Is your mobility strategy up to date?

Written by Christiaan Moeskops 27 August 2018


The changing world of mobility   

In Belgium, cars are still the most frequently used means of transportation. Given the current tax and social security landscape, the company provided car is still a highly valued element in the reward scheme by many employees. Nonetheless, the landscape of the company car is changing with the upcoming new WLTP (Worldwide Harmonised Light Vehicle Test Procedure) rules on determining the CO2 emissions which will increase the (tax) cost of the car if there is no change in legislation. In addition, the already voted changes in tax law, which will enter into force as from 2020, will influence the costs linked to company cars. These new rules on calculating the disallowed expenses for cars will in most cases result in a higher disallowed expense and a higher fleet cost. Apart from this also the increase in traffic and time lost by employees and companies as a result thereof, force both the companies and employees to redefine the solutions they apply in the field of mobility.

 

How can we help? 

A company car is still a highly valued part of the reward package and no longer offering one may not be feasible from an HR perspective. Current needs as regards of mobility and possible alternatives (public transportation, flexible hours, flexible offices, etc.) may be very different for each company. It may therefore not be an option to no longer grant company cars and to provide alternatives to mobility. However, as indicated above, upcoming changes will affect the cost related to your current fleet and your current car park may need to be reviewed to monitor your costs. In this respect we can help you to identify and estimate the corporate tax impact on your car fleet and help you to find valid and attractive alternatives.

 

What are the alternatives for cars? 

More and more companies, which are currently providing ‘salary’ cars to their employees, are looking for alternatives and this in combination with trying to fulfill the employees’ personal preferences in the most optimal way.

The Belgian government on its side, is also doing its utmost to create a shift in mobility behaviour by providing attractive alternatives to the current company car plans. Earlier this year they introduced the mobility allowance or ‘cash for car” measure which is applicable as from 1 January 2018. Moreover, they also announced a mobility budget which will most likely be introduced by the end of this year.

 

What is the difference between a mobility allowance and a mobility budget? 

The mobility allowance or the so called ‘cash for car” was introduced earlier this year by the Act of 30 March 2018. The Act provides for the possibility for employees who have a company car at their disposal to switch their company car for a compensating cash allowance with a similar social security and income tax treatment, provided certain conditions are met. More information can be obtained by clicking the following link.

In addition to the ‘cash for car” measure, the Belgian government announced the mobility budget, offering both employers and employees a number of alternatives to company cars; i.e. exchanging their current company car for a more environmentally-friendly type of car (pillar 1), using the remaining budget for other more sustainable means of transport (pillar 2) or opting to convert the (remaining) budget into cash (pillar 3). Additional information can be provided by clicking the following link.

From a corporate perspective, the cost for providing a company car compared to using the mobility budget is neutral (and needs to be so, based on prospective rules). Generally speaking, switching from a company car to a mobility allowance, decreases the cost for the company (see graph 1). If the company decides to grant this windfall to the employee, the latter amount will be fully taxed and subject to standard social security contributions.

 

Graph: Total cost employer company car - mobility budget - mobility allowance

 

If we look at this from an employee’s point of view (see graph 2) and compare the mobility allowance with the mobility budget, the net spendable income in hands of the employee will be higher if we opt for the mobility budget. In addition, second pillar options (other means of transportation) can be funded pre-tax. Graph 2 indicates the difference in net spendable income between both options, under the assumption that the employee chooses to hand in his or her car and takes out the total budget in cash even when opting for the mobility budget.

 

Graph: Net spendable employee mobility budget - mobility allowance

What else…?

If we cannot implement the mobility allowance or budget or if this solution is not sufficiently flexible, an alternative is to introduce a flexible reward plan outside the new regulations. By introducing the planned mobility budget, the legislature does not rule out the introduction of flexible rewards schemes outside the scope of the forthcoming Act. Based on the general principles laid down in the labour, tax and social security legislation, it is still possible to set up flexible reward plans for different means of mobility or broader options. In this way, employees can define their reward package in a flexible manner tailored to their needs but still within the boundaries set by the employer, allowing to keep control over the financial and administrative burden.

In order to facilitate this, PwC and AON created on online tool called SmartReward. SmartReward is an innovative, customisable and cost-neutral employee reward package tool that’s as flexible and diverse as your workforce. The tool can be limited to only the mobility package but can, at the employer’s discretion, be extended to other reward elements as well. More information can be obtained by clicking to following link: online tool SmartReward.

 

Going forward…..

Changing needs and views on mobility (and reward in a broader sense), force us to reconsider our strategy on mobility. PwC can assist in aligning your new strategy with your (business) objectives while creating a competitive and attractive reward package. We can collaborate to bring this new strategy alive from a legal, tax and social security point of view and help you to communicate and drive this change together with your employees by making the cultural shift together within your entire organisation. We can help you in set up, reduce the administration and make sure that the set-up is fully compliant.

 

Should you have any questions regarding the above or in case you are interested in such report, please feel free to contact us!