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It’s no secret that the world has changed drastically over the past few years—and within the workforce, these changes are even more dramatic.
When it comes to vehicle programs, industry and global changes create new challenges:
While a vehicle program might just feel like one more thing to check off your to-manage list, it can actually be an asset for your company that helps you weather changing tides and adapt to a volatile industry and workforce.
It all starts with having a flexible, data-driven and transparent vehicle program.
In this guide, we’ll outline three ways that a great vehicle program can help your company adapt to changing times, as well as look at what makes a great vehicle program and some flexible vehicle programs available that could help your company.
In the current industry, not only is maintaining company fleets expensive, but it’s also difficult and expensive to even obtain cars right now.
Even with this difficulty and expense, company car programs still remain a popular option. That doesn’t mean they’re well-liked, though—in a survey of beverage distributors in 2022, 87.5% of beverage distributors said they were not completely satisfied with their company fleet programs.
So, why continue with a company car program if it’s not really meeting your needs?
The problem is that company fleets seem easy, they’re straightforward, and they can reduce administrative paperwork. However, many industries are finding they’re becoming a bigger and bigger cost.
In order to reduce costs and eliminate friction from supply chain issues, companies who want to adapt to the changing industry should consider diversifying or eliminating their company fleets. There’s a large variety of vehicle programs you can choose from, and a company fleet may not be the most efficient or cost-effective program.
If you’re thinking about making the switch away from a company fleet, consider:
For many companies, reducing or eliminating their fleet can be a significant source of savings, and reduce friction with rising costs and difficulty of obtaining cars.
Is “The Great Resignation” affecting your company yet? If it isn’t yet, it’s only a matter of time before it does. As of June 2022, there were 11.4 million job openings in the US and only 6 million unemployed workers—which means lots of jobs unfilled with no workers to fill them.
Even workers who are unemployed are getting a lot smarter and pickier about where they work—weighing every pro and con. So what does the labor shortage have to do with vehicle programs? Well, in short, a great vehicle program can help you weather the labor shortage by retaining and attracting great drivers.
Jason, the Head of Operations at Street Delivery, found that switching to Everlance—with automatic mileage tracking, and fair, on-time reimbursements—made their vehicle program an attractive perk for drivers.
“We’re extremely happy with the product. Everlance has really taken our business in a different direction, with just how efficient it is and how easy it is to sell now. It’s a great product… and we’re so grateful that we were able to find it.”
- Jason, Head of Operations
In this industry, it’s essential to make sure that all of your benefits are truly perks for your employees. Transparent, flexible, data-driven vehicle programs stand out among both new and existing employees because, in this case, the benefits are:
When it comes to rising gas prices, there are so many factors at play: political, economic, social and more. In any case, that doesn’t change the fact that filling up costs, on average, 63% more than it did this time last year. (Source: eia.gov)
When it comes to your vehicle or mileage reimbursement programs, you want to ensure that the amount you’re reimbursing employees is accounting for the rising gas prices. Ideally, when gas prices inevitably start to decline again, though, your program is agile enough to save you money and avoid over-reimbursing employees.
But how do you design such a program without starting from scratch each month?
When it comes to mileage reimbursement programs, most people tend to think about them as a simple equation:
[mileage driven] x [IRS standard reimbursement rate] = amount paid to drivers
And while this is simple, it's neither scientific nor agile. The IRS reimbursement rate is meant to account for things like gas, insurance, the cost of owning and maintaining a car and so on. But typically, the IRS rate only changes once a year.
As a result, using the IRS reimbursement rate is not the most up-to-date or scientific option. So, what are the alternatives?
First, companies who want to use a mileage-based reimbursement program should consider the following pieces of information as it relates to the drivers on their team.
Vehicle programs are not one size fits all. As a result, it’s important to understand what the costs of your drivers are—not a generalized national average—in order to compensate employees fairly while also meeting budget goals.
As we mentioned above, most people tend to think about vehicle programs this way:
[mileage driven] x [IRS standard reimbursement rate] = amount paid to drivers
But here’s a better way of thinking about vehicle programs:
[reimbursement amount] - [(mileage driven ÷ mpg) x (cost of gas per gallon)] = reimbursement gap
So what does this mean?
Let’s break that down by looking at some examples:
The reimbursement gap should be covering the cost of everything non-gas-related. The question is—are these hypothetical employees actually spending this much every month on car-related expenses? Sometimes the reimbursement gap makes sense. Sometimes it might be jarringly off.
As you can see, it’s essential to actually do the math for your drivers in your unique situation. Have you done the math for your vehicle program? If not, you could be overcompensating employees at the cost of your company budget.
It’s important to weigh all of your options and know what you’re actually paying for with each, especially given the rising costs of gas and other car-related expenses. So what vehicle programs are available?
CPM (cents per mile) programs
CPM programs are a basic mileage reimbursement program that are a popular choice for many companies. With CPM, your company will set a per-mile rate—either the IRS standard reimbursement rate or another rate—and then employees will track mileage and submit a mileage report for reimbursement.
Working with a vehicle provider like Everlance can alleviate administrative burden associated with CPM programs and can help prevent overcompensating drivers for estimated or unintentionally inflated mileage.
Everlance offers automatic and accurate GPS-based tracking to record every mile, direct report submissions from drivers to supervisors, managed reimbursements and more. With our end-to-end assistance and easy-to-use software, CPM programs can be easy to implement and manage.
Car allowances
Car allowances are a popular option because they’re very straightforward: each month, every employee receives a flat-rate car allowance to cover costs.
The downside of car allowances is that lower-mileage drivers end up being over-compensated, and higher-mileage drivers may end up being under-compensated, so it’s not the fairest option for employees.
Company cars/fleet
Another popular option, the company car model consists of purchasing and maintaining a fleet of company cars that drivers use for work-related purposes. This option has much higher outlay costs. In addition, it also increases your company’s risk profile.
FAVR (Fixed and Variable Reimbursement) program
A FAVR program is one of the most flexible vehicle programs available, for a variety of reasons. FAVR allows you to design a scientific reimbursement plan based on both fixed and variable costs. With FAVR, the employees reimbursement is calculated in two pieces:
This system allows you to stay agile month-to-month as gas prices fluctuate. It provides more transparency for employees while ensuring reimbursements are fair for both employees and for your company. In addition, because only a portion of your monthly budget is mileage-based, it also prevents ballooning and offers greater spend control and flexibility.
When you do the math for your vehicle program, you’ll realize that each company—and even different segments of employees—may have different needs. As a result, you shouldn’t simply apply the same program to everyone—at least not without crunching the numbers first!
At the end of the day, it’s up to you to do the math for your company vehicle program. Is your vehicle program worth it?
If you want expert assistance determining the best vehicle program for your company or creating a transparent, data-driven program, Everlance is an end-to-end vehicle program provider. We help companies track and reimburse mileage, manage expenses, reduce risk and more. Whether you have two employees or two thousand, we’re here to help.
With Everlance, you’ll have a team of experts guiding you through the vehicle program process every step of the way. Why Everlance?
Ready to consider what vehicle programs will meet your needs, reduce your costs and create happier employees?
Set up a time to chat with an Everlance expert, or explore our products and services on your own.
We help people save time and money. At Everlance, we're on a mission to empower mobile workers and businesses. That sometimes leads us to generalize tax information. Everlance team members are not certified tax professionals. If you need help with your specific tax situation, please reach out to your tax advisor.
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