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Offering a mobility allowance instead of a company car in Germany: an employer’s guide

Written by
Kliemt.HR Lawyers, the first port of call in employment law for top-class and future-proof advice.
Authors
Juliane Syrnik
Associate - Germany
Kliemt.HR Lawyers
Germany
24.08.21
4
Many companies offer employees the use of a company car, especially to attract more highly qualified employees. This article shows why the offer of a mobility allowance can be an attractive and greener alternative, and what exactly is behind this term.
What is a mobility allowance?

When a mobility allowance is agreed, the company provides its employees with an allowance that can be used freely. This can be handled by a service provider or offered by the company itself. The allowance can be used flexibly by employees for all means of transport: bicycle, car, public transport, scooter or taxi, the employee decides in which means of transport s/he invests the allowance. The concept is therefore particularly suited to the changing mobility wishes of employees in large cities, who are plagued by traffic jams and parking problems. Here, an alternative means of transport can be attractive. A mobility allowance can be offered either instead of a company car or as an additional benefit if the employee opts for a smaller company car than the class to which he or she is entitled. Then the ‘saved’ allowance can be used for other means of transport.

Concrete implementation: how does it work?

As a rule, the mobility allowance is offered via a service provider who guarantees access to the package via a website or an app and is available to employees as a contact person.

The service provider bundles individual mobility services into customisable mobility packages. The means of transport that can be used can be specified in advance or freely selected. Certain means of transport can also be excluded. The amount of the monthly allowance is freely selectable. The service provider also ensures that the allowance used each month is properly accounted for. If the allowance is not used up at the end of the month, it is either automatically carried over to the following month or paid out to the employee.

Things to consider

Before or during the introduction of the mobility allowance in the company, it is important to keep the following topics in mind and to take them into account in the legal design.

Regulation in a company agreement or in the employment contract

Depending on the concrete structure of the mobility allowance, the structure may be subject to co-determination if there is a works council in the company under s87, paragraph 1, no. 10 of the Works Council Constitution Act (BetrVG). In this case, a works agreement must be concluded. If there is no works council, an individual agreement is sufficient.

General principle of equal treatment

If the mobility allowance is not granted to all employees, there must be an objective reason for this distinction. This can be justified, for example, by the fact that the employee would otherwise receive a company car.

Data protection law

If the company transfers employee data to the provider, the data protection provisions of the GDPR and the Federal Data Protection Act (BDSG) must be complied with.

What are the advantages?

Providing a mobility allowance has some advantages for both the company and the employees.

Tax advantages

If private journeys are also made with a company car, a non-cash benefit arises on which the employee has to pay tax. Depending on the specific arrangement, the situation may be different if the company offers a mobility allowance. Particularly if the mobility allowance is offered in the form of a prepaid card, tax advantages can arise. For this reason, employees can save money here if they decide against a company car and opt for a monthly mobility allowance.

Green policy

A positive side effect is the promotion of the company’s own sustainability strategy. The topic of ‘sustainability’ is already present in the consciousness of many employees (and those who want to become employees in the future) and can influence the decision of which company a job applicant chooses.

High employee satisfaction

This is also a win-win situation for the employees. They can use their allowance freely and choose their means of transport flexibly. If they decide to cycle to work, they also improve their fitness. A high level of employee satisfaction can also strengthen loyalty to the company.

Saved administrative effort

If the company opts for the prepaid variant and a settlement directly via a provider, then it saves itself some administrative effort. Employees no longer have to submit individual travel expense receipts by hand, but can upload the required receipts via the app or the provider’s website.

Mobility allowance can also be used privately

The mobility allowance can also be used outside working hours. If the allowance provided is used up, the costs are settled via the employee’s account.

Conclusion and outlook

A mobility allowance has many advantages for both sides: it can be an attractive and environmentally friendly alternative to the ‘classic’ company car.

It is therefore not surprising that there are more and more providers offering the concept as a service in Germany. Some large companies have already introduced a mobility allowance for their employees following a pilot phase. However, unlike in other European countries, such as Belgium, France, Switzerland or the Netherlands, the topic of ‘mobility allowances’ is not yet widely known. As employee wishes evolve, and with a general increase in awareness of sustainability, it is only a matter of time until this topic becomes more prominent in German companies.

 

This article was written with the support of Canan Schneider, research assistant.