Business man looking at clock

Mobility budget – the better alternative to the company car?

In recent months, an oft-spoken about topic has been making waves: mobility budget. It’s on everyone’s lips, but most fleet managers are still on the fence about it (so far). What’s the reason? In this time of remote and hybrid working, plus the emphatic demand for greater climate protection, making corporate mobility as flexible and sustainable as possible with the help of a mobility budget may be worth considering, especially for companies.
Mobility presents both private individuals and companies with unimagined challenges. New concepts are called for, the quicker, the better. Individually adaptable, cost-saving, sustainable and, above all, employee-centered mobility is what is desired. These same characteristics are, frequently, also apply to the mobility budget, and so the comeback of this concept is hardly a surprise. What’s the buzz all about? Can mobility budget be the key to more flexibility in the fleet?

Infographics communting
More than 12 Mill. people in Germany commute every day.

What is mobility budget and who benefits?

A mobility budget is a fixed travel budget that companies grant their employees. Employees get to decide for themselves the means of transport they wish to use for getting to the office or to a business meeting: public transport, rail, e-hailing, e-bikes or cabs – whatever they like and whatever gets them around swiftly. The idea behind this is that employees have maximum flexibility thanks to a mobility budget, and in the best-case scenario, they opt for environmentally friendly alternatives while the appeal of a company car recedes.
A mobility budget benefits every employee of a company. It allows a wider circle of people, beyond those whose positions entitle them to a car, to travel at company expense. The company sets a fixed budget for each employee and makes the remaining amount freely available. Cost-conscious employees who use public transportation, for example, will be especially recompensed. In addition, the employer gets to create more perks.

Moreover, a mobility budget would provide the incentive to leave company cars idle, especially in congested urban areas, while the tedious search for parking becomes a thing of the past. A mobility budget is also attractive from a tax perspective. Employees who use company cars for personal excursions is subject to taxes. A mobility budget is, likewise, similar, although the type and size of the budget play a role here. Many companies pay tax on mobility benefits under “benefits in kind” and so would profit from tax breaks.

Infographics Traffic jam
How long european business car drivers are stuck in traffic.

Advantages of a mobility budget at a glance

For employees:

  • Incentive for sustainable mobility behavior
  • No need to search for parking, thereby reducing congestion, especially in urban areas
  • Greater flexibility

For employers:

  • Greater inclusion of staff members
  • Tax breaks
  • Implicit reward system for employees
  • Improved image
  • Lower costs

Shortcomings of a mobility budget

“All that glitters is not gold” – this applies to mobility budgets as well. While the willingness of companies to establish a dynamic system for mobility regulation is growing, certain hurdles remain entrenched. Mobility budgets are especially popular in urban areas where there is a good choice of e-bikes, scooters and a public transport network are very good, whereas in rural areas, the selection is much more limited. Here, cars are a necessity for the majority of employees.

Age is decisive: The majority of younger employees favor a mobility budget, while older employees are usually more skeptical about the whole thing fearing being restricted by a fixed mobility framework. Moreover, there are certain people in a company for whom a company car is essential for their work. Field service employees and sales staff who are required to visit customers on site on a regular basis need mobility options. They too can benefit from a mobility budget, though it makes sense to determine which means of transport can best be used. Flexibility on both sides is required. Providing employees with a rail pass for appointments with customers can provide some flexibility. A pool of EVs is also conceivable, although constant availability and sufficient charging capacities must be ensured.

Business man with bike

Mobility budget – A sustainable adjunct, though not a substitute for holistic mobility.

Enabling more dynamic mobility with the help of a fixed employee budget is an important first step toward greater sustainability. The ecological idea alone, however, is not enough. A paradigm shift at all levels is vital for success. After all, a mobility budget will also mean having to loosen up the reins since employees, and not the company, will get to decide on travel options.

The changeover from personal company cars calls not only for a mental reorientation but also organizational effort. Something company management and fleet personnel should not underestimate and needs to factor in. For example, car policies will have to be adapted, and these changes must be communicated to the company. This is a task that both company management and fleet personnel must bear in equal measure. Younger employees who attach little importance to having their own company car, but still want to remain mobile at all times, are well served by a mobility budget. Staffers who are not availed company cars because of their position will be given an indirect perk with a mobility budget. The mobility budget cannot and should not replace an entire fleet, instead it can be offered as an adjunct to a fleet. Traditional company car arrangements will remain unchanged in many firms – albeit with additional attractive options.