If your organization provides a company vehicle to employees, now is a good time to evaluate the tools you are using to support this program. Adopting effective personal use chargeback procedures and mileage tracking tools will reduce your organization's risk.
Personal use of a company car – What's your policy?
If you own a car, you’re all too aware of the need to perform regular maintenance. Oil changes, tire rotations, and tune ups are essential to keep your vehicle in the best possible condition and avoid expensive repairs later. The same is true of a policy governing company cars: go too long without “tuning up” your policy, and you’re setting yourself up for some costly problems.
If you provide employees with a company car, when was the last time you updated your personal use and chargeback policies? With so many drivers staying home during the COVID-19 pandemic, now would be a great time to evaluate your current policies. Some key changes could help you to control your fleet costs.
Challenges of effective personal use policies
There are two fundamental challenges that frequently stand in the way of the effective management of a personal use policy:
Outdated personal use policy for company vehicles
It’s not unlikely that your policy was designed for a different era. Perhaps at the time your policy was first introduced, providing employees with company cars was simpler because costs were relatively minimal and could be more easily controlled. The current business environment presents a more complicated situation. Insurance costs have risen, and depreciation associated with vehicles has accelerated.
Plus, increased fuel efficiency means employees may take more liberties by driving the company car for more personal trips. With gas prices bottoming out, this could increase as pandemic travel restrictions are lifted across the country.
These developments make it increasingly likely that your organization is subsidizing at least some personal use costs. The IRS provides organizations with different methods for determining the value of personal use of a company vehicle. But no matter what personal-use chargeback method you choose, it will rely heavily on the effective and accurate reporting of business and personal mileage. Any under-reported mileage (and there may be more than you think) is going to cost you.
Ineffective fleet management tools
Historically, employees reported vehicle use on a mileage log, operating on the honor system. The process is easy and up until recently had not changed much for most companies. Employees simply kept a log of business and personal mileage, and that was it. Whether employees reported mileage on paper or entered it into fleet software, the process relies entirely on accurate reporting. However, employees often reduced the amount of recorded personal mileage in order to reduce their costs and the time it took them to manage the mileage log.
This outdated system has led many organizations to adopt more advanced mileage tracking systems using technology. If your organization still has employees entering their personal mileage manually, then that's a huge problem. You are using an outdated tool when you could be using a more cost-effective tool that saves the employee time while curbing the inaccurate reporting of mileage amounts.
Advanced tools for company car chargebacks
There are two technological vehicle tracking tools that many organizations have now adopted for fleet management: telematics and GPS mileage trackers. Let's look at the relative advantages of each.
Tool 1: Telematics for tracking company vehicles
Advanced software solutions like telematics can be appropriate for certain organizations. For many organizations, telematics software can risk overcomplicating a simple problem. These tools produce reams of data that go beyond simple mileage, such as driving speeds, braking habits, and cornering tendencies.
Capturing this information can be helpful for delivery drivers, service vehicles, big trucks with valuable cargo, and possible high-risk drivers. However, this tool is total overkill for a sales rep or light service rep driving a company vehicle for both work and personal purposes.
Tool 2: GPS mileage tracking for company vehicles
GPS mileage tracking systems provide an alternative means to measure mileage, but they can violate privacy and are prone to human error. Companies must be cautious they don’t gain access to information that reveals employees’ activities outside of work, such as personal medical appointments or political and religious associations. Access to this information potentially violates the employee's Fourth Amendment rights.
When exploring the dozens of mileage trackers for mobile devices available in the iOS app store and in the Google Play store, it is important to make sure that the app not only provides a streamlined and intuitive user experience but that it also preserves a firm wall between a driver's real-time location and the employer's access to mileage information. (mBurse offers an array of privacy-protecting mileage tracking options on our Mileage Tracking Solutions page.)
Automating mileage tracking without violating employee privacy
With the increased government focus on making companies aware of the challenges associated with mileage logs and the increased audit focus on the misuse of fringe benefits, now is the time to automate the tedious administrative task that is mileage tracking and proactively eliminate excess costs and fraudulent activity.
If you want to tune up your personal use and chargeback policy without stripping out employee perks, or would be interested in hearing what alternatives we offer, call mBurse and ask about our fleet solutions today.