Offering a competitive car allowance in 2023 could get expensive. Auditing your policies can help you boost driver benefits while reducing costs.
mBurse has created a three-step process for evaluating and updating business vehicle policies. Following these steps will enable you to stay responsive and competitive in the changing environment. It will help you customize your car allowance for changing employee needs while cutting expenses at the same time.
Use our Car Allowance Grader to audit your current company policy. You answer a set of questions, and our algorithms provide an automated report to help you diagnose shortcomings, target areas for growth, reduce costs, and increase employee satisfaction.
Based on the results of the policy audit, mBurse will prepare a benchmarking analysis. This report affords the opportunity to compare the company's policy with those of competitors and similarly-sized organizations in other industries. To learn more about the importance of benchmarking data, read this post.
After the audit and benchmarking report, you may request from mBurse a customizable car allowance or reimbursement rate that balances your organization's goals with its employees' vehicle expense needs. You answer a few additional questions, and we provide this rate free of charge. Often, by reducing or eliminating taxes on your car allowance, you can cut costs while increasing employee benefits.
Our self-auditing tool, the Car Allowance Grader, asks the following types of questions:
A car allowance audit should be judged according to three important criteria: cost-effectiveness, company risk, and competitiveness. Our reports include three sections that correspond with these three criteria.
Because the IRS treats a car allowance as taxable income, employees receive 30-40% less than their stated car allowance amount. FICA also adds to the employer's expense. Using a given monthly amount, the Car Allowance Grader calculates the average take-home amount employees likely receive as well as the overall amount the company actually pays on each car allowance.
Using these calculations, you can discover how much money your company could save by switching to a non-taxable reimbursement. If your company already has a non-taxable vehicle plan, you can also discover whether that plan creates its own cost control issues.
The risks of car accidents and labor code violations add hidden costs to most car allowance policies. The three categories to examine during a policy audit are general liability, negligent entrustment, and labor code compliance.
General liability refers to whether an employee's auto insurance coverage is sufficient to cover an accident they cause while on the job. If not, their employer could end up footing the bill.
Negligent entrustment refers to situations in which an employer is held responsible for an employee's costly actions. If the employer does not take proactive, documented steps to ensure that all drivers belong on the road, a lawsuit can name the employer as a defendant.
Labor code violations related to vehicle reimbursements are a threat in employer-friendly states that prohibit employers from passing on business expenses to employees. It is important to know whether your employees operate in these states and whether your policy complies with the law.
If a car allowance policy does not keep up with market changes, that policy will compromise attraction and retention of productive employees. Our annual survey consistently reveals that most organizations go years, often decades, without making changes to their policy.
With so much inflation in vehicle costs, employees at many companies may find that their company's policy does not keep up with their vehicle expenses.
An insufficient vehicle allowance or reimbursement will not only increase attrition rates but also decrease employee productivity as employees drive less to save money. An updated policy may sound costly, but it can increase retention of top talent, attract new employees, and boost productivity.
Once you audit your company's vehicle policy, it's important to take steps to customize your car allowance to the needs of the company and the employees and enjoy the savings that follow – even as you boost benefits for some or all drivers. To start the process, select the option below.