Benefits of employee mileage reimbursement for businesses
If your employees often access corporate travel for any purposes that are connected to your business, they are entitled to mileage reimbursements. Like any other task that an employee might have to pay for out-of-pocket, mileage too is an expense that needs to be reimbursed.
Paying employee mileage reimbursements can be in the best interest of both your company and your employees. They require much lesser bookkeeping than most other business operations and are relatively easy to manage. Mileage cost is also a business expense that falls under the tax-deductibles list for most countries.
So, paying mileage to employees might not be a bad idea for your accounts either. Not only does it keep employees happy, but it is also cost-effective and comes with a whole range of benefits.
Most countries list mileage expenses in the category of tax deductibles. Businesses that choose to reimburse employees for any money or fuel the employee spends on motor vehicles while traveling for business can utilize this facility to great effect. You can file the mileage pay you provide to employees as business expenses and then avail tax breaks on them.
You can also use them to benefit from tax deductions on your overall tax returns as well, depending on the financial status of other departments in your company. This can help you lower the overall tax liability of your business and at the same time give you the benefits of other refunds on taxes.
There are two ways in which you can arrange transportation for business purposes for your employees - let employees use their own vehicles and reimburse them or invest in a fleet of vehicles. Buying and assembling cars is expensive. Even if you decide on leasing vehicles
You are likely to pay for costs related to the acquisition that you either will have to add to capital expenditure or pay in periodic intervals throughout the period of ownership. On the other hand, if you are paying mileage to employees for using their own vehicles, it entails no capital costs or extra expenses whatsoever. You simply need to pay for the miles that employees cover.
When buying cars for company use you also need to maintain them, track miles driven, check for misuse, and at the same time ensure all expenses accrued while performing these tasks are maintained accurately by your finance teams. Vehicles as assets also require you to follow lengthy paperwork and track depreciation when maintaining books.
The rules your government sets for maintaining these assets are another headache. Instead, employee mileage reimbursement is a much easier and hassle-free approach you can take to arrange transportation. The vehicle is the employees to maintain, all you have to do is reimburse their usage as per mileage rates.
When you buy vehicles for your company you will obviously also have to pay for ancillary expenses like insurance, traffic violation fines, maintenance, etc. Over time, these costs can add up to an unnecessarily significant amount. Paying employees for business mileage, however, makes much more sense because it doesn’t come with any of these extra expenses. You don’t have to pay insurance costs for employees with poor driving records or for any damage they cause to the vehicle.
Reimbursing employees for the mileage expenses they incur can come as a huge boost to employee morale and satisfaction levels. It can also be presented as a job perk to attract and retain talent in your company. When an employee sees that their mileage cost is being looked after by their company it gives them an extra reason to have a positive attitude towards running business errands.
It ensures that your workforce is compensated promptly and in a fair manner that is beneficial to both company and the employee. The need for them to worry about whether their expenses will be acknowledged and compensated is eradicated and the result is a happy and content employee.
Employee mileage reimbursement is not as complicated as it might sound. Traditionally, employees would have to produce fuel and maintenance expense receipts to finance departments for the same to be reimbursed. They would also have to fill out extensive expense reporting forms. These forms and receipts would then be compiled, calculated, and finally reimbursed at the end of the month. However, this process has become much easier thanks to automation.
Companies can manage employee mileage reimbursement via automated expense management platforms. They can ask employees to download mileage tracking apps or create a log of miles driven. These miles can then be entered into your expense management software for it to calculate employee mileage reimbursement amounts
Expense management platforms like Volopay come equipped with features like employee expense reimbursements, reimbursement rates per mile. These rates can vary across companies and countries. If you’ve set these rates and entered mileage the platform will take care of the rest, from calculating reimbursement amounts to transferring the amount and notifying concerned parties of the same. Employers usually hold out on reimbursement until they roll out the next month’s paycheck. However, with expense management software you can make this reimbursement instantaneous and send it directly to the employee’s account.