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Losing Cents Per Mile: How Cents Per Mile Programs Can Cost You Millions

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Keeping The Mobile Workforce In Motion Increasing the Risk of Lawsuits Companies that inaccurately reimburse their employees for mandatory business travel greatly increase their risk for class-action lawsuits. Some states require employers to reimburse employees for expenses they incur while traveling for work and face expensive legal action for failing to do so. In California, where Labor Code Section 2802 is particularly strict, companies across retail, hospitality, marketing services, courier/delivery, and food services industries have recently paid business travel-related settlements ranging from $4.5 to $12.4 million dollars. One employer who failed to adequately reimburse employees for driving their personal vehicles for pizza deliveries was required to pay a settlement of $5.1 million in 2006. Another company only reimbursed employees for mandatory business travel if they drove over 25 miles and tracked the mileage through an online system –and paid $4.5M in a 2009 settlement for violating CA Labor Code 2802. A third employer classified mobile workers as contractors rather than employees to avoid business-related travel reimbursements. Their employees were awarded $12.4M in 2007 to recover reimbursement for their expenses. The list goes on. Although the causes of the lawsuits vary, each could have been avoided with a more fair, accurate, and defensible reimbursement method. Losing Cents Per Mile Companies currently using inaccurate reimbursements are losing many cents per mile when paying for travel. The IRS Safe Harbor Rate and individual cents-per-mile programs are simple answers to the complexity of travel reimbursement, but these programs come with steep costs. The annual IRS rate is not agile enough to respond to the fluctuating costs of business travel. Cents-per-mile programs inaccurately reimburse employees, incentivize unproductive behavior, and increase the risk of lawsuits. But there is a better option. Mobile workforce management technology has made reimbursing employees through a fair and accurate Fixed and Variable Rate (FAVR) program easier than ever before. By implementing this more accurate alternative, companies using cents-per-mile programs could save thousands of dollars per employee each year. Continuing to use cents-per-mile programs means accepting an unfair, inaccurate, risky, and very costly solution. Motus, LLC | Two Financial Center Boston, MA 02111 (888) 312-0788 www.motus.com

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