classed as "needing"
to drive for work, a typical approach is to set a threshold for a certain number of
miles a year that the employee must drive. Examples include business usage above
7,000 miles a year at disability employer Remploy or 15,000 miles a year at chemical
distribution firm Univar. By contrast, at science-based products and services
company DuPont UK, employees above a certain grade who drive fewer than 10,000
miles receive a car allowance - as those who drive above this threshold are eligible
for a work car.

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Benefits & Allowances 2010 Travel and subsistence 5

Mileage allowances

Employees who travel by car or alternative vehicle as part of their employment are
commonly offered a mileage allowance to cover their expenses - this policy is in
place for at least some employees in 69.5% of organisations. The rate paid generally
varies depending on whether the employees are travelling in a company car, their
own private car, by bicycle or motorbike.

Mileage allowances are most commonly in place for personal cars (66.8% of
organisations) followed by company cars (46.5% of employers), motorbikes (37.5%)
and bicycles (25.7%).

HM Revenue and Customs (HMRC) sets out approved rates for fuel and mileage
provisions when driving on company business. Employees are not liable to pay tax
on any payments received if employers compensate within the stated bands, but
would be liable for tax on payments in excess of these bands.

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Company car rates

Advisory fuel rates for company cars are published by HMRC and reviewed twice
each year (external website).

Effective from 1 June 2010, the rates are as follows:

• engine size 1,400cc or below: 12p (petrol), 11p (diesel), 8p (LPG)

• engine size 1,401cc to 2,000cc: 15p (petrol), 11p (diesel), 10p (LPG)
• engines above 2,000cc: 21p (petrol), 16p (diesel), 14p (LPG).

A large majority (78.6%) of employers - 162 of the 206 respondents who gave
details - report that they use HMRC rates. The remaining 21.4% (44 organisations)
use other rates. Among the latter group, the median rate for travel in a company car
is 13.55p per mile.

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Benefits & Allowances 2010 Travel and subsistence 6

Personal car mileage rates

For business travel in the employee's own vehicle, the HMRC-approved mileage
rates (external website) currently stand at the following levels:

• 40p for the first 10,000 miles and 25p per mile thereafter for cars and vans;
and
• 24p and 20p for motorcycles and bicycles respectively - with no mileage
thresholds (that is, regardless of number of miles travelled).

Our survey elicited details of personal car mileage rates from 296 organisations that
provide this benefit, which revealed the following:

• most organisations (221, or 74.7%) simply follow the HMRC rates;

• around a quarter (75, or 25.3%) use rates other than the HMRC although the
reported rates in practice are sometimes stated as "40p" among this group -
indicating that respondents may not always be certain of the HMRC rates; and
• those that pay rates that vary from HMRC rates range from a minimum of 11p
to a maximum of 60p.

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Bicycle/motorbike mileage rates

We gathered useable information from nine organisations that have set bicycle
mileage rates, ranging from 5p to 33.6p per mile. For motorbikes, meanwhile, the
rate ranged from 10p to 50p per mile among the 17 organisations that provided
details.

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Subsistence benefits

The subsistence budget is an obvious target for cuts during difficult economic times.
This covers the costs of meals out and/or overnight stays on company business.

Provisions usually fit into one of two broad categories:

• reimbursement of the actual costs incurred; or

• a set figure or maximum expenditure limit for accommodation and/or meals.

There are signs that employers may have targeted this aspect of expenditure during
the recession, with the proportion of organisations that provide subsistence
allowances declining from 59.2% of employers in 2008 to 47.2% in 2009 and to
45.1% in 2010.

Subsistence allowances were offered most commonly for an evening meal (42.4%),
followed by breakfast (40.2%), lunch (39.5%) and afternoon tea (20.1%).

Benefits & Allowances 2010 Travel and subsistence 7

The most common approach where subsistence is on offer is simply to reimburse
reasonable costs, although among organisations providing data where a set or
maximum allowance is in place, these stood at the following levels at the median:

• breakfast allowance - £5.71;

• lunch - £8.12;
• tea - £3.20; and
• dinner - £15.

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Overnight stays

Just over four in 10 (194, or 43.8%) offer a subsistence allowance for overnight
accommodation.

The most common approach (adopted by 151 employers, or 77.8% of the 194 who
offer overnight stay allowances) is to reimburse "reasonable" hotel room costs
claimed as expenses. The remaining 43 organisations have a set allowance and,
among this group, the median figure is £80.

Some employers allow different amounts depending on location, reflecting in

particular the higher costs often incurred in the capital. For example Airwave
Solutions allow £120 for overnight stays generally but £140 for hotel bookings in
London.

This article was written by Janet Egan, a researcher and writer on UK employment
issues.

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Additional resources on XpertHR

• Benefits and allowances 2010: key findings Our survey of 443

organisations details the benefits and allowances provided by UK
employers. We summarise the key points and explore the findings on salary-
sacrifice, flexible and voluntary benefits.
• Benefits and allowances 2009: travel and subsistence benefits This
article examines travel and subsistence benefits in 288 organisations, as
surveyed by IRS in 2009.

© Reed Business Information

Benefits & Allowances 2010 Travel and subsistence 8