As a private citizen a drop in fuel price is always welcome as you suddenly spend less money on filling up your tank, but what happens when you are an employee, who is reimbursed fuel used for business trips? It could mean something else.
The effect that fuel price has on the business and its employees will depend on the systems used to structure and charge fuel. CEO of Accsys, Teryl Schroenn, says: “As an employee, the impact of the fuel drop should not be significant, especially if the company is paying AA rates. You will be paying less for fuel so the difference will come out in the wash. For the organisation, however, there are steps and systems that need to be addressed to ensure that costing and clients are kept up to date.”
When the fuel price changes, many businesses change the rate for calculating what the employee takes home and assess what the impact will be on cost to client. It is important that this price be reflected in what the client pays for transportation or delivery as it can have a significant impact on their bottom line, and the company’s ethical standing.
An honest approach
Some companies, like Accsys adjust the cost to clients according to the change in fuel price; however this is not all companies’ policy. Schroenn says: “It will depend a lot on the tolerance of your customers if your business doesn’t adjust accordingly – some may notice.”
For organisations that average out the fuel costs, the fluctuations may have little to no impact. If a company, for example, average at R3,20 per kilometre it might not adjust the fuel price when it declines to R3. The same company will also not adjust the cost up when the fuel price is at R3,40, Schroenn notes.
Payroll should follow company policy when it comes to adjustments around fuel pricing, employee wages and client charges. How this is done will depend entirely on the systems implemented in the business and the method used for calculations.
“Many systems are automatic so the calculations are done as amounts are submitted and payroll assessed. Those that do them outside the system and pay it manually will have a more complex task, but could look to adopting a different way of handling pricing with each fluctuation. It would be advisable to introduce a methodology that is as simple and effective as possible as fuel prices won’t stop their mercurial changes,” concludes Schroenn.