The car has deemed value of $30,000 per annum - that's what it costs the company to provide the benefit, including FBT at 64 percent. But the sales manager is provided with company car to fulfil her duties. The finance manager and the sales manager are effectively doing jobs of equal 'size' and value. And employers are looking to simplify salary management.Īgainst this background, consider how company cars are factored into the employee's total remuneration package. * Employees want more choice and flexibility in their employment contracts. In some instances, there are restrictions on the personal use of the car in bid to cut the cost of FBT and administration. * The benefit of the perk varies considerably from one company to the next.
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* While each organisation has different car policy, most offer their employees full private usage. * Companies that still offer company cars are generally those where employees require them as 'tool-of-trade' vehicles. That fell to less than 38 percent in 2003. * Research by Higbee-Schäffler shows that in 1994, 83 percent of organisations offered perk cars. If your company still offers them, chances are it won't for much longer - 25 percent of companies with company cars plan to cash them up over the next 12 months*. Six key issues must be considered in the context of the company car debate:* Perk cars are being phased out. And yet it's all easily avoided if, at the outset, there is clear understanding of how company cars are valued. Multiply the episode by 15 additional staff, and management is suddenly facing significant remuneration issue, not to mention staff morale problems. And I'll have to pay tax on the cash amount." Suddenly Joe perceives the deemed value to be too low. "There is no way," he fumes, "that an extra $25,000 on my salary is going to make up the cost of buying and running my own car. Joe goes ballistic and demands meeting with the HR manager. Joe's base salary will increase to $75,000 and he will have to buy, run and maintain his own car. Then the company announced that in keeping with the remuneration strategy of its international parent, company cars "are being phased out". He sees it as way for his employer to avoid giving him an increase in his base salary. "The car isn't worth anywhere near $25,000 - it's only two-litre and it doesn't even have air-conditioning." The deemed value of the benefit is, he feels, too high and he believes that the company is trying to make his total remuneration appear more competitive than it really is. * $25,000 company car - annual deemed value including running and maintenance costs, unlimited kilometres, FBT, parking and so on.īut Joe feels cheated, and grumbles to his partner and colleagues that the company is short-changing him. His $75,000 total remuneration package is made up of: Joe is product manager with ABC Enterprises. And judging from the research, the scene is played out daily in nearly every organisation. The confusion surrounding the 'cashing-up' of cars in employee remuneration packages is illustrated by the following scenario.
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