The new Mobility Budget is characterised by flexibility, giving staff more choice in how they travel. The scheme represents a real opportunity for organisations to demonstrate corporate responsibility while boosting employee engagement.
Today, one in three Belgian employees has a company car. No wonder Brussels is one of Europe’s top 10 most congested cities! The figure is symptomatic of a corporate culture that still sees a car as an essential perk for attracting high-quality employees. Yet the reality is that employee needs are changing. Between smog and the pain of traffic jams, the company car is simply no longer worth it.
Today’s professionals are increasingly concerned about choice – choice of eatery, choice of work schedule – and the choice to make decisions that are positive for the planet. In fact, studies show that a more flexible approach to mobility promotes employee engagement by increasing work-life balance and improving the image of an employer.
Transport represents almost a quarter of Europe’s greenhouse gas emissions. So, the European Commission’s target to dramatically cut emissions by 2030, as well as its efforts to achieve the UN’s Sustainable Development Goals, will require a fundamental change in transport habits. This means people opting for cleaner modes of travel, like bikes, low-emission cars, or public transport.
Last year, the Federal Planning Bureau stated that abolishing the company car would reduce CO2 and NOx emissions by 2.7 %. Yet the number of company cars is steadily rising, and so are the traffic jams. Citizens are paying the cost in congestion, air pollution and greenhouse gas emissions. And no employee is their best self after sitting in a traffic jam all morning.
The issues of company cars and traffic congestion have both been hot on the political agenda for some time. The Mobility Allowance, or Cash for Car scheme, was introduced two years ago, in an attempt to address both. But the initiative had very little success as few organisations signed up. The scheme was legally annulled when the Constitutional Court found it to be discriminatory, and likely to be ineffective at keeping cars off the roads. The judgment followed a complaint by two trade unions and the non-profit organisation, who argued that the incentive was discriminatory and had the potential to be misused for tax avoidance purposes as ‘a form of disguised remuneration’.
The scheme is to remain operational until 31 December 2020 at the latest.
The Mobility Allowance (or Cash for Car) law was published in the Belgian Official Gazette on 7 May 2018 and came into effect retroactively from 1 January 2018.
The initiative aimed at reducing the number of company cars on Belgium’s roads, by offering employees a tax-efficient alternative. Employees who handed back their company vehicle were granted an annual ‘allowance’ with the same tax and social-charges benefits. The cash, could be used to buy a smaller vehicle, an electric bicycle or a public transport pass. The concept was very simple – the execution proved treacherous!
Many found the administration involved prohibitively cumbersome. The payment figure was calculated according to the market value of the company car most frequently driven by the employee over the previous 12 months. There were various stipulations that went with this.
The scheme benefited some employees, but was very stringent and complicated and the uptake was very low. According to HR service provider Acerta, only 14 out of 10,000 company cars had been turned in by September 2019.
One reason for the poor uptake was that the scheme simply did not offer enough benefits for either employee or employer. The yearly amount corresponded to 17.14% (no fuel card included) or 20.57% (fuel card included) of the market price of the car. No other commuting allowance could be paid in addition. For many, this was not adequate compensation. Exchanging the car for cash only made economic sense for those with a short daily commute, a relatively expensive company car and adequate public transport.
As for employees, the system held a lot of hidden costs. For example, basing the remuneration on the market value of the car did not make sense for an employer who got a good price on a fleet of vehicles. The employer also had to pay a Belgian social security contribution determined by the CO2 emission rate of the displaced company car.
The Mobility Budget was introduced on 28 February of this year and came into effect on 1 March.
The ‘Budget’ is a sum of money that employees can freely devote to the means of transport of their choice, in order to get to work with a smaller carbon footprint. This time, the goal is to support flexible solutions by facilitating the use of alternative modes of transport, without precluding the use of a car.
Like the Cash for Car scheme, the initiative targets scenarios where company cars are in use. By the time the measure is introduced, employers must have been offering company cars continuously for at least 3 years. As for the employee, they must have been using a company car for at least 3 months.
The budget itself is calculated according to the cost of financing and operating the car, including fuel, maintenance and insurance costs. Therefore, the budget differs for each employee and depends on their commuting distance.
While the ‘Cash for Car’ scheme did not prevent participants from using their payment to buy a cheaper (no less carbon intense) car, an employee in the Mobility Budget scheme can only spend this budget based on the following three pillars.
The Mobility Budget allows an employee to continue using a company car, if they switch to a more environmentally friendly model. It must comply with EU standards, emitting no more than 95 g CO2/km.
Tax-wise, that car is treated as any other company car. However, the taxable benefit in kind and the special CO2 social security contribution will be lower than that of the previous vehicle.
This pillar offers a wide range of possibilities. For example, the employee can use the budget for a subscription to public transportation, or for the purchase, the maintenance and equipment of soft transport vehicles (e.g. a bike, hoverboard or electric step). If, because of the higher transport needs, the budget is large enough, the employee can use it to fund more than one method of transport, or even to buy a laptop for remote working, thus circumventing the need to travel every day.
Living close to work is also considered to be a mobility solution. Under this pillar, the employee’s housing costs can even be covered, provided that the place of residence is located within a radius of 5 km from the place of employment. Other items included in this option are renting vehicles (up to 30 days per year), and shared solutions like carpooling. The budget spent in Pillar 2 is entirely exempt from tax and social security contributions.
As a third option, the possible cash balance will be paid to the employee at the end of the year. The balance is subject to a 38.07% (25% + 13.07%) social security contribution.
The Mobility Budget is a very structured scheme that, instead of curtailing employees, actually opens up their options for living a more sustainable life the way that best suits them.
For an employer, the Mobility Budget is not fraught with hidden costs like the Ccash for Ccar scheme was. If their employee opts for a cash payment, for example, then their social security contribution is entirely at the expense of the employee, with no additional cost to the employer.
It is no secret that employee engagement is key to the success of a business. A recent Gallup study found that organisations with highly engaged employees outperform less engaging competitors by a margin of 147%!
The Mobility Budget allows employees to choose a commute that works for them. If an employee supports their workers to learn about their travel options, and provides an easy way to organise their travel choices, the result is happier, more engaged employees who travel to work with less stress and in less time.
Studies show that work flexibility and autonomy are essential for maintaining a happy, committed workforce, and for retaining talent. According to research published in The Psychologist-Management Journal, employers who gave flexibility to their workers had eight times more employees who intended to remain with the organization and five times more highly engaged employees.
The Mobility Budget can also increase the profile of an organiszation, boosting its corporate social responsibility by contributing to CO2 emissions reduction.
The Mobility Budget is a legislative backbone for corporate responsibility and employee engagement. Of course, implementing it practically and managing it properly, means supporting employees to learn about the best, most efficient travel solutions for them.
Luckily, software companies like Skipr have spotted the potential of the Mobility Budget to really enhance company performance. Skipr specialises in supporting professionals to manage, plan, book and pay for their mobility. The centralised end-to-end mobility solution makes travel management simple, and even fun.