When employees drive their own car for work

When employees drive their own car for work: What the law says (and what you should do)

“It’s not my fault… you should pay for it.” This is why work-related driving needs to be in your contracts and policies.

A recent example of this situation has raised a really important lesson: unclear expectations and rules around personal car use can lead to serious headaches.

It might be a site visit, a supplier meeting, or a client consultation. Whatever the purpose, the moment they call and say, “I’ve had a bingle,” the next question is almost always: “Who’s paying for the damage?”

If your business doesn’t have a clear contract clause or policy in place around vehicle use, you’re standing in a legal and financial no-man’s-land. So, let’s clear it up.

First, what does the law actually say?

In Victoria, you’re governed by the Occupational Health and Safety Act 2004. That means you’re legally required to ensure the health and safety of your workers while they’re doing work for you—and yes, that includes when they’re driving.

But here’s the catch: your obligation is to protect the person, not their property. So, unless you’ve done something negligent (like asking them to drive an unsafe car, or not providing any safety guidance), you are not legally required to pay for damage to their personal vehicle.

From a WorkSafe Victoria point of view, they’d expect that you:

• Conduct a risk assessment for work-related travel
• Confirm the employee’s vehicle is roadworthy
• Provide guidance around safe travel and insurance
• Only require travel that’s reasonable and necessary

But they won’t expect you to pick up a $15,000 repair bill unless you’ve directly caused the risk.

Fair Work?
Same deal. You’re only on the hook for repair costs if it’s in their contract, your company policy, or a formal agreement like an enterprise deal.

That’s why things get sticky when there’s a pattern of:

• Work travel is required, but not formalised
• Reimbursing for kilometres, but not asking for proof of insurance
• Assuming someone’s covered, when they’re not

Let’s talk about car allowances and KM reimbursements

A lot of businesses offer either a kilometre reimbursement or a flat car allowance to employees who drive for work.

Here’s the difference:

• Km reimbursement is usually based on the ATO rate (currently 85c/km for 2024–25). It assumes the employee is covering fuel, wear and tear, rego, and insurance.
• A car allowance is a fixed amount paid regardless of how much someone drives. It’s often treated as a taxable benefit and usually shows up on their payslip.

The catch?
If you’re paying either of these, you’re acknowledging that employees are driving for work. That creates an implied expectation—and if you’re not crystal clear about responsibilities, insurance requirements, and liabilities, it can come back to bite you.

Can you require fully comprehensive insurance?

Yes. If you’re asking people to use their own vehicle for work purposes—and especially if it’s an inherent part of the role—you can absolutely require that they:

• Maintain valid registration and roadworthy status
• Provide proof of fully comprehensive insurance

You’re entitled to set that as a condition of employment, especially where driving is a core duty.

It’s no different to saying a forklift operator must hold a licence, or that someone working from home must have a safe workstation setup. It’s about managing risk.

But what if employees push back?

This is where a lot of businesses hesitate—especially if driving wasn’t clearly outlined as a requirement when the person was hired.

Here’s what we’d do:

1. Update your contracts and policies moving forward
   Start by locking this into new employment contracts for any role where travel is part of the job.
2. Roll out a new Vehicle Use Policy for existing staff
   Communicate the reason clearly—this is about safety, compliance and avoiding unexpected costs. Make sure it includes expectations around insurance, travel approvals, and what is and isn’t reimbursed.
3. Get signed acknowledgements
   Have employees sign to confirm they’ve read and understood the policy. That protects you and makes enforcement easier.
4. If someone refuses?
   It depends on whether driving is an inherent requirement of their role.

• If yes, and they refuse to comply with a lawful and reasonable direction (e.g. maintaining insurance or providing documentation), this could become a disciplinary issue.
• If no, you may need to explore reasonable adjustments, like removing driving duties or providing alternatives (e.g. using company cars, booking Ubers).

Don’t wait until there’s a crash to fix the policy

If this scenario makes you sweat a little, you’re not alone. We’ve seen this play out in countless businesses—across construction, professional services, community care, even retail.

It’s rarely about bad intent. It’s about policy gaps, assumptions, and things falling through the cracks when no one’s looking.

But these situations cost time, money and trust if you’re not covered.

Need help fixing it?

We can help you:

• Review your current contracts and identify risk gaps
• Draft or update a Vehicle Use Policy
• Add the right clause to your employment contracts
• Communicate and roll it out the right way (no drama, no confusion)

Not sure where to start? Book a quick call and we’ll help you get your contracts and policies sorted—before the next bingle becomes a $15,000 bill and an HR disaster.