NHS Fleet Lease Car Scheme Managers Guide The administration of the scheme is outsourced to a specialist management company (Knowles Associates) who provides quotations, scheme management, driver support and management services for the organisation. The scheme administrator manages the processes, validates invoices and is responsible for payroll notification etc. on behalf of the employer. This guide is intended to provide NTW managers with background information about the Lease Car Scheme. Further information can be found in the Driver s Guide to the Lease Car Scheme and the Terms & Conditions of Use. Scheme Administrator: Knowles Associates TFM Ltd Red Lion House, The Green Great Bentley Colchester Essex CO7 8QG Telephone: 01206 252300 Fax: 01206 252211 Email: www.nhsfleet.com NTW Contact: Joe Milne, Head of Facilities Telephone: 0191 2232213 Email: joe.milne@ntw.nhs.uk Ian Ross, Service Manager (General Services) Telephone: 0191 2232628 Email: ian.ross@ntw.nhs.uk Date of Issue: June 2011 NHS Fleet Lease Car Scheme Managers Guide (June 2011) 1
Introduction Business travel is an essential element of any health organisation s service provision; it is also one of the largest expenditures. Cost, safety, environment and reliability are key issues for the service; affordability and attractiveness are key issues for the driver. What is a lease car? A lease car is a company provided car that is made available to an employee for their private use and the employee pays a monthly rental for a fixed period of time. The payment for the private use is a leasing arrangement between the employer and its employee, and is known as the lease car scheme. What is a leasing scheme? The leasing scheme refers to the way the private use arrangement operates. It includes the way that the driver s private use calculation works, the Terms and Conditions of Use of the lease and any restrictions, incentives and eligibility criteria the organisation wish to include. Key Features of the scheme? New Car Free Choice of Make and Model No Deposit No Credit Check Unlimited no Obligation Quotations Maintenance & Servicing Comprehensive insurance Road Fund Licence Tyres and Batteries 24 hr/365 Breakdown and Recovery Service Accident Management & Courtesy Car Expert advice and assistance Fully Automated Web Based System What is Contract Hire? This is the public sector s preferred method of funding the car. Under a contract hire arrangement a car is provided by a leasing company for a fixed term in return for a monthly or annual payment. The car is purchased and sold by the leasing company, who pay for the maintenance and repairs to the car, and includes breakdown and recovery services and vehicle excise duty. This is generally called a lease scheme. Why do we need a lease car scheme? Lease cars were introduced into the public sector in 1986 as an alternative to employees using their own cars for work. The principle reason was to save money by not paying the expensive nationally agreed regular user allowances. However, over time this has expanded to include Duty of Care, Environmental Reduction and Staff Benefits. NHS Fleet Lease Car Scheme Managers Guide (June 2011) 2
What are the benefits to the organisation? There are principally four benefits:- Cost Savings Improved Duty of Care Reduced Carbon Footprint A genuine Staff Benefit How can we save money? In the NHS the average cost of business travel in a private car is between 58p and 63p per business mile. The average cost of a lease car is below 40p per mile. How can we Improve Duty of Care? Under the Health and Safety at Work Act any car used at work is a company car and the same rules that apply in the office also apply to the car. The Trust is particularly at risk of prosecutions if the vehicle is not roadworthy or the documentation is not legal. New laws on Corporate Manslaughter exist where managers are negligent and fail to identify risks and take appropriate action. On average the lease car is 5 years newer than the average staff s own car and much lower mileage. The car is fully maintained and serviced, covered by full recovery services if it breaks down or is involved in an accident. A courtesy car is provided in the event of an accident and in most other instances so the driver can continue with their duties. The car is also fully covered for all insurance risks for the driver and their partner. Additional drivers may be added but you will need to provide their full details on a proposal form. How can we reduce the carbon footprint? Car Benefit Tax legislation has done a great deal to improve engine technology and reduce carbon output over recent years. A typical car that was emitting over 175 grams of CO 2 in 2005 produced 145 grams in 2008 and now produces less than 120 grams of CO 2. This means that a driver replacing their lease car will reduce the carbon footprint by 17% but a grey fleet driver joining the scheme could save over 31%. Why is the scheme an employment benefit? The public sector is a major purchaser of vehicles and motor insurance and because of this manufacturers are offering significant discounts over retail prices. In addition there is no deposit to pay and all major costs of maintenance and insurance are spread equally throughout the year. The employee is not subject to any credit checks before they take a car and the car is not included in any lending calculations such as mortgages or home improvements. Finally the price is fixed for the period of the contract and not subject to inflation so it is very easy to budget. NHS Fleet Lease Car Scheme Managers Guide (June 2011) 3
Is it cheaper for the NHS to purchase the cars? Some people argue that ownership is cheaper than leasing because the leasing company makes a profit. This is true if the organisation has the expertise and resources to do this including readily available capital. The benefits of contract hire are that the car is owned and all risks of failure are with the leasing company. The car is never an asset and there are no capital charges. The payments are fixed for the period of the lease and budgets and cash flow are manageable. In addition, contract hire gives the benefit of choice; if a company purchased their own cars they would not want a fleet of different makes and models, rather they would want to limit choice to one or two makes and models. How do we know we are getting best value? Buying Solutions (formerly NHS PASA) have in place three very effective national framework agreements. The first is with motor manufacturers for vehicle purchase under which the manufacturers offer very large discounts over retail prices. The second is with leasing companies who can use the discounts to calculate the contract hire rates and the third is with insurance underwriters who provide all risk fleet based cover. Almost all motor manufacturers have signed up to the purchase contract giving a very wide choice of cars and the discounts are higher than most of the largest UK private companies achieve. There are currently eight leasing companies that offer contract hire rentals under the contract, which means that we can use the cheapest quote for each car on-the-day effectively market testing every car. The insurance contract provides full comprehensive cover for all risk and usually covers any vehicle and any driver. Premiums are based on the cost of claims rather than on individual driver s performance or type of car. How does the Scheme work? If the employee joins the scheme they can choose to use the car for their own private and social use. If they do, they have a free choice of any car (subject to availability) available in the UK. The car will be procured under the Buying Solutions Framework agreement using the supplier that offers best value on-the-day. The whole life cost of the chosen car will be calculated including insurance, Class 1a NIC, Administration and Fuel etc. The driver s business mileage allowance is calculated based on the estimated annual business mileage and deducted from the total annual cost of the car. The driver will pay the difference between the cost of the car and the allowance as a contribution for the private use of the car. Because we use a mileage allowance the business cost will be fixed regardless of the car chosen or the private mileage driven. This is because the driver will pay all additional costs above the allowance. What effect does CO 2 emissions have on the scheme? Because the car is used privately, Car Benefit Tax will be charged to the driver; this is based on the list price and the CO 2 value of the car. However, the private use contribution, paid by the driver, will be offset against the full benefit charge. Therefore, the choice of car is very important in reducing Tax and National Insurance costs. NHS Fleet Lease Car Scheme Managers Guide (June 2011) 4
In addition to the tax position low emission cars are also more fuel efficient and will cost less to run. Vehicle Excise Duty (RFL) is also based on the CO 2 value; the VED is free in the first year and only 90.00 per annum for cars with a CO 2 value between 120 and 130 g/km and 30 for cars between 110 and 120 g/km reducing to nil below 100g/km. What is the Trust contribution? The only way to ensure that the organisation s costs are predetermined and fixed is to use a business mileage based allowance and compare this to the full cost of providing the car. The allowance should also provide an incentive to travel fewer business miles, reduce risk and reduce CO 2 output. To do this, we need to reduce the headline mileage allowance paid to drivers. To save money the allowance will be lower than the current motor mileage rate. All employees will have the allowance offset against the cost of their chosen car. Further details are available from the Trust s Facilities Department or Knowles Associates, the Trust s lease car management company. What is the Application Process? Before deciding drivers can obtain as many car quotes as they wish. The quotes are provided online and the driver can complete the online application. This application is sent by an electronic link to the line manager or budget manager who is authorised to approve the application. Full details of the car, mileage and costs will be available to the manager. The manager will agree the application which is sent to the scheme controller in the organisation who is responsible for final sign off. Once agreed the application is sent to the scheme administrator who will order the car and secure the price. Each driver will have an internet welcome page where they can follow the progress of the car through to delivery. Once delivered the driver will have a home page where they can access full details of the car and the suppliers; they can also access a whole range of services including foreign travel, accident reporting and mileage and expense claims. How does the driver proceed? The scheme administrator has staff available to take telephone or mail enquiries during office hours. In addition there is a website where drivers can access information about their car and access a wide range of services. The website is accessed through the internet or via a dedicated micro site located on the intranet. The intranet site includes all transport and travel related policies and guides; there are links to various services including online quotes, car application, vehicle progress, accident management, mileage reporting and expenses. NHS Fleet Lease Car Scheme Managers Guide (June 2011) 5
Relationships, responsibilities and duties A lease car is provided to employees to enable them to carry out their work in a safe and efficient way. Because the driver can opt to use the car privately, and choose the car they drive, it is also a significant benefit. It is important to understand that the scheme is the organisation s scheme and the lease arrangement is between the employer and the employee. Therefore it is the employer that sets the rules of the scheme and interprets the Terms and conditions and, as a consequence, has the discretion to make decisions about the operational and contractual issues and any charges made under the scheme. In addition to arrangements with their employee, the organisation has separate arrangements with suppliers, under national framework agreements, for the provision of the car, insurance and administration services etc. The car is provided by a leasing company under a contract hire arrangement whereby the leasing company is responsible for all repairs and servicing costs. The car is insured with an insurance underwriter who is responsible for the negotiation and settlement of claims under the policy. Line managers will have a responsibility to calculate and agree the annual business mileage for the driver and confirm that they have seen a valid driving licence. During the contract the line manager will approve mileage returns. It is the line manager s responsibility to ensure the employee submits mileage claims monthly and does not allow these to be batched and returned for a period of several months. This is particularly important at the end of the financial year for tax purposes for the individual. The line manager must ensure that during the contract period the employee s mileage claims are monitored against the original estimates that were submitted. Where circumstances have changed that affect the mileage undertaken by the employee the line manger will ensure a new calculation is carried out by the contractor and the payments made by the employee are adjusted. The scheme administrator will provide managers with full support and will provide options for decision making. Generally, the manager will have little to do other than monitor the use of the car. The scheme administrator runs the scheme on behalf of the employer with the objective of ensuring that the scheme runs effectively within the rules of the scheme. They are responsible for providing quotations, and ensuring that the contract mileages and contract terms with the other suppliers are correct. They will also provide assistance and advice to drivers and remove, as far as possible, any inconvenience or anxiety. In addition, they provide a management service to the employer ensuring the scheme operates within budget, carrying out all administration work associated with the scheme and keeping the employee fully informed and up to date with industry and related developments. What if? There are many questions relating to the operational issues such as long term sickness, maternity leave, transfers and early termination etc. These policies will be agreed with the organisation and included in the scheme Terms and Conditions of Use ; for ease of reference we have included a sample of these questions in the NHS Fleet Lease Car Scheme Managers Guide (June 2011) 6
Employees Guide to the Scheme, which accompanies this Manager s Guide to the Scheme. What are the Regulatory Issues? There are a number of regulatory considerations, because the scheme is based on a lease hire arrangement, the Consumer Credit Act applies to the terms of offer. The following Acts also apply; Road Traffic Act, Health and Safety at Work Act, Provision and Use of Work Equipment Regulations and the Data Protection Act. In addition, if the scheme management is outsourced to a third party organisation that organisation also needs to be registered and regulated by these Acts. If the third party organisation also provides accident management services or advises on insurance or provides insurance mediation they must be approved and regulated by the Financial Services Authority (FSA). Eligibility criteria To be eligible for consideration for a lease car, an employee must fulfil the following minimum criteria as outlined in Agenda for Change Terms and Conditions Section 17 a requirement to travel an average of 3,500 miles per year or a requirement to travel at least 1,250 miles per year and a necessity to use the vehicle an average of 3 days per week or a need to spend an average of at least 50% of their time on such travel including the duties performed during the visits or is required to travel an average of at least 1,000 miles per year and spend an average of at least 4 days per week on such travel, including the duties performed during the visits. Cost of the Scheme to the Department The provision of a lease car will cost the department using an equation of:- a) lump sum of 1530 NHS Fleet Lease Car Scheme Managers Guide (June 2011) 7
plus b) 14p per business miles NHS Fleet Lease Car Scheme Managers Guide (June 2011) 8