The share of company cars fell back last year for the first time. Though the success was still trending before 2023, the sharply rising cost of electrification and the dampened interest from younger staff are pulling the brakes on Belgium’s ‘wage on wheels’, according to HR company SD Worx.
In a probe, SD Worx analyzed 1,2 million private sector employees with over 175 000 company cars. Though the fall from 14,8 to 14,4 percent might seem a minor drop, it is symbolic as company cars are an essential part of the pay package of the otherwise heavily taxed employee remuneration. The share has been growing steadily year over year, and five years ago, only 11,5% benefitted.
Cost increase of 25%
This turning tide is caused by the transition to electric cars. Though these are fiscally the optimum choice, the upfront purchase represents a cost increase of nearly a quarter over five years (from €32 529 in 2018 to €40 280 in 2023). Last year alone, the price hike for companies was 10%, urging new car policies where starters are increasingly only granted a company car after one year of loyalty.
The decline is age-related and more noted among those under 30, particularly those under 25 (from 3,3% to 2,0%). Beyond the age of 30, over half of the cases involve a company car, as the benefit and more expensive models are accompanied by more responsibility within the job.
But SD Worx also points to a mind shift, where young employees increasingly favor alternatives like the mobility budget. A different attitude to the footprint and attractiveness of cars and practical intricacies explain this. In cities where charging infrastructure – often provided by the company – is challenging, a bike allowance or car sharing is increasingly considered a better solution.
In Belgium, where the mobility budget is one of the most elaborated in Europe, the appraisal is also at a record level. With 83% in favor of wage advantages for mobility – including cars – the country leads before France (78%), Ireland (74%), and Austria (75%). Belgium is the only European country where more than half of employees enjoy mobility benefits (57%).
The importance of company cars was illustrated last week when it became clear that the benefit-in-kind for fossil-fueled vehicles would rise significantly in 2024. The formula for calculating the contribution is based on the average CO2 emissions, which decrease steadily yearly over the electrification incentives.
Functional company cars
The exact impact, ranging from a few to a dozen percentage points, isn’t clear yet but brought Minister of Finance Vincent Van Peteghem (CD&V) to the conclusion that an adaptation is necessary due to “artificially strong” deviations.
The reaction exemplifies how the company car is a stronghold in Belgium and a sacred cow for politics, especially with elections following later this year. Nevertheless, calculations unveil that the government loses three times more on company car income through incentives than it invests in public bus transport.
Electric drivelines represent 31,48% of company cars in the last quarter of 2024, up from 11,1% a year earlier. Diesel was at a historically low share of 7,9%, while gasoline took the lead with 60,5%.
However, not all of these ‘paycheck cars’ are merely benefits to win the war for talent in the marketplace. The survey from SD Works also points to the balance with functional company cars, which are indispensable in sectors like construction and home nursing. These are more common among older employees and represent half of the share.