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Fleet or Reimbursement? It's No Longer One or the Other

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Keeping The Mobile Workforce In Motion Reimbursement Options Mobile workforce managers typically use either Flat Car Allowances, Cents Per Mile, or Fixed and Variable Rate (FAVR) programs to reimburse employees who use their personal vehicles for business. Car Allowances—single company-wide rates ($500 a month per employee, for example)—are simple options, but they do not take the variable costs of travel into consideration. Car Allowances are also subject to both FICA and income taxes, so providing a Car Allowance of $300 costs an organization $322 aer FICA taxes, while employees take home only $225. Cents Per Mile programs also provide easy solutions by reimbursing employees a set amount for each mile driven (offering 50 cents per mile, for example). But these programs generally under- reimburse low-mileage drivers and over-reimburse high-mileage drivers, incentivizing each to either drive less (to avoid incurring personal expenses) or drive more (to increase their take-home amount). Both programs, if proven unfair to employees, can lead to expensive class action lawsuits. FAVR programs consider the full range of costs involved in using personal vehicles for business travel. Effective FAVR programs monitor the fixed costs of business travel, such as the price of car insurance premiums and taxes, while also accounting for the variable costs (like fuel prices and vehicle mileage). By monitoring the geographic differences and daily fluctuations in each, mobile workforce managers can provide individualized payments. In the past, employers found the administrative burden of tracking, documenting, and reporting all the costs for every mobile employee daunting, but modern technology now makes implementing and maintaining FAVR programs easier than ever. If employers choose reimbursement over fleets, implementing a FAVR program is the only fair, accurate, and defensible option. Reimbursement Benefits Custom reimbursement programs have distinct benefits many mobile workforce managers find attractive. Historically, reimbursement programs have allowed employers to take on less risk and liability than fleets. Fleet programs leave companies liable for accidents involving company vehicles at all times, even when the accident occurs outside of work hours. With reimbursement programs, the individual employee's insurance policy is typically considered primary and the company's policy secondary even if an accident occurs during business use, leaving the employer responsible only for claims not covered by the individual driver's policy. Employers are not responsible for the cost of accidents outside of business use (i.e., weekends, vacations, and personal errands). Another unique benefit of reimbursement programs is the flexibility given to employees. With reimbursement, employees are able to choose the vehicles that work best for them, which can be advantageous from a cultural-standpoint. Fleet Benefits Fleets can be appealing options for employers that need to provide transportation for specific functions, like service trucks, vans, delivery vehicles, or those with other equipment requirements. The more specific the type of vehicle needed, the stronger the case for providing a company car. UPS, AT&T, Comcast, FedEx, and many others rely on fleet vehicles for this reason. Mobile workforce managers also choose to use company-provided vehicles for cultural reasons. Some employers have tied their corporate identity to corporate vehicles, either through specific vehicles or with company-branded wrapping. Employers can influence the perception of their brand by selecting a specific type, make, and model that best represents them. Mobile workers then uphold and extend that projected image while driving the company vehicle for personal use and when arriving to meet with clients.

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