Employment Policies, Procedures & Guidance CONTRACT HIRE (CAR LEASING) SCHEME

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1 CONTRACT HIRE (CAR LEASING) SCHEME 1. Introduction GUIDANCE NOTES The following details describe the conditions for providing a contract hire car to employees of the Council. Under the scheme, the Council will provide a contract hire car, which can be used for official business and private use. The scheme is optional. The assisted car purchase scheme, essential and casual users' allowances will continue for those employees who are eligible and who do not wish to participate in the contract hire scheme. A maximum of 3 Requests for Quotation may be submitted. Further Requests for Quotation will incur an administration charge to the employee of plus VAT per Request which is payable on submission of each subsequent Request for Quotation. An employee who wishes to participate in the scheme should consider the following conditions before applying - the employee shall be deemed to have accepted all the conditions upon making an application for a car. 2. General Information Under this scheme the Council would hire from one of a number of contract hire companies a specific car for an employee who wishes to participate in the scheme. The employee will have a choice of model of vehicle, subject to a maximum level of 185 grams per kilometre in respect of carbon dioxide (CO2) emissions and to the prior written approval by the employee's Chief Officer as to the suitability of the proposed vehicle for business use. As explained further below, employees may be required to pay a contribution in respect of the contract hire costs for the vehicle, as determined by the Council and this will be deducted in equal amounts from his/her salary. The period of contract hire will be fixed at either three or four years (at the election of the employee) on a fixed price basis and the Agreement between the Council and the Employee will remain on a fixed price basis for the duration of the hire period, variable only by adjustments necessary to correct inaccurate business and private mileage estimates any changes to VAT or Road Fund Tax or the imposition of any other statutory tax charge or penalty, which will be passed on to the Employee. The five variants of the lease car scheme and the Council's contribution to the cost of the contract hire agreement per annum will be as follows: All Green Book (not JNC) posts graded POG or equivalent and above all of these postholders may participate in the scheme with an employer contribution of 6.75% of the maximum point of their salary grade at the time of delivery of the car. Where the post holder is on a linked grade, for example PO F/G, eligibility to the scheme would start at Spinal Column Point 41, unless covered under below. Posts graded SO2 or equivalent and above where difficulties are experienced or anticipated in recruiting or retaining staff (as approved by the Chief Executive on the Contract Hire (Car Leasing) Scheme April 2008 Page 1

2 advice of the Corporate Head of Personnel) these postholders may participate with an employer contribution of 6.75% of the maximum point of their salary grade at the time of delivery of the car. (iii) (iv) (v) Posts graded SO2 or equivalent and above which have Essential User Car Allowance the employer contribution is calculated using a formula based on their previous mileage claims, or 6.75% of the maximum point of their salary grade at the time of delivery of the car, whichever is the lower. Any employee outside of the categories above but in receipt of an Essential User or Casual User Car Allowance may lease a car through the scheme and the employer contribution is calculated using a formula based on their previous mileage claims. Any other employee may participate in the scheme with no employer contribution. Please note that in each instance an employee on a fixed term contract of employment may only participate in the Scheme where at the date of the proposed hire agreement, the period of service remaining under their contract of employment will exceed the relevant vehicle hire period (i.e. 3 or 4 years as appropriate). The level of the employee contribution would depend on several factors namely: (iii) (iv) the type and specification of car selected including any optional extras. the estimated number of business miles the employee travels in a year. the estimated total number of miles (business and private) the employee travels in a year. whether the employee is classed as a Casual or Essential Car Allowance holder, or is eligible under the subsidised scheme. (e) (f) (g) (h) The employee's maximum contribution to the cost of the scheme must not exceed 15% of his or her gross salary (i.e. Spinal Column Point) at the estimated time of delivery of the car. The employee will not be eligible to join the scheme if he/she has been convicted of any offence that will preclude the employee from obtaining comprehensive insurance. An employee may apply to join the scheme at any time, but cannot subsequently withdraw from the scheme during the period of the contract hire except in the circumstances detailed later in paragraph 7 of these guidance notes. The employee shall enter into a contract for a hire period of three or four years (at their discretion) and at the end of the contract may enter into another contract under the scheme. Whilst participating in the contract hire scheme the employee's rights to Essential and Casual Car User's Allowances will be suspended and any existing car loan must be repaid in full within one month of delivery of the contract hire car. Employees will be expected to make their own arrangements to dispose of their existing vehicle, if they consider it necessary. (j) All vehicles hired by the Council must use unleaded petrol or diesel Contract Hire (Car Leasing) Scheme April 2008 Page 2

3 (k) The provision of a car through the scheme to an employee will constitute a taxable benefit upon which the employee will be liable to pay income tax to HM Revenue and Customs at such rate(s) as shall be determined from time to time during the contract hire period. If necessary, employees should contact HM Revenue & Customs for further advice prior to joining the scheme. 2. Terms of Contract Hire Contract NB. The Contract Hire Company will own the car throughout the period of the agreement. The employee will be required to enter into a formal Hire Agreement with the Council and to abide by the conditions of the scheme as detailed in this document and the terms and conditions of the Agreement. Please note that the scheme is based upon a separate agreement between the Contract Hire Company and the Council. An employee who joins the scheme will, for a monthly charge deducted from his/her salary, be provided with a car of his or her choice (subject to the restrictions set out at Paragraphs 2 and (e)) to be used for business and/or private mileage for a period of three or four years (at their discretion). Deductions will commence in the month following that in which the vehicle is delivered. The following will be provided: (iii) (iv) full maintenance and mechanical repair subject to the specific terms of the separate Agreement between the Council and the Contract Hire Company; a road fund licence; membership of a national motoring organisation which will include Home Start facilities unless a similar service is provided by the manufacturer of the vehicle. This covers the hire vehicle only and cannot be extended to other vehicles owned by the employee or his/her family. This will not necessarily cover breakdowns abroad this area is the responsibility of the employee to arrange and fund if they so choose. provision of a replacement vehicle when the hire car is unavailable for use due to breakdown or accident damage within 24 hours of notification. The hire agreement will specify a total mileage, which the vehicle is expected to cover during the period of the contract. A fixed amount per mile will be charged for any mileage in excess of this figure. Conversely a rebate may be allowed where mileage is below the specified level. Where excess mileage costs are incurred, the employee will be charged for the proportion of the charges, which are due to excess private miles. The Council will bear the cost of excess business miles. Similarly, any rebates for lower than contracted miles will be apportioned in the same way. NB Newly promoted employees can estimate their mileage using the experience of the previous post holders, (subject to approval by Chief Officer). Prior to ordering the vehicle, the employee will be required to sign an undertaking confirming his/her requirements and to be responsible for all charges or costs to the Council arising out of cancellation of the Order Contract Hire (Car Leasing) Scheme April 2008 Page 3

4 (e) Prior to delivery of the vehicle, the employee will be required to sign a formal Hire Agreement. He/she must produce a Certificate of Insurance in respect of the vehicle and a current valid driving licence for inspection. (f) (g) (h) The employee will be required to have the vehicle available whenever required for official business. The employee will be required to sign an acceptance note confirming receipt of the vehicle as ordered (i.e. correct model, colour, extras, etc.) and that the vehicle is in a satisfactory condition. Delivery of the vehicle will be to the Civic Centre. The employee will be required to provide at their own cost his or her own insurance cover for the vehicle for the duration of the hire period. This must be comprehensive and cover all risks normally covered by comprehensive insurance (including windscreen), business use, and all other uses to which the vehicle will be put. The policy must include an endorsement recording the Owner's (i.e. the Contract Hire Company) interest in the vehicle. The insurance must be obtained from a company that is a member of the Association of British Insurers (ABI) or a name at Lloyds. An annual inspection of the insurance documents and Driving Licence will be required. It may be possible for employees to purchase the hired vehicle at the end of the hire period, but should they wish to do so this will be a private matter between them and the Contract Hire Company. 3. Employee's Responsibilities The hire charges are determined by the Contract Hire Company on the assumption that the vehicle will be kept in good condition throughout the period of hire and to the same high standard as if the vehicle was owned by the employee concerned. It is therefore in everyone's interest that this standard is maintained, particularly so that the car maintains its book value when returned at the end of the contract. The employee has a specific responsibility for the following: (iii) (iv) (v) (vi) (vii) (viii) keeping the vehicle clean and in good condition; at regular intervals checking the various fluid levels, tyre pressures and condition etc., and "topping up" as necessary; reporting defects promptly to the nominated garage or as otherwise instructed by the Council or Contract Hire Company; ensuring that servicing, repairs and maintenance are carried out by the nominated garage as approved by the Contract Hire Company at the intervals recommended by the manufacturer; ensuring that any work covered by the manufacturer's warranty is carried out under the warranty and that he or she does nothing which would invalidate that warranty; obtaining approval for repairs above any costs specified by the contractor and ensuring that invoices are submitted if required as instructed by the Contract Hire Company; reporting to the Council should it be anticipated that actual mileage will differ from that estimated; ensuring that a valid road fund licence is displayed at all times; Contract Hire (Car Leasing) Scheme April 2008 Page 4

5 (ix) conforming to all instructions and recommendations in the manufacturer's handbook and all other instructions and advice given by the Contract Hire Company or the Council Contract Hire (Car Leasing) Scheme April 2008 Page 5

6 (e) The employee should note that he or she will be personally liable for the car's road-worthiness in accordance with all legal requirements for the duration of the hire period as if he or she were the owner of the vehicle. Employees should not service, repair, adjust or adapt the vehicle themselves (other than in the circumstances mentioned above), and in particular must not interfere with the Odometer (the instrument which records the mileage for the vehicle). The employee is under a duty to report all damage or defects in writing immediately. Where an employee has damaged the vehicle due to failure to maintain or non-reporting of defects then he or she is liable to pay for the resulting repairs. The employee will pay for any fuel put into the vehicle, together with oil and other fluids required outside normal repairs and servicing. The employee will be reimbursed for business mileage based on the rates defined by the NJC. The level of reimbursement is intended to compensate the employee for the cost of fuel used whilst using the car for business purposes. All other costs of running the vehicle shall be borne by the employee save as where indicated otherwise in this document. (f) (g) (h) (j) Where an employee with a hired car uses another vehicle for business purposes the rate of reimbursement he receives will only be the fuel reimbursement applicable to his hired car, or the fuel reimbursement relevant to the actual car used whichever is the lower. The employee will meet the cost of any extras fitted to the vehicle after delivery. Reasonable reinstatement must be made following the removal of extras. The employee will pay for the cost of repairs and replacements occasioned by abuse or neglect on the part of the employee and the assessment of the value thereof by the Council and/or Contract Hire Company shall be binding on the employee. Employees may be required, at short notice, to present the vehicle's service records and mileage records to the Council's nominated representative for inspection. Mileage records will be required to be kept for all business miles as per the Council's prescribed procedure. Should an employee incur a parking fine or other motoring penalty in respect of the hired vehicle, any failure to settle the fine / penalty may result in a penalty charge being imposed by the Contract Hire Company, payable by the employee Contract Hire (Car Leasing) Scheme April 2008 Page 6

7 4. Use of the Vehicle A hired car may only be driven by persons holding all necessary current licences and permits in respect of both the vehicle and themselves and covered by the employee s fully comprehensive Policy of Insurance. This includes provisional licence holders who are suitably accompanied, for normal social, domestic and pleasure purposes providing suitable insurance cover exists. It may not be used for hire or reward or for racing, rallying or other similar pursuits. Towing is permitted providing the manufacturer's recommendations are followed with regard to fitting of towing equipment and maximum weight of the trailer or caravan. The cost of such fitting must be borne by the employee. Employees will be liable for any damage caused by tow bars. No adaptations may be carried out to the hired vehicle without the prior approval of the Contract Hire Company. 5. Foreign Travel The vehicle may be used for foreign travel subject to prior written approval from the Contract Hire Company and the obtaining of the appropriate form to allow use of the car abroad. Applications should be made at least one month prior to travel. The following conditions and procedures must be adhered to: NB. The employee must ensure they have comprehensive insurance cover valid for the country visited. An employee should not assume that their existing comprehensive insurance provides this level of cover whilst driving abroad and must check with their insurance company. The Contract Hire Company and the Council cannot be held liable for any costs incurred in returning the vehicle to this country following an accident or breakdown abroad. Where appropriate, the employee must ensure that he/she is in possession of a valid Driving Licence. In the event of a breakdown abroad, the employee will be expected to pay for any repairs. A receipted invoice giving full details of the repairs should be forwarded to the Contract Hire Company, who may reimburse any repair costs, if appropriate; however, reimbursement will be based on repair costs in Great Britain. Please note that this does not cover any breakdown recovery costs incurred Contract Hire (Car Leasing) Scheme April 2008 Page 7

8 6. Termination of Contract Hire Agreement If it is necessary to return the vehicle early and terminate the Agreement before the hire period has elapsed, the Council reserves the right to charge the employee the early termination costs incurred. These are set out below. These termination costs may only be waived by the Council (i.e. City Treasurer) in exceptional circumstances and at its sole discretion. Termination Costs EARLY TERMINATION COSTS (3 year hire period) MONTH IN WHICH TERMINATED NUMBER OF FULL MONTHLY RENTALS PAYABLE* MONTHS MONTHS MONTHS MONTHS Further, an administration charge of will also be levied. This may be waived at the discretion of the Council's City Treasurer EARLY TERMINATION COSTS (4 year hire period) MONTH IN WHICH TERMINATED NUMBER OF FULL MONTHLY RENTALS PAYABLE* MONTHS MONTHS MONTHS MONTHS MONTHS Further, an administration charge of will also be levied. This may be waived at the discretion of the Council's City Treasurer The Council reserves the right to terminate the scheme in respect of any employee in the event of any changes, which would make continuance detrimental to the Council's interest. The period of such notice will be a minimum of three months in writing. Prior to terminating their contract through change of employment or retirement employees may apply to purchase the vehicle from the Contract Hire Company. The hire agreement between the Council and the employee and the employee's right to the vehicle will terminate immediately: on death, retirement, or termination of employment with the Council; by any serious breach of the conditions of the hire agreement Contract Hire (Car Leasing) Scheme April 2008 Page 8

9 (e) (f) Unless otherwise stated in succeeding paragraphs, in the event of the Council terminating the agreement as a result of the above, notice of termination will be in writing and will be effective from the date of notice. All sums due to the Council, including any early termination charges, will be payable immediately. At the end of the contract period the car must be returned to the Contract Hire Company in good repair and condition although the employee may have the option to purchase the vehicle at a price determined by the Contract hire company at that time. Any outstanding dispute as to the condition of the vehicle shall be dealt with in accordance with the policy of the Contract Hire Company at that time. Purchase of vehicle at the end of the contract period does not preclude the employee from entering into a new hire agreement unless the original vehicle is purchased by way of a loan from the Council via the Assisted Car Purchase Scheme. 7. General Points for Information In the event of an accident to the vehicle the employee, or his Insurance Company, will pay for all repairs and/or replacement parts that are needed. This work must be carried out by a company previously approved by the Contract Hire Company and the Insurance Company. 8. Factors Affecting Employee's Contribution Various factors affect the level of contribution payable by the employee under a contract hire scheme such as the type and model of car obtained, total annual mileage and total annual business mileage, whether the employee is a casual or essential car allowance holder, and the effect on the employee's tax position. For further information regarding contributions payable by the employee to the scheme please contact Corporate Procurement Contract Hire (Car Leasing) Scheme April 2008 Page 9