Allstar recently conducted a study into the pros and cons of 'Pay & Reclaim' (P&R) - a method used to reimburse employees for the cost of fuel used for business travel (company or private car).
We found that P&R is a workable system for reimbursing infrequent business drivers.
For drivers that do regular business mileage, an alternative such as a business fuel card can give fleet operators greater control, cost visibility and an opportunity to adapt driver behaviour as part of an overall fuel cost reduction plan.
Here’s why:
The fixed 'pence per mile' reimbursed to a driver, whether calculated by the company or based on HMRC Advisory Fuel Rates (AFR), is often flawed. This is because it is based on factors that can fluctuate or are taken on trust - such as business miles travelled, average MPG or the average national fuel price. The result could mean the amount paid sometimes favours the company and sometimes favours the driver.
Because P&R schemes mean drivers must bear the burden of paying fuel costs upfront, research shows they have a tendency to compensate themselves by exaggerating business mileage and inflating their expense claims. In contrast, drivers see fuel cards as offering convenience as well as a positive indication that their company is helping reduce paperwork and make life easier.
P&R schemes increase administration costs as expense claims must be processed. Handling expenses can be complicated if drivers fail to supply fuel receipts. When a company uses fuel cards, they are given a consolidated invoice - which eliminates the need for drivers to keep receipts or for company staff to waste time chasing them!
With a fixed 'pence per mile' reimbursement rate, companies may be paying your drivers too much. With an Allstar fuel card the cost of fuel cannot be inflated by drivers adding on the cost of snacks and drinks! The card offers drivers a chance to refuel at around 8,000 filling stations nationwide and your company fuel policy can be designed to encourage them to stop at lower-cost outlets without the need to deviate from their route.
A survey conducted by Concur in 2011 showed that 41% of employees' expenses claims were submitted without a receipt and the VAT was therefore unrecoverable. An Allstar fuel card provides companies with one HMRC compliant invoice so there's no need to rely on drivers to collect VAT receipts and hand them in.
A P&R scheme doesn't encourage drivers to improve their fuel consumption since they are reimbursed at a fixed rate based on a nominal MPG. However, companies that use an Allstar fuel card have access to useful management information that allows them to target drivers whose average MPG suggests an inefficient driving style. Companies can then provide driver training to help reduce both fuel consumption and CO2 emissions.
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