Company Vehicles and Compensation

Many employees around the motu are provided with company vehicles as a work tool, that they can also use in their personal lives. This ranges from full personal use, to use for commuting to-and-from work only.

Valuing this tool as part of a remuneration package can be challenging, so we’ve put together this article to help you assess a fair value for company-provided vehicles, regardless of the terms of use, when assessing the remuneration and pay of your employees.

The below information is an aggregate of information from the Inland Revenue, Strategic Pay, and sense checked against MyHR’s client base and knowledge. This represents current remuneration standards and expectations.

Formula:

1. How much use of the vehicle will the employee have?
   1. Full private use: They can use it in their personal live, for any travel or use, including holidays and travel outside of the region they live
   2. Limited private use: They can use it in their personal live, for travel or use, but only in the region they live in, or only when they are working (and not on periods of annual leave).
   3. Commuting only: They can use the vehicle to travel to and from work, but not outside of work hours or for personal travel.
2. Then, what was the purchase price of the vehicle?
3. Multiply the price of the vehicle by the appropriate %.

Examples:

Adding a vehicle to remuneration

Wiremu’s salary is currently $55,000, and he’s accepted a new job with his employer that comes with a pay increase and a vehicle. He’s asked for a company vehicle that he can use for full personal use, which his manager has agreed to.

His manager Taylor has $20,000 allocated that they can give to Wiremu as part of this new role, and the company vehicle that is available was purchased for $24,000.

What will Wiremu’s new remuneration look like?

Value of vehicle:

1.  35% of vehicle purchase price = $8,400
2. $8,400 + GST = $9,960 (vehicle component)
3. Budget of $20,000 minus $9,960 = $10,040 (salary increase)
   
   New remuneration:
4. $55,000 (current salary) + $10,040 = $65,040 (new salary)
5. $65,040 + $9,960 = $75,000 (total remuneration)

Removing a vehicle from remuneration

Himari’s salary is currently $72,500, and she has a company vehicle that she uses for commuting to and from work. Her employer has decided that maintaining a fleet of vehicles is too expensive, and wants to remove company vehicles from employees (including Himari) and compensate them with a salary increase instead.

 The vehicle that Himari uses was purchased for $35,000.

 What will Himari’s new salary be if her employer removes her company vehicle?

Value of vehicle:

1.  10% of vehicle purchase price = $3,500
2. $3,500 + GST = $4,025 (vehicle component)
   
   New remuneration:
3. Salary of $72,500 plus $4,025 = $76,525 (new salary)