Driver-only hire or a vehicle supplier: who carries the risk?

If your company already owns the car, driver only hire for company car use looks like the cheap option, and often it is. The catch is that you keep almost all of the risk. The car is on your registration, so e-challans arrive at your address. The motor policy is yours, so a claim lands on your record and your renewal. When the car breaks down, you still need a way to get the director to a 9am meeting. When you hire a vehicle supplier instead, meaning a provider that supplies the car and the driver together, most of that moves to them, and you pay for it in the monthly rate. The real question is not which option is cheaper, but which risks you want to keep and whether anyone in the office has time to manage them.

Below is who normally carries each risk under each model, and how to compare monthly costs honestly. It is written for firms, NGOs and foreign offices running one car or a small pool, and is not legal advice.

Driver only hire for company car or a vehicle supplier: the decision summary

There are three common arrangements, and people mix up the first two constantly:

• Your own employee driver. You own the car and employ the driver directly. You carry everything.
• Driver only hire. You own the car. A provider, agency or individual supplies the driver on a daily or monthly arrangement. The car risk stays with you. Some of the people risk may sit with the provider, depending on the contract.
• A vehicle supplier (car plus driver). The provider supplies the car, the driver, the maintenance and usually a replacement. You buy a service and hold very little of the asset risk.

The table below shows where the risk typically sits. “Typically” matters: every line can be moved by a contract clause, and that is exactly why you should read one.

A rough rule: if you have one reliable car and someone in the office who will actually track insurance, challans and servicing, driver only hire can work well. If the car is old, the trips are critical, or nobody owns the admin, a vehicle supplier usually costs less in practice than it looks on paper.

Insurance: whose policy covers the driver

This is the first thing to settle, and the one most often skipped. When you hire a driver for company vehicle use, the driver is behind the wheel of a car insured under your policy. Whether that policy responds to a claim depends on its wording, not on the fact that the person is a professional.

Third-party motor cover is a compulsory class of insurance in Pakistan. The Securities and Exchange Commission of Pakistan, which regulates insurers under the Insurance Ordinance 2000, lists “Motor Third Party Compulsory” among the classes a registered non-life insurer can underwrite (see the SECP insurance licensing page). Compulsory third-party cover protects other people. It does not repair your car. Most companies therefore buy a comprehensive policy, and that is where the driver questions live.

Questions to put to your insurer in writing

1. Who is permitted to drive? Some policies cover any driver with the owner’s permission; others restrict cover to named drivers or employees. A driver supplied by an agency may not be your employee.
2. Is business use covered? A car insured for private use and driven for company errands can create an argument at claim time.
3. What licence does the policy require? Ask whether it must be valid, of the right category for the vehicle, and held for a minimum period.
4. What is the excess (deductible), and who pays it? Write the answer into the driver contract, not into a WhatsApp message.
5. Does the policy include a courtesy car or recovery? This affects the breakdown section below.

Check the licence yourself too. In Punjab, the Driving Licence Information Management System (DLIMS) has a public “Verify License” function. Other provinces run their own systems. Keep a copy of the driver’s CNIC and licence on file, and diarise the licence expiry date. An expired licence is the cheapest way to turn a routine claim into a rejected one.

Under a vehicle supplier

With a supplier, the car is insured on their policy and the driver is their responsibility to authorise. Ask for evidence that the vehicle is insured for commercial passenger use, and whether any damage charge can ever be passed to you. If the answer is “never”, put it in the contract; if “sometimes”, get the circumstances in writing.

Accidents and third-party liability

This is where company car driver liability becomes real money. When a car hits a motorcyclist in Rawalpindi traffic, three different questions arise at once: who pays the injured party, who pays for your car, and who deals with the police. They do not all have the same answer.

With driver only hire

• The injured third party is exactly what compulsory third-party cover exists for, and that cover sits on your policy. If it is invalid because the driver was not permitted or the licence had lapsed, you have a problem that no apology will fix.
• Damage to your own car falls on your comprehensive policy, subject to excess. If you only have third-party cover, you pay.
• The driver’s own negligence is a contractual question. Can you recover the excess from the provider if their driver was clearly at fault? If the contract is silent, expect to absorb it yourself.
• Police and paperwork: the registered owner and the driver will both be involved. Decide in advance who in your company handles this, and make sure the driver knows to call that person immediately.

With a vehicle supplier

The supplier’s insurer handles third-party and own-damage claims, and the supplier deals with the police and the repair. Your exposure narrows to your passengers’ own injuries (which your staff medical or travel cover should address) and any liability you accepted in the contract. That is a large part of what you are paying for.

Either way, agree a simple protocol: the driver checks for injuries, calls emergency services where needed, photographs the scene and plates, rings one named company contact and writes a short incident note the same day, so the insurer can be told within the time the policy sets. On motorways and national highways, the National Highways and Motorway Police are the traffic authority. Patrol officers carry handheld devices connected to a central server, a system extended to all motorways and national highways in January 2018 (background on the NHMP). A highway incident therefore creates a record quickly, and your paperwork should match it.

Breakdowns and the replacement vehicle

The driver and vehicle supplier difference shows most clearly on the morning a car will not start. With driver only hire, you have a driver on the clock and no car. With a supplier, a missing car is their problem to solve, provided the contract says so.

If you own the car

You carry servicing, tyres, batteries, the air conditioning that fails in June, and the days the car spends at the workshop. Build three things into your plan:

• A servicing schedule the driver follows and logs, with odometer readings recorded at each fuel stop.
• A fallback for critical trips. Airport runs and board meetings cannot wait for a part to arrive from Lahore. Decide now whether you will hire a car with driver for those days, and from whom.
• A rule for the driver’s time while the car is off the road. Are they still paid? Can they drive a hired car on your behalf? Is that hired car insured for them?

If you use a vehicle supplier

Ask four precise questions, because “we will arrange a replacement” means different things to different suppliers:

1. How quickly does a replacement arrive, and is that a target or a commitment?
2. Is it the same class of vehicle? A hatchback in place of a seven-seater is not a replacement if you carry a delegation.
3. Does the monthly rate reduce if no replacement is supplied?
4. Who pays for the recovery truck?

For long-distance work the stakes rise. The UK Foreign, Commonwealth and Development Office notes that outside the major motorways Pakistani road quality varies, that some northern roads close in extreme weather, and it recommends experienced local drivers on remote mountain routes, only in clear weather (FCDO Pakistan safety and security). If your company car does northern trips, a dedicated hire for that trip is worth serious thought. The FCDO also advises against all travel, or all but essential travel, to several parts of Pakistan, including Balochistan and areas near the Afghan border, so check the current FCDO Pakistan advice before any journey outside the main cities.

Traffic challans and e-challans: who receives them, and who pays

Traffic fines follow the registration. That single fact decides most of this section.

In Punjab, the Punjab Safe Cities Authority runs camera-based enforcement that detects violations and issues electronic tickets (PSCA). The e-challan system started in Lahore, using automatic number plate recognition cameras, and challans are sent to the address registered against the vehicle (Punjab Safe Cities Authority background). Anyone can check for outstanding challans on the PSCA e-challan portal using the plate number together with a CNIC number or the chassis number; there is also a PSCA app.

What this means in practice:

• Driver only hire: the car is registered to your company, so the challan comes to you, often weeks after the event. The driver who ran the signal may have left by then. You need a policy on whether fines are deducted from the driver or the provider, and a log that ties each date and time to a driver.
• Vehicle supplier: the challan goes to the supplier as registered owner. Some suppliers absorb fines; others pass them back to the client, sometimes with an admin fee. Ask which, and ask for the challan copy with any recharge.
• Motorway and highway tickets issued by NHMP officers are handed over on the spot, so the driver knows immediately. Make it a rule that every ticket is reported the same day.

Our suggestion: check the e-challan portal monthly for each company vehicle, on a fixed date, and reconcile it against the trip log. It takes minutes and stops unpaid fines piling up until you try to sell the car. Other provinces and Islamabad run their own enforcement systems, so check the relevant authority for vehicles registered outside Punjab.

Employment or contractor: what the driver’s status changes

A driver can be your employee, an agency’s employee placed with you, or a self-employed individual. The label on the invoice matters less than how the relationship works day to day. If you set the hours, give the instructions, provide the car and pay a fixed monthly sum directly to the person, the arrangement looks a lot like employment whatever the paperwork calls it.

Why this matters to you:

• Statutory obligations. Provincial labour and social security laws and minimum wage notifications can apply to employers, and the Employees’ Old-Age Benefits Institution requires covered industrial and commercial employers to register staff and contribute. Thresholds and rates differ by province and change with budgets, so confirm the current position with your HR adviser.
• Working hours and overtime. A company driver who starts with the school run at 7am and finishes after a dinner at 11pm has worked a very long day. Tired drivers crash. Whatever the legal position, set a maximum day and pay for the extra hours.
• Termination. Ending an employment relationship is slower and more formal than ending a service contract. That is one honest reason some firms prefer a driver transport company to direct hiring.

If you use a provider for driver only hire, ask directly who employs this driver, who pays them and who handles their statutory registrations. If the answer is vague, assume the obligations may land on you.

Cost per month: comparing like with like

This is where most comparisons go wrong. A driver only quote is a salary line. A vehicle supplier quote is a service line that already contains depreciation, insurance, maintenance, replacement cover and the supplier’s margin. Comparing the two headline numbers tells you almost nothing.

Build the full monthly cost of owning and running your own car with a hired driver, then set it beside the supplier quote. We have left the figures out because they vary by city, vehicle and hours, and change often. Fill in your own.

Example, for illustration only: a company with a five year old sedan, used ten hours a day on weekdays inside one city, may find that driver only hire wins comfortably once the car is already owned and reliable. The same company, sending the car to Islamabad twice a month for board meetings, may find overtime, outstation allowances and the risk of a breakdown far from home change the answer. Run the numbers for your real pattern of use, not an average one.

What to put in writing before the first shift

Whichever model you choose, most disputes come from things nobody wrote down. Use this as a working checklist.

1. Scope of use. Cities, outstation trips, maximum hours per day, days per week, and whether personal use of the car by staff is allowed.
2. Insurance confirmation. For driver only hire, your insurer’s written confirmation that the supplied driver is covered for business use. For a supplier, evidence of their commercial cover.
3. Excess and damage. Who pays the excess, and in what circumstances damage costs can be recharged to either side.
4. Fines. Who pays challans, how they are evidenced, and the deadline for recharging them.
5. Absence and replacement. How quickly a replacement driver, and where relevant a replacement vehicle, is provided, and what happens to the fee if none is.
6. Employer of record. Who employs the driver and handles salary and statutory registrations.
7. Conduct. Phone use, confidentiality, and a right to request a different driver.
8. Logs. A daily trip log with start and end times and odometer readings, owned by you and shared with the provider.
9. Notice. How either side ends the arrangement, and the notice period.

Plenty of firms use both: a driver on the company’s own car for daily city work, and a supplier for peaks, long trips and visitors. For a wider look at the trade-offs, our guide to self-drive versus a car with driver in Pakistan covers the same decision from the traveller’s side.

How iDrive fits in

iDrive works with independent drivers and fleets across Pakistan. If you are weighing a long-term arrangement, start with our page on monthly driver hire in Pakistan, then compare it with car rental in Pakistan for periods when you need the vehicle as well. For visiting executives and meeting days, see our business travel car service. Share your routes, hours and vehicle needs, and the team will come back with options to review; availability and final terms are confirmed before anything is agreed. When you are ready, send the details through the iDrive journey request form.

If your need is a one-off, such as a visiting colleague landing in Karachi, our sister service Pakistan Taxi has a practical guide to arriving in Karachi for a hotel stay or business visit.

Questions people ask

Does my company car insurance cover a hired driver?

Only if the policy wording allows it. Some policies cover any authorised driver, others only named drivers or employees, and business use may need to be stated. Ask your insurer to confirm in writing before the driver starts.

Who pays an e-challan if a hired driver commits the offence?

The challan goes to the registered owner of the car, which with driver only hire is your company. Whether you can recover it from the driver or provider depends on your agreement, so write that down and keep a trip log that ties times to drivers.

Is a hired driver my employee?

It depends on who hires, pays and directs them in practice. If an agency employs the driver and places them with you, the agency normally carries the employer duties, but get that confirmed in writing. If you pay the person directly and set their hours, treat it as employment and take HR advice.

Is a vehicle supplier always more expensive?

The headline rate usually is, because it includes the car, insurance, maintenance and replacement cover. Once you add those costs to a driver only arrangement, and price the admin time, the gap often narrows or closes, especially for older cars and frequent outstation work.