What to Consider When Returning a Company Car, When It’s Permissible, and What to Keep in Mind

The return of company vehicles is an essential aspect of the employment relationship between employers and employees. This process is not only of administrative and legal significance but also crucial for fostering trust between both parties. The proper and diligent return of the company vehicle is of great importance to prevent potential issues. In this article, we outline the key considerations to ensure a smooth and equitable process.

Why is the return of the company vehicle important?

A company car serves as a valuable work tool for employees and forms part of their compensation, particularly when it is permitted for personal use. Nevertheless, employers may, under specific circumstances, request the return of the company vehicle and should, in any case, handle the vehicle’s return at the end of its use with due diligence. As an employer, there are certain aspects to consider during the company car return process to avoid complications and ensure a seamless transition, ranging from communication with employees to vehicle inspection and financial transactions. To achieve this, it is essential to adhere to a transparent procedure and maintain proper documentation.

In what circumstances can a company car be returned?

Various reasons can lead to the return of a company car, including the possibility of an early return of the vehicle:

Company Car Return upon Resignation: When an employee leaves the company, the return of the company car typically occurs.
Company Car Return upon Internal Job Transfer: If employees transition to a new position that does not include a company car benefit, it may necessitate the return of the company car.
Company Car Return during Parental Leave, Illness, Part-Time Employment, or other changes in employment terms.
Company Car Return at Contract Termination or Lease Expiry: For company cars provided through leasing agreements, the return takes place at the end of the contract or lease term.
Company Car Exchange within the Company: For instance, due to fleet optimizations or a shift towards more environmentally friendly vehicles, a company car exchange may occur.

However, specific agreements may be required for some of these scenarios.

Company car return during parental leave.

During parental leave, the employment contract is suspended. The employee is not obligated to provide work to the employer, and conversely, the employer is not obligated to provide salary or a company car. The employer has the right to request the return of the company car during parental leave, and no compensation is due to the employee. However, it is, of course, possible for the employer to grant permission for continued usage despite this.

Company car return during sick leave.

If an employee becomes ill for an extended period, resulting in incapacity for work, the Continued Remuneration Act specifies the periods during which they can still claim the employer’s contractual consideration. Allowing the use of a company car for personal use is considered part of the “remuneration” subject to continued payment under the Continued Remuneration Act .

What agreements regarding the return of company cars are (un)permissible?

Unilateral revocation rights or voluntary reservations are not permissible since the company car constitutes a part of the employee’s compensation. However, it is possible to agree on a revocation clause between the contracting parties, provided that the reasons for revocation, such as economic factors, performance, or the conduct of the employees, are specified, and it does not encroach upon the “core” of the compensation structure (the company car portion should not exceed 25-30% of the salary).

Clauses in the employment contract that protect the legitimate interests of the employer in providing a company car are permissible. This includes situations where the employee is lawfully released from work or when the employment contract is terminated. Additionally, an initial contractual provision stating that the company car must be returned without compensation in the event of the cessation of work-related duties, such as due to illness, is permissible.

Under certain circumstances, there may be a claim for return if the employer requires the company car for a replacement employee. However, in such cases, the employee is entitled to compensation. A clause stipulating the continued payment of leasing installments for the remaining term of the lease agreement by the employee after the termination of the employment relationship is invalid.

Company Car Policy Template

The use of company cars within a corporation should be clearly regulated. Otherwise, there is a risk of misunderstandings and conflicts. To avoid this, it is advisable to develop a company car policy…

The return of a company car should be contractually stipulated.

The provision of a company car is typically based on an appropriate provision in the employment contract or a separate company car provision agreement. The return should also be clarified for the following reasons:

Clarity and Transparency: Contractual provisions establish clear guidelines for both employers and employees, preventing misunderstandings and ensuring consistent handling of the return process.
Liability Issues: Guidelines determine responsibility for specific damages or wear and tear on the company car. This protects the employer from unexpected costs and ensures that employees handle vehicle usage responsibly.
Vehicle Condition: Regulations can specify the condition in which the company car must be returned. This ensures that the vehicle is in an acceptable state and clean, potentially increasing its resale value.
Mileage and Usage: Setting limits on mileage or other usage provisions for the company car aims to limit excessive kilometers and wear and tear, thus avoiding additional costs when usage exceeds the agreed-upon limits.
Legal Protection: Contractual provisions provide legal protection for both the employer and employees. In the event of discrepancies or disputes, the contractual agreements can serve as a basis for finding a fair resolution.

What should be considered during the return of a company car?

When returning a company car, it is important to follow a defined procedure and use a return protocol to record all relevant information and avoid future issues. In particular, the following aspects should be taken into consideration:

Communication: Ensure that you communicate with the employee well in advance and provide clear instructions for the return of the company car. Specify the exact date and location for the return.

Vehicle Inspection: Thoroughly inspect the vehicle during the return process to identify any damages. Compare the current condition with the original condition when the company car was handed over to the employee.

Recording Damages: Document all damages, whether they are scratches, dents, or other forms of damage. It is advisable to take photos or videos to document the vehicle’s condition. Both you and the employee should sign a handover protocol that records the condition of the vehicle.

Mileage: It is recommended to agree on an appropriate mileage limit in advance to avoid excessive usage. During the return, not only assess the condition but also check the mileage to determine whether any excess miles have resulted from personal or business use. Record the vehicle’s mileage at the time of return, enabling the calculation of additional costs for excessive use or mileage overage if necessary.

Return of Vehicle Documents and Accessories: Ensure that the employee returns all relevant vehicle documents, such as the registration certificate, part I and part II (formerly known as the vehicle registration document), service records, and the owner’s manual. Also, verify whether all accessories, such as vehicle keys, navigation devices, or chargers, have been returned in full.

Final Settlement: Review all financial aspects related to the company car. Ensure that all outstanding payments or reimbursements owed by the employee concerning the vehicle, such as fuel expenses or repair costs for damages caused by the employee, are settled.

Conclusion - Return of a Company Car

The proper return of a company car is an important process that should be carried out meticulously by both employers and employees. Clear communication, a thorough inspection of the vehicle, and adherence to contractual agreements can help prevent potential difficulties and costs. A detailed handover protocol documenting the vehicle’s condition, any damages, and the mileage is of significant importance. This ensures transparency and provides legal protection for both parties. Adhering to these aspects facilitates a smooth and equitable return of the company car.