Four Signs Your Car Allowance Isn’t Competitive—and Four Ways to Fix It

Written by mBurse Team Member Dec 27, 2017 7:14:00 AM

Competition lies at the heart of the American economy. In this post-recession era, everyone’s looking for an edge over their competitors. As job markets open up and demand for employees rises, it’s imperative both to attract top talent and retain top talent. To remain competitive, organizations must pay attention to their competitors’ compensation and benefit programs.

Your car allowance policy for mobile employees is an important piece of the compensation puzzle. You have to protect your employees’ compensation from the high and often volatile costs of operating a personal vehicle for business. Failure to do so will mean loss of top employees to competitors offering more robust car allowance policies.

Disguised compensation or competitive business tool?
Car allowances were originally used as a way to deliver additional compensation to employees. Negotiating a car allowance offered an alternative to negotiating salary with new hires and as a result allowances came to be viewed essentially as a disguised form of compensation. Instead of viewing a car allowance as a dynamic business tool to help retain current employees, many businesses let years pass without ever reviewing their car allowance, focusing instead on the compensation package as a whole.

With mobile employees occupying an increasing share of the workforce, it is imperative that companies not neglect the car allowance. In order to remain competitive in the marketplace, organizations must make sure their car allowance is a business tool that covers all mobile employees’ costs. A car allowance that is directly responsive to employees’ costs is an invaluable tool for retaining top employees.

car allowance tax waste calculator

Signs your car allowance policy may not be competitive
So how do you know if your car allowance is a competitive business tool? If any one of the following statements is true, it’s time to review your car allowance and make it more robust.

  1. You have not benchmarked your car allowance to competitors’ car allowances
  2. You have not compared your car allowance with employees’ actual costs
  3. Your car allowance amount was not based on expense data in the first place
  4. Your car allowance has not changed in years

Challenges to creating a competitive car allowance
Before making any adjustments to your car allowance, it’s important to understand the challenge every car allowance policy faces: All mobile employees do not experience the same costs or territory sizes.

Unless all employees work in the same geographical location, drive similar distances, and drive similar vehicles, you will see a wide variety of expenses associated with driving personal vehicles for work. While some employees may find the allowance adequate or even generous, others may find it insufficient. This disparity will affect morale, dampen productivity, and ultimately drive some employees out the door.

Fortunately, these challenges are not insurmountable. With a willingness to think outside the current car allowance paradigm and a willingness to do a bit of research, you will find that a robust, competitive plan lies within your grasp. 

Ways to quickly sharpen your competitive edge:

1. Use regional gas prices to help establish a new car allowance amount.

2. Factor regional car insurance costs into the new amount as well.

3. Provide a reimbursement instead of an allowance to address unequal territory sizes and costs.

4. Contact mBurse—fair and flexible reimbursements are our specialty.

It is imperative to address your car allowance to remain competitive in the marketplace. You want to incentivize employees while covering their costs. This keeps top talent in your organization and sets you up to attract new employees.

Contact mBurse today for a free benchmarking report comparing your car allowance policy to industry-leading policies.

2017 car allowance survey results

icon of envelope

Subscribe by Email