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Document updated/added on 10.05.2020

Topic: Contractual clauses

Car or car allowance clause
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Car or car allowance clause

Car or car allowance clause

If you provide an employee with a company car, or a car allowance, you need to refer to it in their written statement of employment particulars, or employment contract.

Statutory provisions

The Employment Rights Act 1996 requires you to include details of “any other benefits” in the written statement of employment particulars (which you may incorporate into a more detailed employment contract). This mainly applies to employees who commence employment with you on or after 6 April 2020, but it also applies where either an existing employee (i.e. one employed before 6 April 2020) makes a request for an updated written statement, or you start to provide a new benefit to an existing employee. In the latter case, what you effectively need to give the employee is a statement of change to their employment particulars, and this must be provided no later than one month after the change in question. Benefits includes both contractual and non-contractual ones, and so will encompass both company cars and car allowances. Unfortunately, you can’t deal with this obligation by simply referring the employee to the provisions of our Cars and Car Allowances Policy. This is because the provisions on other benefits must be covered in the written statement itself; the legislation doesn’t allow you to refer to another reasonably accessible document, such as a staff handbook, for the information. You therefore need to ensure that the written statement provides at least the key information on the benefit, even if you do then cross-refer to a more detailed policy to supplement the information given in the written statement.

Clause wording

Use the relevant sections of our Car or Car Allowance Clause where you either provide a car for an employee or you alternatively offer (or the employee has been given the choice and opted for) a cash allowance instead of a car. It’s sensible not to include the exact specification of the car to give you flexibility, so our clause follows that approach. You’ll then need to consider whether the employee will be entitled to private use of the car (which would be the normal position) and, if so, whether their spouse/civil partner can also drive it. Our clause gives you optional wording to cover the various scenarios. It's usual for you to bear the car’s reasonable running and standing costs, so this is what our clause provides. You’ll also need to decide whether you’ll pay for the employee’s private fuel costs and so our clause covers this too. Our clause then sets out a series of rules governing the employee’s use of the car. We’ve optionally cross-referred to the policy here for further details. In addition, our clause includes a deduction from wages provision, to apply in various circumstances.

If the employee is legally entitled to drive and uses their own car for work purposes, you may instead opt to provide them with a car allowance. This is normally an annual amount which you pay in equal instalments at the same time as salary, so this is what the car allowance part of our clause provides. We’ve stated that the allowance isn’t pensionable, meaning it’s excluded for the purpose of calculating the employee’s pension entitlement. For more details of the provisions governing an employee using their own car for work purposes, we’ve optionally cross-referred to our Driving Whilst on Company-Related Business Policy.

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