SOUTH CAMBRIDGESHIRE DISTRICT COUNCIL. REPORT TO: Leader and Cabinet 13 January 2011 MILEAGE AND CAR ALLOWANCE POLICY

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1 SOUTH CAMBRIDGESHIRE DISTRICT COUNCIL REPORT TO: Leader and Cabinet 13 January 2011 AUTHOR/S: Executive Director, Corporate Services MILEAGE AND CAR ALLOWANCE POLICY Purpose 1. To provide Cabinet with the proposed policy changes to the Council s mileage and car allowance scheme. 2. This is not a key decision but Cabinet is required to consider and agree this significant policy change. It is a change to current policy relating to Council employees, and it is likely to result in the Council making of savings which are significant having regard to the Council s budget for the service or function to which the decision relates. Recommendation 3. That Cabinet APPROVES the proposed changes to the Council s mileage and car allowance policy and that the new policy becomes effective from 1 April Reasons for recommendation 4. The recommended changes are: The cessation of the Council s lease car scheme The use of HMRC rates for car mileage, carrying passengers, and the use of cycles and motorcycles for business travel The introduction of a payment of a car allowance based on qualifying criteria That any future HMRC rate changes are applied. 5. The revised scheme offers a fairer means of reimbursing employees for using their own vehicle for business travel. The adoption of HMRC rates will also reduce the administrative burden for Payroll in relation to the year-end issue of P11D returns. 6. Cabinet, at its meeting in November 2009, agreed to the revised Financial Strategy and savings proposals, which included the cessation of the lease car scheme and a revisions to car allowances. Council approved this in February The proposed scheme will enable the Council to achieve the budget reductions outlined at this meeting. 7. The review of the scheme is an action arising from: The Council s review of pay & benefits as part of its commitment to achieve Single Status and the requirements of the Equality Act 2010 Travel for Work project (Travel Link) action plan, climate change and sustainability work programme

2 2009 and 2010 staff savings suggestions in response to corporate savings targets. Executive Summary 8. The current mileage reimbursement, car allowance and lease car schemes have been in effect for many years and in the light of equal pay requirements and the need for the Council to achieve budget savings, it is appropriate to review the arrangements in order to; introduce a fairer and more consistent approach in line with Equalities legislation; to reflect the Council s commitment to sustainability and reduced CO 2, and to achieve significant budget savings as outlined in the report to Council in February A review of the Council s scheme, along with research into policies at other local authorities and organisations in general, has concluded that many are moving away from the traditional local government NJC scheme and lease car schemes. Many local authorities are no longer paying an essential car user payment, and most are adopting the HMRC mileage rates. Recent information released by the National Employers for Local Government Services has confirmed that it is intended to change the NJC car allowance scheme (essential lump sum and casual rates) and replace it with a flat rate payment, which is likely to be in line with the HMRC rate of 40 pence per mile. Local government employers have welcomed this proposal. 10. The NJC rates paid to employees are determined by the engine size of the vehicle, a higher rate is paid for larger engine sizes and lower rates are paid for cars with smaller engines. It is recommended that one rate of mileage payment is introduced at South Cambridgeshire District Council. The rate will apply to all employees, regardless of their vehicle engine size and CO 2 efficiency level. It is recommended that the HMRC rate, currently 40 pence, be used. 11. The lease car scheme has also been in existence for a number of years and was, in the past, seen to be a recruitment and retention incentive. However, there is now a trend, for cost and green reasons, for businesses to no longer offer this benefit. There has been a steady decrease in the number of employees opting to have a lease car and following the decision to no longer offer a lease car for the Chief Executive or Executive Director posts, it is recommended that the Council no longer operates a lease car scheme. Existing leasing contracts will be allowed to run to the end of their current term but no new leases or extensions will be approved. Background 12. South Cambridgeshire District Council recognises that, in undertaking their duties, there are occasions when employees use their own vehicles (including cars, motorcycles, cycles) to travel within and outside the district. The Council currently pays agreed NJC mileage and car allowance rates as set out in Appendix 1. These rates are set annually and the amount paid to the employee is determined by the engine size of the vehicle used for business travel. Larger engine sizes qualify for higher payments and it is felt that this doesn t encourage the use of more efficient, smaller cars. 13. The NJC mileage rates reflect the cost of petrol reimbursement, wear & tear, additional business insurance and service costs (around 40 pence per mile), the remainder of the payment is deemed to be profit and therefore a taxable benefit. The payment of essential car allowances is also regarded as a taxable benefit.

3 14. Over the years, job appointments and changes to roles have led to a position whereby the scheme has not been consistently applied and some car allowances are being paid where the level of mileage is below the threshold of 3000 miles annually. The same situation has happened in relation to lease cars. This has led to a general feeling of unfair practices within the workforce and has been borne out by comments in recent staff surveys. 15. In some cases, where either the employee s recruitment package or where their level of business travel is extensive, it has been the Council s practice to allow access to the lease car scheme. Some years ago the number of lease cars contracted to the Council was around 40, however there has been a steady decline and there are only 15 currently on the scheme. Again, this is an area where inconsistency in applying the scheme has led to perceptions of unfairness by staff. 16. The staff allowances and benefits are being reviewed as part of the Council s Job Evaluation and Single Status project, which aims to achieve a fair and equitable approach to pay and benefits. All policies relating to payments and benefits are being reviewed in the light of Equal Pay legislation. 17. The Council s financial position, and the need to achieve significant budget reductions, has also led to the examination of corporate costs. One suggestion put forward by a number of staff was for staff mileage and car allowances to be revised to save money. SMT and EMT agreed that work should be done to take forward this proposal. 18. A working group, with staff, union and management representatives, has been involved in the development of the proposed mileage and car allowance scheme. The group has considered a number of issues and concerns raised by staff including; how the policy will be applied to part time staff; the criteria used to determine a business user and whether the payment will be made to an employee on long-term sick leave. The proposed scheme is attached as Appendix 2. Considerations 19. Feedback from the National Employers organisation, other Councils and discussions with East of England Local Government Association (eelga) has found that, in the current climate of budget reductions, many local authorities are reviewing employee terms and conditions. Many employers are reducing benefits such as car allowances, health insurance, professional fees and other benefits in preference to cutting jobs. It is almost certain that the national mileage scheme, which is part of the terms and conditions for local government employees, will be changed to reflect the HMRC mileage rates, and the essential user allowance will cease. 20. At South Cambridgeshire District Council the current criteria for essential user payments (annual mileage of 3000 or more) has not been applied consistently and, over a number of years, some employees have continued to receive the payment even though their level of mileage has decreased or their job role has changed to one where business travel is not required. 21. The Team Leader responsible for sustainability and climate change has been consulted and has provided feedback on the proposals. In particular, he has highlighted the need to encourage more car sharing and also suggested that the Council increases its passenger rate from 2 pence per mile to 5 pence (in line with HMRC rates) to encourage car sharing to business meetings.

4 22. The Council currently operates a car loan scheme, which will be reviewed in the light of changes to the mileage and car allowance policy. 23. Some employee contracts make reference to the essential user/casual user car scheme or lease cars. The Council s employment contracts contain a clause; The Scheme of Conditions of Service made by the National Joint Council for Local Government Services is incorporated into this contract (as are other documents such as the Council s disciplinary rules and procedures). Local agreements under Part 3 of the NJC Scheme are also incorporated. When these change, as they will from time to time, your contract of employment will change as well. If they change in an important way then this Authority will inform you that a change has taken place within a month of the change occurring (or as soon as possible if a month is not possible). Formal notice will immediately be given to staff affected by the policy change (those who are currently in receipt of an essential user allowance or lease car). It is intended that the new scheme will be effective from 1 st April Financial 24. The Payroll Assistant has confirmed that there are currently 15 lease car drivers. An exercise has been undertaken to compare the cost of the leases, currently , to what the cost would be if the Council: a) moved lease car drivers to the current Essential user status, or, b) moved lease car drivers to HMRC rates plus a car allowance. There would be an overall increase of with option a) but an overall reduction in cost of with option b). 25. The Council also provides insurance cover for the lease cars, this was last renewed in September 2010, and the cost was 8, Accountancy staff have advised that the cost of the cover, under the current policy provision, is likely to increase as the number of vehicles being covered decreases as the insurance risk is deemed to increase. 26. There are currently 150 staff designated as essential users, the annual cost of paying the lump sum is 185,850. It is estimated that 90 of the 150 employees do not drive the minimum requirement of 3000 miles per annum. 27. Further financial modelling has been undertaken to look at the cost comparison of moving the current group of employees from the essential user status to HMRC rates plus a car allowance. Based on 2009/10 mileage for casual and essential users: (a) (b) move essential users to the new scheme and HMRC rates would save in the region of 213,971 move casual users to the new scheme and HMRC rates would save in the region of 11, If the Council decides to pay a car allowance, based on the criteria outlined in the proposed scheme, then there will be a cost of up to 960 per annum for each employee who qualifies for the full payment. Based on the current number of essential users (146), all qualifying for the full payment, this would be a cost of 140,160.

5 29. Implications Financial Legal Staffing Risk Management Equal Opportunities Climate Change Options Savings are set out on the body of the report Employees will feel that their employment benefits are being eroded, however savings will count towards corporate budget reduction targets and reduce the need to find officer post savings. The new scheme will be more transparent and fairer. There is a risk of equal pay claims if the current scheme and practices are not changed. A revised scheme will ensure a fairer approach to reimbursing employees for business mileage. An EQIA has been undertaken. There are no negative impacts. There is a positive impact in relation to part timer employees (predominantly women) as the qualifying criteria is pro rata. Proposals have the support of Team Leader responsible for sustainability and climate change 30. Option 1. To retain the status quo including the lease car scheme and continuation of the use of the NJC mileage rates and allowances. This is rejected on the basis that it will not provide savings, it will continue with an inequitable position in relation to benefits and it will not fulfil the actions arising from the Travel for Work action plan. 31. Option 2. To no longer offer a lease car scheme to employees. This would mean that current leases would continue to the end of the normal contract period but that no further leases or extensions would be permitted. Drivers, once their current lease expired, will move onto the Council s mileage reimbursement scheme for the purposes of claiming business travel. This option would achieve some savings in the region of those outlined in 24 to 28 above. 32. Option 3. To cease using the NJC mileage rates and allowances, which are based on vehicle, engine size. To introduce the use of the HMRC rate (single rate of 40 pence per mile for the first 10, 000 miles and 25 pence thereafter. See Appendix 3. The Council would no longer pay an Essential user lump sum or a car allowance. 33. Option 4. As option 3 but with the addition of a car allowance payment based on a set of criteria as defined in the proposed mileage allowance policy. 34. The working group recommended the following: (a) The cessation of the lease car scheme option 2 (b) The use of HMRC rates for mileage, passengers, cycles and motorcycles and the payment of a car allowance based on qualifying criteria option 4 Consultations 35. Employees are already aware of the proposal to review mileage and car allowances as the idea was submitted via the staff suggestion scheme for corporate savings and has been communicated at corporate brief. Local trade union branch members have been part of the working group for this project. The HR Manager and Payroll Officer have attended staff team meetings and a lunchtime briefing session was arranged for local UNISON members. General comments from staff have been received and can be provided on request.

6 36. Trade unions have been formally consulted, at the date of writing this report the following feedback has been received from UNISON: UNISON would like to express concern that many officers have accepted their current jobs on the understanding that they would receive an essential car allowance. In many cases the payment of an allowance is guaranteed in their contract. The proposed criteria should be amended to give a double weighting to those who drive over 3,000 miles a year. This could be balanced by putting "response to out of hours calls" and "emergence call outs" as one criterion instead of separate criteria. It would be useful to know what training line managers will be given to ensure that any new policy is uniformly applied. 37. The Team Leader responsible for sustainability and climate change has been consulted and his comments and suggestions have been taken into account. In particular incentivising car sharing to meetings. Conclusions / Summary 38. A number of options have been considered as part of this review and the group has taken account of the decisions made by other local councils in relation to mileage and car schemes. 39. The Council s acute financial position requires savings to be found, Council, at its meeting in February 2010 approved revisions to car and mileage payments to achieve such savings. Although it is regrettable that this will have a negative impact on the staff benefits package it is a means of achieving considerable corporate savings per annum. Background Papers: the following background papers were used in the preparation of this report: Car allowance schemes from other local employers HMRC guidance Contact Officer: Susan Gardner-Craig, HR Manager Telephone: (01954)