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 As the price of employee commutes continues to accelerate, employers are beginning to pump more energy and dollars into creative cost-saving strategies for their road-weary workers.
The strategies range from shorter workweeks and flexible schedules to transit subsidies and carpooling incentives. Now, employers also are tapping IRS rules for relief.
The little-known section 132(f) of the Internal Revenue Code allows employers to assist employees with transportation costs by reimbursing or excluding up to $115 per month for each qualified employee, said Jay Kennedy, chairman of the State Bar of Michigan taxation section and senior counsel at Warner Norcross & Judd, a Southfield-based law firm. The employee must use the money for carpools, mass transit, or qualified parking.
“It's a tax-free benefit that an employer can provide to an employee or employees that commute to work in a qualified vehicle,” he said. “It's really a subsidy.”
For a vehicle to qualify for the subsidy, it must have room for six passengers plus a driver. The employer can hire a third party to provide the transportation or employees can qualify with the right vehicles. Employers can offer the benefit in one of two ways: they can cut a check for $115 or they can offer it by reducing an employee's salary by that amount – much like how 401(k) contributions work. The salary reduction option would require an employee to provide written consent and would allow the company to use the money to purchase transportation services.
With increasing gas prices, Kennedy said he expects more companies will begin using this benefit – if they haven't already started.
“It's not going to solve the gas crisis,” but it might ease some of the burden, he said.
Last month, the IRS also announced an increase in the standard rate for business vehicle operating costs. For the final six months of 2008, the allowable deduction will rise from 50.5 cents per mile to 58.5 cents. The rate also applies to businesses and others that qualify for depreciation allowances that operate autos for charitable, medical, or moving purposes.
Lenny Sanicola, practice leader, professional development at WorldatWork, said the most popular way to ease pain at the pump for employees right now is to provide different work schedule options. For example, many companies and state and local municipalities now are allowing employees a four-day workweek option. Other companies also are offering gas cards, van pooling options for certain departments, free emergency transportation for those who opt for carpooling options, incentives for employees who commute with others, and concierge services for those who carpool but may need to run errands during the day.
Municipalities, such as Houston, are encouraging employers to offer flexible work schedules to reduce the number of employee commutes. Houston's program, called Flex in the City 2008, encourages employers to try flexible work options.
Companies that participate are asked to adopt an additional flex option that eliminates at least one peak commute during a specified time period. In 2007, the program meant a savings of 906 peak commute hours, equaling a savings of $16.8 million in annual user cost savings.
Employers that want to assist commuters also can provide valuable information via a company's intranet about how to stretch gas dollars and keep vehicles running efficiently, Sanicola said.
Before enacting any program, however, Sanicola suggests that employers consider a few questions to help determine the needed scope. First, assess whether high transportation costs affect the entire organization or have a greater impact on a specific department, such as a call center, he said. Are there certain departments within the company where the average wage of employees is lower, requiring more financial assistance? Job types also play a factor in the kind of assistance that can be offered. For example, some positions simply do not lend themselves to teleworking arrangements.
“You kind of have to know where it hurts – and where employees are feeling pain,” Sanicola said. After that analysis, you then can determine what your company can afford to provide employees.
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Written by Jenny Cromie, certified human resources specialist (CHRS) |
