Employer Mileage Guide

Mileage reimbursement involves reimbursing employees for using their personal vehicle for work or expenses for using a company car. For example, you might reimburse employees based on their mileage logs or based on an allowance.

Each organization has its own rules of employee reimbursement. Also, while there aren’t federal requirements, there may be state requirements that your company needs to adhere to. So be sure to create a clear policy and educate your employees on what’s involved.

How does employee mileage reimbursement work?

Employee mileage reimbursement programs are often as unique as their organizations. Some organizations still use paper logs. Then, the finance department is tasked with a behemoth of a task: tracking down individual reports, verifying routes, and then individually approving reports.

But there’s a new way to manage mileage—and it comes with a suite of benefits that extend beyond significant cost savings. With intuitive and intelligent technology, you’re sure to ensure mobile employee effectiveness, keep your team happy, and save administrative time across the board.

What are the benefits of the “new way”? 

The benefits of the modern approach include: cutting costs easily, leveraging powerful business insights, keeping employees happy, saving administrative time, and staying audit-ready.

Learn More About Everlance Business

Reimbursement program options

When the company provides the vehicle:

If your team drives company cars, you can offer reimbursements for expenses like gas, parking, and tolls. Unfortunately, you can’t use the standard mileage rate to calculate these expenses because this rate includes the cost of operating a vehicle. 

When employees own the vehicle:

Option 1: Cost-Based Reimbursement

Under a cost-based mileage reimbursement policy, employees are in charge of logging their work trips (including details like date, locations, purpose, and distance). Then, employees report these trips to their employer for reimbursement.

Companies can use the Cost-Per-Mile (CPM) method or a Fixed & Variable Rate (FAVR) method. 

What is a CPM program?
A CPM program involves using the Standard Mileage Rate to calculate reimbursements based on miles logged (work miles X current standard mileage rate = reimbursement). When using a CPM plan, your employees are typically reimbursed on a non-taxable basis.

What is a Fixed & Variable Rate program?
A FAVR plan reimburses employees who use their own car for business purposes based on a combination of mileage reimbursement and a monthly allowance. The allowance includes both a fixed amount and a variable amount (which depends on fluctuating vehicle expenses). The total payment is made in periodic payments to employees.

The fixed payments cover the fixed costs for depreciation, insurance, registration fees, and taxes that don’t tend to vary significantly based on how much you drive. The total costs for these expenses are calculated and then adjusted to reflect the percentage of time the vehicle is used strictly for business.

The periodic variable payments cover variable costs, including fuel, oil changes, tires, and routine maintenance. When using a FAVR plan, your employees are typically reimbursed on a non-taxable basis.

FAVR is often a fairer method, plus it gives you more control over reimbursements. There are certain requirements to qualify—get in touch with our sales team today to see if you qualify.

Option 2: Allowance or Stipend

Under a mileage allowance policy, employees are typically paid a set amount upfront for each payment period. 

Want to save time managing mileage? 

Meet Everlance Business. Everlance Business is employee mileage reimbursement for the 21st century. 

We've combined our #1 mileage & expense tracking app with a powerful admin dashboard to help organizations manage their mileage & expenses. Partner with us to create a seamless reporting flow that leverages innovative technology. 

Everlance Business takes the tedious work out of mileage and expense tracking, integrates the reporting flow, and enables powerful business insights. It also makes mobile reporting more accurate and easier than ever for all stakeholders—no paper, no odometer, and no unnecessary hours wasted on tracking down individual reports - while typically reducing mileage reimbursement costs. 

We’re the mileage experts, with over 1.5M users relying on our app to track their business miles. So whether you want a CPM or FAVR program for a team of 5 or 50,000, we’ve got you covered.