In many companies, the company car was long considered a status symbol and an important incentive for employees. But times are changing and the mobility needs of employees are evolving with them.
It is no longer a matter of course that all employees want a company car. More and more people are demanding alternatives to the classic and personally assigned company car. Not least in order to make the achievement of climate protection goals in the transport sector more realistic. This is because company cars are predominantly registered in Germany, and due to tax privileges, the choice usually falls on large, emission-intensive vehicles.
An attractive alternative to the company car for both companies and employees is a flexible mobility budget that can meet the mobility needs of the workforce while keeping costs under control. In addition, a mobility budget can bring about a shift to climate-friendly means of transport and ultimately reduce the number of large company cars if the mobility budget includes downsizing plus complementary means of transport. This article clarifies how this can work.
The idea behind the flexible mobility budget is simple yet effective. Instead of offering all employees a company car, they have the option of receiving a mobility budget that is converted from the original cost of a company car. This budget can then be used in a variety of ways to meet employees' individual mobility needs.
The mobility budget works similar to a monthly salary that can be used for mobility. Employees have the freedom to use it for different purposes:
Mobility budgets offer several advantages compared to a company car. With a mobility budget, employees gain more flexibility in choosing their means of transport. In contrast to a company car, employees can also use public transport or sharing services.
Employees who do need a car can use car-sharing services or a flexible car subscription for several months - depending on their personal needs.
In addition, the mobility budget is usually more cost-effective for companies than a company car, as it does not include fixed costs such as leasing rates, insurance or maintenance. Here, too, flexible and time-limited car subscriptions offer themselves as a module of a mobility budget, especially if companies only need a vehicle seasonally.
The effort required to manage the mobility budget is also usually less than for a company car. Automated and tax-optimised mobility budget solutions as an app or software application reduce the administrative effort for companies; trip receipts do not have to be submitted in paper form for accounting purposes, but can be transmitted via scan upload.
The mobility budget can offer attractive opportunities for all employees. For those entitled to a company car, an incentive can be created here to use the company car
Employees without a company car entitlement have the option of using the mobility budget provided for individual mobility or for commuting to work. Employees can benefit from tax savings when using the mobility budget, for example public transport is tax-free.
Employees who get a company car do not have to give it up immediately. Also, depending on the company structure, not all company cars can be replaced by a mobility budget. A mobility budget can act as a supplement to the company car. This gives employees the opportunity to opt for a smaller, more efficient and cheaper vehicle - for example an electric vehicle - and in return receive an additional mobility budget equal to the amount saved.
This practice is often referred to as downsizing. It involves replacing the company car with a smaller and less expensive model, while the mobility budget provides additional flexibility. This allows companies to reduce costs without giving up the benefits of a company car altogether.
If the conditions in the company are right to replace the company car offer with a mobility budget, the framework conditions should be defined. It makes sense to define this in the existing car policy or in a newly formulated, more comprehensive mobility policy: Who can use it for which journeys and for how much?
For employees entitled to a company car, the reference rate of the vehicle to which they are entitled can be used as a starting point. If the company wants to achieve savings with the mobility budget, the amount can also be set below the reference rate.
The levels at which it is offered depend on how many employees are to benefit from it or are to be motivated to use alternative means of transport to get to work. In this way, more employees can be reached than just those who are entitled to a company car. This controls corporate mobility and the carbon footprint.
In addition, companies should clarify how to deal with residual amounts left over at the end of the month. There are also various scenarios that a company should run through in order to obtain the best possible solution. On the one hand, the private use of residual amounts can be permitted in order to reward a particularly economical use of mobility. Another option is to invest the unused budget in selected sustainability projects.
What is the taxation of the mobility budget? There is no uniform tax regulation for the mobility budget as a form of employee mobility. It can be treated in different ways for tax purposes. On the one hand, the regulations for the taxation of employee mobility depend on the purpose of travel (work or private) and the choice of means of transport (e.g. public transport or individual mobility).
Whether and how employees have to pay tax on the mobility budget also depends on how it is handled and accounted for. In principle, it is worthwhile for employees and employers if they grant the mobility budget in addition to the salary. There are three different solutions to implement a mobility budget in which employees can receive the mobility budget tax-free.
If the mobility budget is used for a job ticket, no taxes are due. Likewise, when using a company bike, if the mobility budget corresponds to a salary extra and not a salary conversion. Mobility budgets as remuneration in kind, for example in the form of prepaid cards, are taxed at a lower rate than a salary payment. With regard to the design of a mobility budget and its taxation, companies and employers should better seek (tax) advice.
Want to learn more about how a flexible mobility budget can be implemented in your company? Contact us today for more information and advice.
