Your business may offer mileage reimbursement programs for your employees. But, do you have to? Here's what you should know about employee mileage reimbursement laws.
There is no federal law requiring businesses to reimburse employees for their mileage. Some states like California do have reimbursement requirements for employee mileage. Mileage reimbursement can be a good way to attract and maintain workers. Many organizations use the optional Standard Mileage Rate for their reimbursement rates. For 2017, that would mean providing 53.5 cents per business mile. Your mileage reimbursements may be a deductible business expense at tax time.
There's no federal mandate requiring mileage reimbursements. But, there may be a slight exception depending on the net compensation. The Fair Labor Standards Act requires wages to be "free and clear." Employees can't "kick-back" directly or indirectly a part of their wages to the employer. This could be through cash or non-cash, such as business use of a vehicle. Make sure you're not violating the FLSA. This could happen if the net effect of no reimbursement is the compensation falling below minimum wage.
California requires employers to reimburse workers for their business mileage. This is according to Section 2802 of the California Labor Code. Importantly, employers don't have to reimburse¬†employees for commuting. How to comply with California requirements:
Your employees don't have to pay taxes on a mileage reimbursement if you have an accountable plan. An accountable plan follows these requirements:
The majority of companies who calculate mileage reimbursement rely on a manual mileage log. Employees have to write down their mileage then input it to a spreadsheet to calculate mileage.. They then must submit that to finance and then employees are eventually reimbursed. This process is often inefficient and can fall prey to employees doctoring mileage. Digital products like MileIQ for Teams provide simple yet powerful mileage reimbursement solutions. Employers can rest assured that they're reimbursing the proper amount. Employees enjoy how they can stop worrying about tracking mileage and focus on growing the business.