The current high inflation and depreciating local currency have brought fresh challenges to the total cost of employment model

Taurai Masunda / Posted On: 23 October 2019 / Updated On: 14 September 2022 / Recruitment and Selection / 440

Search Blog Click here to search the site.
The current high inflation and depreciating local currency have brought fresh challenges to the total cost of employment model



We recently carried out a company vehicle policy survey. The aim of the survey was to investigate market practices in relation to company vehicles.

 

HR personal needs to invest significant resources into designing benefits packages that can be used to recruit new employees and to retain the talent they already have. Company vehicle benefit is one of the benefits that current and prospective employees look at. In a society for human resources management survey on job satisfaction and engagement, the vast majority (92%) of employees indicated that benefits are important to their overall job satisfaction. Also, results showed a relationship between benefits and retention, with 29% of employees citing their overall benefits package as a top reason to look for a position outside of their current organization. 32% of employees who were unlikely to look for an external position cited their overall benefits package as a top reason as well.

 

Different companies have different reasons for adopting a certain company vehicle policy. For some, providing employees with a car is simply the cost of doing business. Those employees that must travel long distances in a sales-based role may need a car to fulfill their job function. Other employers, whose staff has frequent contact with their clients outside of the office, may wish to control their company’s public image by furnishing those employees with a vehicle that reflects the company values, whether that be a luxury vehicle or a more understated option. Finally, many companies may see a company vehicle policy — either in the form of a company-provided vehicle or a car allowance — as a key to their employment brand and a major prerequisite meant to attract top talent. Indeed, car benefit policies can provide value to a company in a number of ways.

 


Misunderstanding what current employees and new recruits expect and what the competition offers on a local basis can represent a deal-breaker. The car benefit has an emotional impact that does not easily compare to any other element of reward. Often times, organisations feel it is in their interest to ensure that an employee drives a vehicle of a good safety standard and size, especially where the employee needs a vehicle to execute his or her work effectively. Thereby it may make little sense to offer cash where a car would be a guarantee of good service.

 

When organisations provide vehicle allowance under the total cost ownership model, they have to provide maintenance allowance also. Providing a car without maintenance could reduce companies’ ability to attract talent and may come across negatively. This model has the risk of cost increases. Moreover, the total cost ownership model is difficult to administer in economies that are not stable. In our recent survey we find that 13% of survey participants are on the total cost model and provide a vehicle allowance. The key question is,  how feasible is it running this model currently?

 

Companies that converted to a total cost model during the multi-currency system operated this model fairly well. The challenges brought by the current high inflation and depreciating local currency have brought fresh challenges to the total cost model. A vehicle purchase from the local or external market requires foreign currency in USD. Therefore, it is currently impossible/impractical to operate a vehicle loan scheme under the total cost model. Other companies think that the only option is to revert back to a fully expensed company vehicle where the employer funds the purchase of the vehicle. However, fully expensed company vehicle brings governance {abuse of the company vehicle}. The fully expensed company vehicle scheme is very expensive to run.

 

What scheme you decide to adopt entirely depends on your own situation as a company. Do not rush to copy what other organisations are doing without doing proper due diligence.

 

For the full report – Company Vehicle Policy Survey Report, contact Taurai Masunda. Taurai Masunda is a Business Analytics Consultant at Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/taurai-masunda-b3726110b/ Phone +263 4 481946-48/481950/2900276/2900966 or cell number +263 779 320 189 or email: [email protected]  or visit our website at www.ipcconsultants.com


Taurai Masunda
      View Taurai Masunda's full profile



Related Articles






Popular Categories