How to Minimize Risk Exposure

When a company maintains a fleet of vehicles for daily use by their employees, that company assumes full liability for the vehicle. This means that there is no distinction made between business and personal use in the case of an accident claim. Moreover, this liability stands, even in cases where the vehicle may be operated by someone who is not an employee of that organization. That is why the optimal way to reduce risk exposure with a company vehicle program is to migrate toward reimbursement.

A vehicle reimbursement plan is intended to reimburse mobile employees for expenses associated with driving a vehicle that they provide, for the purposes of company business.  Reimbursement is comprised of two components:

The Base Fixed Rate

The base rate reflects the hard costs associated with purchasing and owning a vehicle, such as insurance, licensing, etc. The monthly fixed rate is non-taxable when IRS compliant.

 

The Operating Variable Rate

The ongoing variable rate takes the ongoing costs of operating a vehicle into consideration. This rate is denominated as cents-per-mile.

 

By migrating away from fleet management and adopting a vehicle reimbursement plan, organizations can significantly minimize risk exposure. A VRP uses the driver’s own vehicle, which means that driving for non-work-related purposes releases the organization from any liability, should an accident occur.  The same can be said for any driving done by individuals other than the employee.

 

While fleet programs were once extremely common in corporations throughout North America, more and more corporate stakeholders have begun to see them as fiscally inappropriate. It is simply far too great of a risk to assume responsibility for employee driving habits and possible deficiencies, not to mention those of others in their household.

 

A Fair Option for Corporations and Their Employees

 

In addition to reducing liability, adopting a VRP allows corporations to provide fair and accurate vehicle reimbursements. A reimbursement model that combines allowance and reimbursement is the most optimal. This plan recognizes the fact that some vehicle expenses are fixed, while other are variable, and payments are made accordingly.

 

To learn more about the different types of reimbursement programs, please contact CarData by phone at 1-866-550-5188 or via email to info@cardataconsultants.com.