Many organizations that pay a car allowance also provide employees with a gas card or fuel reimbursement. Offsetting your employees' fuel costs can be a big mistake, however, because you lose the ability to control costs.
Why give employees a fuel card/reimbursement?
America’s workforce is increasingly mobile, and traditional car allowances aren’t getting the job done. Fluctuations in gas prices and variations in territory sizes mean that one-size-fits-all allowances under compensate some employees, leading to complaints. These concerns often lead organizations to equip employees with a gas card to make up the difference in an attempt to create a corporate vehicle reimbursement program.
Giving employees a gas card is generous and convenient. It’s also foolish. Sure, it quiets complaints and demonstrates a desire to treat employees equitably. But rather than solving the true problem – an insufficient car allowance – you create a new set of bigger problems.
3 reasons not to give employees a fuel card
Fundamentally, a gas card limits your ability to control costs. Let's look at three contributing factors that illustrate this problem.
Gas card costs are subject to each vehicle’s fuel economy.
An employee’s choice in personal vehicle lies outside your control. If an employee chooses to drive a Hummer, you will be subsidizing their fuel costs. A gas card removes any incentive for the employee to use a fuel-efficient vehicle for work purposes. This exposes your bottom line to expenses that contribute nothing to your organization’s mission.
Business use vs. personal use of fuel is difficult to measure.
When an employee drives a personal vehicle for company purposes, it becomes difficult to separate business use from personal use. Say an employee runs a quick errand between stops, or picks up the kids from school after work, or takes a weekend trip using the remnants of gas purchased with the fuel card. Instituting a mileage log does not fix the problem, because unreported personal use here and there adds up over time
Employees control the gas card; you don't.
Employees control the fuel card and your costs based on how they report business use vs. personal use. Because a lot of companies rely on the honor system quite often business use goes over-reported.
Many organizations regain some control by placing limits on daily, weekly, or monthly transactions. However, such limits still leave two problems: employees with high fuel costs may remain under-reimbursed—the very problem the fuel card was meant to solve—and employees with low fuel costs may unnecessarily spend up to the maximum by over-reporting business use.
Alternatives to fuel cards or reimbursements
Our increasingly mobile workforce requires innovative solutions. If you are providing a fuel card or fuel reimbursement you are going to need a mileage log to substantiate business use. Find out how you can fairly reimburse mobile employees while controlling fuel costs through accurate, convenient mileage capture tools. Take the first step in creating a corporate vehicle reimbursement program that is equitable for both the company and employees.
Even better, switch to a more cost-effective and equitable car reimbursement system. Explore the different forms a car allowance or reimbursement can take to figure out which is the best fit for your organization. Click the link below to read our guide to car allowances.