At mBurse, we constantly say, “Equal is not equitable—it’s just equal.” This statement has almost become a cliché in the office, but this statement is true. The reason is simple: giving equal treatment to people in unequal circumstances does not yield equitable outcomes.
Merriam-Webster defines “equitable” as “dealing fairly and equally with all concerned.” Equality is part of the definition, but so is fairness. Equality by itself does not always produce fairness. There’s a reason in college sports why Title IX does not stipulate absolute equality between men and women, that is, competing against each other in the same sports. That would not be fair, since men and women do not have equal musculoskeletal structures. Title IX only requires equitable opportunities for men and women to participate in sports in general. This means that women and men are treated differently in certain cases in response to the differing abilities of each gender.
When two people with different needs are treated exactly the same, it often results in an unfair situation. That’s why “equitable” is a more worthy goal than “equal.”
Equal vs. equitable car allowances and mileage reimbursements
When it comes to travel expenses, no two employees experience exactly the same expenses. That’s why mBurse advocates equitable—not equal—car allowances and mileage reimbursements. Should an employee who covers a large, high-cost territory receive the exact same car allowance or mileage rate as an employee who covers a smaller, less costly territory? In that case equal treatment would be inequitable treatment.
Fairness means aligning the allowance amount or reimbursement rate with territory size and territory costs for each mobile employee. For example:
Your employees expect to be treated fairly. It’s right to treat them fairly. By making sure your car allowance or mileage reimbursement fully protects each employee’s income from the costs of operating their personal vehicle, you are treating them all fairly.
Determining an equitable car allowance or reimbursement rate
Many car allowances are derived from best guesses or what competitors are doing. Leadership uses their best guess and common sense to come up with a car allowance amount that controls the budget, keeps the company competitive, and keeps employees happy. The challenge is, even with the internet, accurate and up-to-date cost data can be elusive.
For example, gas prices not only fluctuate over time, but they also vary by location. And they can spike in one part of the country but remain stable in another. The same can be true of car insurance rates, since they are often tied to extreme weather events that affect one part of the country but not others. It’s not hard to discern general patterns and averages when it comes to gas prices and insurance rates nationwide, but how do you stay up-to-date and keep track of localized fluctuations? Even within a single state, costs can vary widely, especially between urban and rural areas.
How can you know for sure what size territories your reps drive and whether their costs are being covered?
Equitable is right, but it’s complicated.
Establishing an equitable car allowance or reimbursement rate for each employee can get complicated. Factors like gas, insurance, license fee, taxes, maintenance, and depreciation should be considered. Depending on the number of mobile employees you have and the number of home zip codes represented by your mobile workforce, establishing an equitable situation could take some time.
Aligning territory costs and size is a science. But it’s worthwhile because it’s the right way to treat employees. Plus, there are a number of costly consequences that can result from inequities. Employees receiving a flat monthly allowance may drive too little, trying to save money but limiting productivity. Employees receiving an insufficient mileage rate may drive unnecessary miles in order to bump up their reimbursement. In either case, morale can dip, and attrition rates can increase.
You can’t afford not to treat your employees right. Call mBurse today to learn more about how to develop an equitable allowance or reimbursement policy. We can take a complicated process and make it simple.