By Ken Robinson
April 26, 2023
For businesses that rely on driving employees, reimbursement for vehicle expenses is a top priority. Companies can reimburse employees using a variety of programs: car allowances, cents-per-mile reimbursements and more. Many of these programs have more than one name, and the ways they calculate reimbursements vary as well. However, as the number of mobile workers continues to increase, the one-size-fits-all vehicle programs expose their drawbacks. These drawbacks often affect not only the employer, but the employee as well. An organization may have drivers that require multiple types of reimbursement programs depending on their role and milage. When looking for a more fair and accurate way to reimburse employees for vehicle expenses more employers are turning to FAVR mileage reimbursement.
Fixed and Variable Rate (FAVR) mileage reimbursement, also referred to as a FAVR reimbursement plan or FAVR vehicle reimbursement plan, reimburses employees for the fixed and variable costs of vehicle ownership. What exactly does that mean? What separates “fixed” costs from “variable” costs?
The term “fixed costs” refers to expenses that are consistent each month but vary from employee to employee due to factors such as vehicle type, miles driven and location. Examples of fixed costs include insurance premiums, license and registration fees, taxes and depreciation.
Variable costs, on the other hand, can change each month and are based on number of business miles driven and geography. Variable costs include gas, oil, maintenance and tire wear. As we’ve seen from recent gas price trends, these prices can fluctuate significantly over time.
FAVR is the smart option for companies looking for a vehicle program that fairly reimburses employees, while protecting the business from excessive spend and accident liability. There are several ways a FAVR mileage reimbursement is different from a typical mileage reimbursement. At the top of these reasons is the fact that FAVR is the only methodology recommended by the IRS. Other reasons include costs of vehicle ownership, flexibility and personalized reimbursements.
FAVR reimburses for fixed and variable rates of individual driving employees. This includes maintenance, oil, tire wear and other incidental expenses. Mileage reimbursement rates, on the other hand, do not provide accurate or fair reimbursements for variable driving costs far beyond fuel.
Traditional mileage reimbursement programs are based on data from the previous year. This often results in static rates that do not accurately reflect the reality of employee expenses. FAVR mileage reimbursement allows employers to adapt to fluctuating market conditions, making it more fair and accurate for employees.
No two employees are exactly alike. The same goes for their expenses. Your rural driving employees and your city driving employees have entirely different experiences. A company’s reimbursement strategy should account for those differences. Unlike cents-per-mile programs, FAVR reimbursement payments are specific to each driving employees’ location and the costs that are unique to that location.
While FAVR may be the right choice for a lot of companies, it might not be the right fit for yours. It’s not a question of the number of driving employees in your mobile workforce. However, to qualify for FAVR, employees must drive a minimum of 5,000 miles each year. Whether that only applies to one subset of your mobile workforce, or doesn’t line up at all, your company has other options.
We’ve shared what makes the FAVR reimbursement program so great. It’s the only IRS-approved option. It’s highly configurable, which means organizations can adjust payments within the IRS guidelines to create tax-free reimbursements. That adaptability means reimbursements can be adjusted to whatever economic situation. But FAVR is a challenge to duplicate in house. Most companies using FAVR outsource it to companies like ours. So what sets Motus apart? Let’s start with the Motus Platform.
The Motus platform powers our solutions, using millions of data points to create accurate reimbursement calculations. Basically, it makes vehicle programs convenient for drivers and simple for employers and administrators. How does that play out? The platform streamlines vehicle program management and compliance with IRS requirements. It also enables employers to customize tax-free reimbursement rates that align to job role needs, employee’s location costs and account for miles driven.
Whether your mobile workforce is five drivers or 5,000, the Motus platform provides all the tools you need to streamline management of a FAVR program. Thousands of companies efficiently and frictionlessly manage their programs using those tools and guidelines. The platform offers streamlined exception management workflows, dashboards on key aspects and program health and helpful reminders for upcoming deadlines. Through the Motus Platform, a single person can manage hundreds of drivers.
We understand a good reimbursement solution isn’t just about what you can do with it, but how easy it is. That’s why we’ve focused so much into simplifying the approval process. We provide convenient approval workflows, configurable to any team. These workflows can be configured for multiple approvals or a single approver. Reviewers can choose how to approve mileage, either in batches or by individual trips. Admins can also delegate approval responsibility to other team members for as long as necessary. Additionally, these workflows enhance the approver experience, improving insight into reporting to ensure drivers don’t miss their reimbursement if an approver is out.
The Motus app is a one-stop for any driver’s reimbursement needs. In less than 10 minutes each month, they can accomplish everything they need to. The app offers guided workflows that simplify setting up. It also offers several options for reporting miles, including automatic mileage capture for trips outside of business hours. The process to review trips in the app is quick and in-app notifications help employees meet deadlines and receive maximum reimbursement amounts. Finally, employees can view their reimbursement rates and history any time in the app or their user portal.
Processing more than $2 Billion in reimbursements each year, it’s no wonder Motus is a leader in reliable payments. Beyond being reliable, we also offer payment options to meet the needs of companies across industries and sizes. Our payments can integrate directly to any payroll system, or we export approved reimbursements for a payroll system. We can also push expense claims to Concur or other T&E partner, or directly deposit payments to employees for you.
With the right vendor, FAVR mileage reimbursement can simplify manual processes with automation, ensure compliance and provide accurate payments, all while controlling costs. Motus works with companies to deliver a frictionless reimbursement experience tailored to role, business use and location. With guided workflows and easy submission, the Motus app makes mileage capture easy for employees. And the configurable rates and in-depth reports of our platform provides administrators with powerful yet simple tools to monitor and manage their program. Interested in learning more? Check out our FAVR offering.
With Motus, accurately capturing business mileage has never been faster or easier.
Contact us today or take a virtual tour of the Motus Platform.
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