Review of the reimbursement of travel expenses

Transcription

1 Review of the reimbursement of travel expenses October 2010

2 Contents Review of the reimbursement of travel expenses 1 Current arrangements 1 What is being proposed - overview? 1 Proposals in more detail 3 On-going review of age rates 3 Calculating the cost of fuel 4 Reserve rate 4 Lease cars 5 The environmental agenda (the green agenda) 5 Timetable for implementation 5 Annex 1 6 Background 6 Calculating reimbursements in the NHS 6 Consultation on proposed changes in Principles for agreeing new arrangements 6 Current system of allowances and payments 7 Additional allowances 8 Annex 2 9 Standard methodologies for calculating the costs of motoring 9 The AA guides to motoring costs 9 Standing charges 10 Running costs 10

3 Review of the reimbursement of travel expenses Working in partnership as a sub-group of the NHS Staff Council, the Council s age sub group which has both employer and trades union representatives - has been reviewing the allowances paid to staff who use their own vehicles on official business. The review aimed to deliver a national system for reimbursements which meets the needs of staff, employers and the service in line with principles for any new arrangements: fair to staff, easy to use and transparent, with built-in partnership reviews of allowances, to ensure they cover costs incurred. This briefing gives employers and staff information about the NHS Staff Council s proposals for a new system of reimbursement of travel expenses. The document contains: - a description of the proposed new system of reimbursing travel costs; and - background information about age allowances and the review (see annexes). Current arrangements The NHS has a responsibility to reimburse costs incurred by staff who use their own vehicles to travel on NHS business. The national rates of reimbursement currently in the Handbook were last uprated in July 2008 in response to rapid increases in fuel prices at that time. Subsequently fuel prices and other motoring costs have changed. However, the NHS Staff Council has no agreed way of measuring these changes and, therefore, of checking if rates of reimbursement have kept track with changes in costs. Yet it is essential that nationally agreed rates appropriately reimburse staff for the costs they incur when they use their own vehicles for work purposes. The current arrangements are set out in Section 17 and Annex L and Annex M of the NHS terms and conditions of service handbook. What is being proposed - overview? The proposals have been developed following a consultation with NHS employers and trades unions which indicated a preference for a single rate of reimbursement and use of the AA guides as the reference for the costs of business motoring for the NHS. The sub-group believes this will ensure an authoritative and independent point of reference that reflects the true cost of motoring. From 1 July 2013 we are proposing a system of reimbursement of the cost of s travelled on NHS business to replace the existing system of payments and allowances. In keeping with the principles we have agreed we are proposing a simpler system based on a standard rate of reimbursement up to a maximum annual age after which the rate changes. The distinction between regular and standard car users would be abolished and there would be no reference to engine size. All travellers, irrespective of the frequency of their journeys 1

4 and the vehicle they drive, would receive the same rate of reimbursement. There would be a separate rate of reimbursement for motorcycle and bicycle users. Feedback from the consultation exercise indicated that staff and managers regarded certain allowances for carrying passengers and heavy and/or bulky equipment as important and we propose that these should continue to be part of the new system of reimbursement. We recognise that it is necessary to ensure that the average car user is appropriately reimbursed. It is not possible to have a national system that reflects each individuals costs or personal circumstances. The single rate will be set at a figure that we believe, as accurately as possible, reflects the costs to the average car user. Our proposals, which are outlined in more detail on NHS Employers website, are summarised below: - a single rate of reimbursement for all private car users, which would be reviewed twice a year; - rates of reimbursement which will move in line with business motoring costs; - using independently sourced information on costs via the AA; - reimbursement based on the average costs of running a car in the AA s estimate of a mid-range of price and size; - an increase in the rates for pedal cycle users; - rates for motor-cycle users to be 50 per cent of the proposed new standard rate of reimbursement for vehicle users; - continuation of excess travel expenses for staff required to change base as a result of organisational change; - any local agreements will be honoured; - half of the value of interest on capital (money) which an individual may otherwise invest if it had not been spent on the car (the cost of capital) is taken into account in setting the standard rate of reimbursement; - a change of reimbursement rates triggered when a change in overall motoring costs produces an increase or decrease above or below 5%; - a small increase in the allowance for carrying bulky and/or heavy equipment; - payment of the full standard age rate when staff are required to attend training courses or events away from their normal base; 2

5 - a reserve rate of reimbursement to replace the Public Transport Rate (PTR) which would be 50 per cent of the proposed new standard age rate; - elements which address concerns expressed by the Sustainable Development Unit (SDU) and other organisations concerned with the green agenda. The rates of reimbursement which would apply if the proposed system were in use today are in the Table below. Proposed rates of reimbursement at 1 July 2010 costs Column 1 Column 2 Column 3 Column 4 Type of vehicle/allowance Car (all types of fuel) Annual age up to 3,500 s (standard rate) 54 pence per Annual age over 3,500 s (standard rate) 18 pence per All eligible s travelled (see paragraph and Table 9) Motor cycle 27 pence per Pedal cycle 20 pence per Passenger 5 pence per allowance Reserve rate 27 pence per Carrying heavy or 3 pence per bulky equipment These proposed rates and the proposed new qualifying conditions would apply to all journeys made on and after 1 July There would be no changes to age allowances and the qualifying conditions in the national Handbook before then. Proposals in more detail Our proposals include a new system for working out what the costs of business motoring are. This is set out in the proposed new Annex L which would be incorporated into the revised terms and conditions of service handbook. Annex L shows how the list of costs in the AA guides would be taken into account in setting the standard rate of reimbursement. On-going review of age rates We are proposing that the new standard rate of reimbursement should be reviewed twice each year: 3

6 the first review would take place as soon as possible after the publication of the new AA guides (normally in April or May). The new values of the cost items listed in the guides would be used to update the values in Table 22 in Annex L and the change in the standard rate produced would be compared to its value at the time the standard rate was last changed. A change in the standard rate of more than, up or down, would lead to rates being adjusted for age undertaken from the following 1 July; a second review in October would look specifically at the average fuel price in the twelve month period ending in October. A change in the standard rate after this review would depend on the same rules as for the April/May review and would apply from the following 1 January. During the period leading up to the implementation of the new Section 17, Annex L and Annex M on 1 July 2013, the NHS Staff Council would check the rates of reimbursement being proposed using the procedures for review set out in the proposals. Any changes to the proposed standard and related rates of reimbursement resulting from these reviews, would be published in pay circulars so that local partnerships could keep track of changes in the proposed new rates of reimbursement until they are implemented on 1 July The rates implemented on 1 July 2013, would be those resulting from the review which would be done following the publication of the new AA guides in April/May Those rates would apply to all journeys undertaken on and after 1 July Calculating the cost of fuel It is the cost of fuel that is often the trigger for concerns over reimbursement for business travel. However, the AA estimates that the biggest single cost item is depreciation, which is a standing cost, rather than a running cost. All items in the AA s list of motoring costs are calculated in terms of their cost per travelled. Under the proposed new arrangements, the cost of fuel is calculated this way, referenced to the average cost over the last twelve months. An example of how this works is below. Using Table 22, we have assumed a total of 10,000 s of motoring each year, standing charges of around 3,845 per year, which produce a cost per for business s travelled of around 38 pence. In this example the average cost of fuel in a twelve month period is 105 pence per litre and produces a cost per of 11.8 pence for fuel only. Reserve rate We are proposing that there should be a reserve rate of reimbursement to replace the existing public transport rate (PTR). The reserve rate would be used to assist with the cost of journeys made in specific circumstances (see below). The reserve rate would be set at half of the standard rate (currently this would be 3 pence per above the current public transport rate) and the reserve rate would move up and down, in line with the standard rate. 4

7 The reserve rate would be used to reimburse travel when: - an employee unreasonably declines the employers offer of a lease vehicle (see the proposed new Annex M); - employees are required to return to work or work overtime, in line with Section 3 of the NHS terms and conditions of service handbook, on any day and incur additional travel to work expenses on that day; - a claim for excess age is made in situations where there is a compulsory change of base, either permanent or temporary, resulting in extra daily travelling expenses; - an employee uses his or her own vehicle when suitable public transport is available and appropriate in the circumstances. Lease cars Some principles are described in Annex M in the NHS terms and conditions of service handbook and in the relevant texts of national conditions for doctors and dentists. The details of arrangements for lease car users are agreed by partnerships locally and are part of local green transport planning. The environmental agenda (the green agenda) We have reviewed the responsibilities the NHS has to ensure sustainable development and carbon reduction. The achievement of the targets the NHS has been set, depend on local partnerships implementing strategies which bring together all the talents and expertise of the workforce. The age sub-group has considered the green agenda in all of the options it has considered. Directgov ( the official Government website for information on green transport issues has listed, in association with What Car, the top rated fuel efficient small family and family cars. These fall into 16,000 to 20,000 purchase price category in the AA guides to motoring costs, which link to the range of rates being proposed. For more information on the NHS carbon reduction strategy, see Saving carbon, Improving Health: NHS Carbon Reduction Strategy for England at which was launched on 27 January by the Department of Health Timetable for implementation We expect to be able to report on the results of trades union consultations when the NHS Staff Council meets on 19 November. If there is a positive result we would aim to publish amendments to the NHS Terms and Conditions of Service Handbook soon after. Existing rates of reimbursement would be frozen until 1 July

8 Annex 1 Background Calculating reimbursements in the NHS The national system of reimbursement of travel expenses was formerly the remit of the General Whitley Council (GWC) and national rates of age allowances were last fully reviewed in The uplift to rates applied in July 2008 is the first change since then. Until 1993, rates were reviewed annually by reference to the estimates of motoring costs produced by the Automobile Association Trust (AA). At that time AA estimates of costs and the allowances in the old GWC Whitley handbook were all based on engine size. Mileage allowances and the wider age allowance policy were transposed from the GWC arrangements to Agenda for Change, or were included in negotiations on new contractual conditions for medical and dental staff. The arrangements, dating back to the GWC/Whitley days, were copied into the new NHS terms and conditions of service handbook and medical and dental terms and conditions. In January 2008 it was recommended that local employers uplift some standard user rates. In July 2008, a 10 per cent increase to age allowances for all NHS staff was agreed amidst rising fuel prices. That agreement was made in conjunction with a commitment to continue talks in order to conclude the review of age allowances. Consultation on proposed changes in 2009 In March 2009 we invited all local partnerships of employers and trades unions to comment in partnership on proposed ideas for the main elements of a new system of reimbursement. We received feedback from over 90 local partnerships via a questionnaire. We received another nine responses in a more general format and over 60 responses from individual staff. Detailed comments were also received from the Sustainable Development Unit (SDU) the Energy Saving Trust (EST) and the Procurement and Supplies Agency (PASA). Over 90 per cent of the partnership responses indicated agreement with the general approach suggested by the age sub-group. In particular, the responses indicated a preference for a single rate of reimbursement and use of the AA guides as the reference for the costs of business motoring. Principles for agreeing new arrangements The age sub-group believes that age allowances should be based on certain core principles. These are: - fairness: allowances should reflect the cost of using vehicles for work and should be felt fair by car users; 6

9 - simplicity: the system should be easy to administer - allowing staff to make claims easily and managers to deliver reimbursement quickly, and must be deliverable on existing payroll systems; - transparency: all staff and managers should be clear how age rates are calculated and what the entitlements are, how they will be reviewed and how changes will implemented; - a partnership system: under the NHS Staff Council, for the regular review of allowances based on the agreed measure. The new system of reimbursement we are proposing is in line with the principles outlined above. Current system of allowances and payments Currently the provisions in the national Handbook distinguish between standard and regular users. Regular Users are those employees who are classified by their employer as a regular car user and for whom their employer has deemed it uneconomic, or is unable, to offer a lease car. To qualify for regular user rates of reimbursement employees must satisfy the eligibility criteria in the national Handbook. Employees who use their vehicles on NHS business and who are not classified as regular users by their employer are classed as standard users. The rates of reimbursement for regular and standard users are in Table 1 below. Table 1 Table 1: Rates paid to standard and regular (vehicle?) users 1 in the NHS. 1 Please refer to the Agenda for Change Terms and Conditions of Service, Section 17 for full details of the definition of a regular user 7

10 Additional allowances Passenger allowances 5 pence per. Public transport rate 24 pence per Bicycle allowance for local determination subject to a minimum of 10 pence per Motorcycle allowance dependant on cc and age (see Annex L of the NHS terms and conditions of service handbook) 8

11 Annex 2 Standard methodologies for calculating the costs of motoring The sub-group understands that recently the debate on age allowances has become focussed on fuel costs. These are an important part of motoring costs and changes in the cost of fuel should be reflected in the overall rate of reimbursement. There are many other items contributing to the full costs of motoring for staff. For example tax, insurance, depreciation, repair and MOT costs. The age sub-group believes that only by taking account of all the costs involved, can we be sure that staff are being appropriately reimbursed for the cost of their journeys on official business. The guides on motoring costs produced by the AA, have been the basis for the calculation of national age allowances for many years. The guides set out in detail the costs of running a car. We are proposing that the AA guides are the best source of information on the costs of motoring and that they can be used to obtain information to estimate the costs of business motoring. The guides are, we believe, the best basis for calculating reimbursement for business travel because they provide the facilities needed for the regular review of motoring costs, including those costs like fuel which tend to change often. The AA guides to motoring costs Motoring costs tables are produced annually by the AA (normally in April or May) and have been since Care needs to be taken with comparisons due to changes that have taken place over the years, namely: cars are more economical and safer; today s cars produce less than 2% of the emissions of earlier vehicles; cars are quieter, easier to drive, more durable and reliable. The AA figures are based on how much it is likely to cost the average private user to run a petrol or diesel powered car in the following purchase price categories: Petrol Up to to to to Over

12 Diesel Up to to to to Over the purchase price of a new car which is replaced after five years; an analysis of the running costs of the 60 top-selling models representative of the UK market. Standing charges Standing charges are defined as the costs of keeping the vehicle on the road, even if it is not used. They include: Road tax Insurance Cost of capital used the interest on capital (money) which may otherwise be invested if it had not been spent on the car Loss of value depreciation costs Annual roadside breakdown cover. The standing charges per can be calculated by dividing the standing charges by the s travelled per year. Running costs Running costs per relate directly to using the vehicle and include: Petrol Parking and tolls Tyres Servicing and repair costs. The fuel cost element in the AA guides can be increased or reduced in line with fuel price fluctuations. 10

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