At the end of the day, employers who choose to offer a company car do so for one of two reasons: either on a ‘needs’ basis or a ‘status’ basis, according to the latest analysis of provision from Towers Watson. The category of employee offered a ‘status’ car varies widely around the world; for example, in Europe and the middle east, most sales professionals and supervisors will be offered one, whereas in Asia Pacific countries and Latin America, status cars are not offered until middle, senior or even executive level.
The cost of a car within the context of the total remuneration package also varies enormously. For example, the purchase cost of a car for senior management is very high in Switzerland, but makes up a relatively small proportion of this group’s cash remuneration. Conversely, the purchase price of a car in Indonesia is low but represents 14% of the average manager’s salary. A third of European employers now offer employees the alternative of cash to a car, even though this is rarely tax efficient for the employee concerned; the number of organisations in Latin America offering cash allowances instead of a car has increased slightly over the past few years.
Paul Richards, EMEA Practice Leader, Data Services at Towers Watson, said:
‘As global employers slowly seek to add a consumer-like experience to reward packages, we’re seeing an increase in the adoption of “choice plans”. In Continental Europe for example, where the poor tax effectiveness of cash compensation for employers and employees alike generally makes car-only plans more prevalent, roughly a third of companies now make use of cash (usually as part of the “choice plan”), even if the bulk of staff are unlikely to opt for it, and the trend is slowly growing. In Latin America as well, the percentage of companies offering cash allowances has increased slightly over the past few years.’