Employees who drive for business purposes have any number of different reasons to drive during their workday. From sales to services, the road can feel like the office to many mobile workers. So how do companies handle situations where employees are temporary drivers? Whether they’re running errands, traveling for business, filling in for someone temporarily, or working as contractors, how are companies reimbursing temporary drivers fairly? Our goal is to ensure that your compensation strategy is fair and compliant with regulations.
Most of the time, employees who need to be reimbursed for driving their personal vehicle for business purposes are driving regularly – if not daily. It’s fairly straightforward to build a reimbursement program for these employees.
But what do you do when an employee whose job function doesn’t normally involve driving ends up needing to drive their personal vehicle for work? There are various situations in which a business may require temporary driving, including errands, business travel, temporary replacements, and contract work. Let’s take a closer look at each of these scenarios.
This is a fairly broad category that encompasses any time an employee needs to leave the office to go pick something up and bring it back to the office. Maybe the office manager is restocking the break room, an assistant drops packages off at the post office or someone needs to pick up signed documents from a local client.
Regardless of the purpose or cargo, the challenge is the same. Employees who drive their personal vehicle for work should be compensated fairly for doing so.
When employees embark on a business trip with a rental vehicle and company credit card, there’s no need to worry over reimbursements. But when an employee takes their own vehicle on a road trip for your business, the company is obligated to reimburse them for gas and vehicle wear and tear for that trip.
That’s fairly intuitive for out-of-state trips, but the rule also applies for day trips to neighboring cities and even one-off trips around town. Whether your employee is driving 50 miles or 500, they deserve fair compensation.
Let’s say one of your regular drivers calls in sick or takes some PTO time for a vacation, and another employee who doesn’t normally drive needs to step in and fill their shoes until they return. Alternatively, perhaps one of your regular drivers leaves the company, and a temporary driver needs to fill their seat for several weeks until a full-time replacement is hired. In either case, the company needs to reimburse the temporary driver for as long as they’re filling in.
Independent contractors aren’t inherently temporary drivers. The nature of their employment may be as-needed, but plenty of companies work with contractors who are expected to drive their personal vehicle for work when their services are required. In such cases, these employees should fall under the same vehicle program that you have for regular drivers.
That said, unlike W2 employees, contract workers can claim business mileage as a deduction on their taxes if they’ve received no reimbursement for it. While this would mean more work for them, they may prefer the deduction at the IRS mileage rate.
Paying temporary drivers fairly ensures compliance with legal requirements and promotes employee engagement. From a legal and compliance standpoint, properly reimbursing temporary drivers helps businesses avoid liabilities and uphold their reputations. It also fosters a sense of equity, increases employee satisfaction and engagement, boosts morale and establishes a positive work environment. Fair compensation is a strategic investment in employee relations and organizational well-being.
Businesses have several options for paying temporary drivers. From reimbursing gas to paying a lump sum or cents-per-mile rate, employers can ensure adequate compensation. Let’s look closer at each of these options, beginning with reimbursing for gas.
When temporary drivers travel for your business, you can compensate them through a gas reimbursement system. This is a straightforward way to account for travel costs. It involves paying drivers for their actual fuel expenses incurred during their duties.
Companies acknowledge and offset the financial impact on temporary drivers by covering fuel costs. This promotes transparency and fairness in reimbursement practices. Gas reimbursement is equitable for both parties, simplifies compensation and allows for a direct correlation between the driver’s expenses and the reimbursement received.
Regular employees may have access to a company credit card to cover their gas, but that’s probably not the case with temporary drivers. Instead, you’ll need to provide some sort of cash reimbursement with their paychecks.
You can also pay temporary drivers a lump sum, commonly called a “car allowance” or “flat allowance.” This fixed amount provides drivers with financial coverage for the business use of their personal vehicles.
These lump sum payments are taxable unless supported by detailed mileage logs, so employees and employers must keep accurate mileage records. These help substantiate the vehicle’s business-related use and comply with tax regulations. Temporary drivers should record mileage logs to guarantee a smooth and risk-free reimbursement process.
The IRS mileage rate is a convenient, efficient method to reimburse employees for all driving expenses – including fuel, wear and tear and insurance. That means rather than calculating separate payments for each expense, you can use a single per-mile rate when reimbursing temporary drivers for everything.
As of 2023, the rate per mile driven for business purposes is $0.65. Businesses defer to the IRS mileage reimbursement rate as their standard approach when reimbursing temporary drivers for a couple of reasons:
Travel deductions apply when an employee is away from home or their primary workplace for more than a day’s work and requires overnight accommodation. These travel expenses must be considered necessary and exclude extravagant spending for personal purposes.
For employers, deductions are allowable for travel expenses incurred during temporary work assignments not exceeding one year. Deductible expenses include things like:
To ensure eligibility for tax write-offs, temporary drivers must keep careful records, which include receipts, canceled checks, and supporting documents. These may be required during tax return preparation to substantiate the legitimacy of the claimed deductions.
Refer to the full IRS guidelines to optimize your taxes and maximize available travel expense deductions.
More often than not, this will be a one off situation, requiring no more than the possibilities above. But if that proves not to be the case, we’re happy to help. Motus simplifies driver reimbursement with tailored vehicle solutions that cater to unique business needs. Here’s how:
Temporary drivers play many important business roles, from running errands to business travel and contract work. Compensating these drivers can be challenging for businesses, so it’s important to take a legally compliant approach that promotes fairness. Fair compensation helps companies avoid liabilities and leads to employee engagement and a positive work environment. Is your company aware of the latest vehicle program liability and compliance regulations? If not, Motus provides a comprehensive guide to business liability and compliance. In it, we offer valuable insights to help your company stay aligned with industry standards. Check out our guide to stay informed and secure in your vehicle program management.