The Right Mileage Reimbursement Rate

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 2019, the IRS standard mileage rate, also known by a number of other titles, is 58 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

There are 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 range from implementing a Fixed and Variable Rate Reimbursement (FAVR) Program to adding the Motus App for automated mileage tracking in your current mileage reimbursement 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. Expect to learn more about those options using the links above. You can also contact us directly to learn more!

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The Author

Ben Reiland

Ben Reiland is a Content and SEO Specialist with Motus, LLC. Host of The Road Warrior Podcast, he shares the stories of people who drive for work when he isn't keeping an eye out for industry impacts and staying on top of trends. Ben's expertise ranges from verticals and labor laws to oil price impacts and more!

Read more by Ben Reiland

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