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How to Create a Company Vehicle Policy? [Free Template Included]

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If your company provides cars to employees, it's strongly advised to create a comprehensive company vehicle policy before handing them over to your workers. This document is a legally binding agreement that will protect your fleet and your company's interests. Company vehicle policy should be detailed and define how your team can use the vehicles in question.

Writing a solid company policy can be a daunting task, especially if you have never done anything similar before. 

To help you get started, we'll cover the necessary policy elements in this article. And as a bonus, you can download our free company vehicle policy template too!

Company Vehicle Policy for Employees: Necessary Elements 

Company vehicles are employers' property, so as with any other asset, it's critical to safeguard them. One of the ways to do so is by providing your staff with guidelines on dos and don'ts regarding the company car acquisition.

There are certain clauses that every comprehensive company car policy should contain. So let's dive deeper into these necessary elements:

Who Qualifies for a Company Vehicle

For starters, a company car policy should clearly state who is eligible to be assigned a company car.

In other words, this agreement needs to specify the eligibility requirements for using a company vehicle.

In most cases, this clause lists three categories of employees who may be assigned a company car:

  • Employees who require a vehicle to complete their daily tasks like truck drivers or delivery drivers
  • Employees who need to travel over a certain number of miles per year to meet the company's needs (meeting clients or vendors, for example)
  • Assigning employees company cars can be part of their employment benefit

How the Vehicle Will Be Used

This section aims to explain how the company car can be used: for professional use or personal use. It's up to you to decide whether you'll allow personal use of a company car. What's in your company's best interest, and what should you do? 

You need to bear in mind that personal use comes with certain difficulties like increased wear and tear on the vehicle and increased liability.

Your safest bet is to limit the use of the company vehicle to work hours. 

However, there is another thing you need to be aware of, and we'll explain it in the section below. 

Fringe Benefits for Employees

Permitting personal use of a company car can be an incentive for your employees. In addition, it can help your company attract and retain the top talent in the industry. Depending on how competitive your industry is and what's the norm, you may opt to offer this extra perk.

In that case, you need to be aware that using a company vehicle for personal use is considered a taxable fringe benefit. 

To learn more about calculating personal use, read the IRS Employer's Tax Guide to Fringe Benefits

Prerequisites to Driving a Company Car

This clause of the company vehicle policy defines requirements that employees need to meet to be granted a company car. Usually, the prerequisites refer to having a valid driver's license and having a spot-free driving record for a certain number of years. 

Driver Responsibilities  

This is yet another critical clause of the contract we're discussing. The company car policy needs to contain employees' duties while using the vehicle. Employees are expected to follow a specific set of rules, and this also needs to be explicitly written. Below we'll list some of the standard rules employees are required to abide by:

  • Driving safely
  • Maintaining the security of the vehicle and its contents
  • Respecting traffic laws and parking restrictions
  • Use of handheld cellphones (texting included), while the car is on the move, is prohibited

Addressing Employees With Disabilities 

If your company hires employees with disabilities, they may nevertheless qualify for a company car. Many people with disabilities can drive, so a company may decide to take specific steps to enable their company car use.

On the other hand, note that workers who need to take medications that severely affect skills needed to drive safely like reflexes or vision may not be eligible to drive a company car.

Accident Procedures & Reporting Maintenance 

This clause needs to clearly and in detail state what should employees involved in an accident with a company car do and/or don't do. Who should they report the accident to, and the exact procedure for reporting accidents should be an essential part of the company vehicle policy. 

Such events are stressful, so it's always good to use this Policy to remind the steps that employees should take. For example, if possible, they should get a copy of the accident report. They are also expected to keep insurance information (it should be up-to-date) in the vehicle and provide it upon request.

Of course, employees are encouraged to follow legal guidelines for exchanging information with other drivers. Also, in serious accidents, they are obliged to contact the local police.

These policies usually hold employees responsible for weekly checkups of the tire pressure, oil levels, water, and damage to any part of the vehicle - internal and external. 

Aside from that, the company vehicle policy for employees usually include a clause that states that employees are also responsible for reporting any mechanical difficulties, repair needs, or vehicle damage.

Tickets and Citations  

It is common to hold employees personally responsible for traffic violations and citations received while using the company car. However, there is an important thing to bear in mind regarding the parking violations: in some states, they aren't leveraged against the driver - they are directed to the vehicle. 

For this reason, it is common for the Policy to include a clause that employees are responsible for this type of fine. This way, even if the parking citation is directed to the company, you'll be able to recover the expenses of the penalty from the worker.  

Obligations of the Company + What the Company Is Not Responsible for

The company has several responsibilities related to its fleet too. For starters, the company should ensure the vehicle is safe to drive. In addition to that, the company also has several ongoing responsibilities that usually include scheduling regular maintenance appointments, insuring company cars, and maintaining good coverage.

Finally, it's up to companies to promote driver's safety by verifying that employees are qualified to drive and by encouraging their teams to follow safe driving practices.

The employee vehicle use agreement usually contains another section: what the company isn't responsible for. This part of the company vehicle policy states that the company is not responsible for paying the financial consequences of the employee's actions while driving the company vehicle (for example, fines from traffic violations).

Disciplinary Consequences 

You also need to be prepared for the unfortunate events when someone from your team violates the terms of the company vehicle policy. So, the goal of this clause is to list fines and punishments employees may receive if they don't follow the Policy's rules. 

You can define this clause however you find it appropriate. Still, some of the frequent measures include revoking the company car or reprimands, depending on the severity of the employee's failure to meet the agreement's terms.

For example, for minor offenses, your Policy can predict issuing a reprimand. However, serious offenses, like driving under the influence, are sometimes followed by terminating the employee in question or even by legal actions.

Company Vehicle Policy: Final Thoughts

Having a comprehensive company vehicle policy ensures a safe work environment for your employees and an added layer of protection for your assets. In addition, the employee vehicle use agreement ensures awareness of essential safety measures and the penalties for improper company car use.

Free Company Vehicle Policy Template

To help you get started, we've created a company vehicle policy in pdf that you can download, print, and use as a guide. With this document, you can easily tailor a policy that will suit your business's needs. 

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