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The Right Mileage Reimbursement Rate

Headshot of a man with a blurred background By Ben Reiland May 30, 2019

Categories: Mobile Workforce Vehicle Reimbursement

Is your company’s mileage reimbursement rate the best for your drivers?

Mobile workers are an integral part of any company’s business. Whether they’re made up of sales reps, managers, consultants, service providers or a combination of these and myriad other driving roles, a company will not succeed without them. So when it comes to making sure they’re paid for their business travel, your company should be doing it correctly.

One of the most common forms of reimbursing drivers for the miles they drive for work is the mileage reimbursement, or cents-per-mile (CPM), vehicle program. With this program, companies use a mileage reimbursement rate to pay out a certain amount for each business mile driven (thus the term cents-per-mile). But what does a proper mileage reimbursement rate look like?

The IRS Standard Mileage Rate

Many companies default to the IRS standard mileage rate. As of 2024, the IRS standard mileage rate, also known by a number of other titles, is 67 cents. Companies generally use this rate because they know that reimbursing drivers above it has tax consequences. But, when using this rate, most companies are over-reimbursing their drivers.

The Low End of Mileage Reimbursement Rates

If your mobile workers drive over 5,000 miles per year, they won’t be needing a high mileage reimbursement rate. Remember, the IRS standard mileage rate is the cap. Much like road ways have speed limits but rarely a mandatory speed, people assume they should drive at the speed listed and not below it. In fact, if your mobile worker is driving thousands of miles every month, your company should look at a lower mileage reimbursement rate.

The High End of Mileage Reimbursement Rates

If your mobile workers drive under 5,000 miles, a higher mileage reimbursement rate might be the best option. As long as it sits below the IRS standard mileage rate and the mobile workforce tracks the appropriate information, it won’t be subject to taxes or expose your company to audit risk.

The Truth About Mileage Reimbursement Rates

Depending on the company’s policy, there can be problems with a mileage reimbursement program, no matter what mileage reimbursement rate drivers are refunded at.

The first big one is equitable reimbursement. A driver in North Carolina may be happy with the company’s mileage reimbursement rate. But a driver in New York facing higher gas prices and automotive costs isn’t likely to share this attitude. If the reimbursement does little to make up for the price they pay in gas, it may disincentivize them from driving to the furthest extent of their abilities.

The second big one is mileage fraud. Most companies with mileage reimbursement programs rely on their drivers to manually capture their business mileage in mileage logs. This process is less than precise and may cost your company a good deal more than anticipated.

The third is adequate insurance. Employees that do not meet specific insurance requirements may put your company in a difficult situation should they get into an accident or violate laws of the road.

The Solution to Mileage Reimbursement Issues

The solutions to these issues can be as simple as … updating your cents-per-mile program. Companies with a mobile workforce that operates in a relatively similar region and doesn’t require a lot of high mileage travel are ideal for CPM. Issues with mileage fraud can be curbed with an automated mileage capture app, a tool that increases reporting accuracy and reduces employee admin. And, with the right vendor, companies can ensure drivers have up to date insurance when driving for the company.

If CPM is no longer a good fit, it might be time to implement a Fixed and Variable Rate Reimbursement (FAVR) Program. With a FAVR program, mileage reimbursement rates are tailored precisely to the driver’s region and submitted trips. And the Motus App captures key data automatically, removing concerns of mileage fraud. Interested in learning more about how FAVR works. Check out the Business Guide to Fixed and Variable Rate Reimbursement.

Read the Guide

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