An oil and gas company was paying approximately 250 employees a taxable car allowance that had remained the same amount for many years. In addition, the company provided a fuel card to employees.
Between providing a car allowance and a fuel card for so many employees, the oil and gas company struggled to control costs. They faced a scalability and sustainability problem as the company grew and costs ballooned.
With a portion of their car allowance diverted to taxes, employees relied on the fuel card to offset vehicle costs. Because the allowance was not adjusted for geographically-sensitive costs, some employees experienced higher costs than others. Over time, though the car allowance did not increase, company costs climbed as employees used the fuel card more liberally. The company did not require employees to report personal use of fuel (which violated IRS regulations).
After partnering the mBurse, the oil and gas company adopted a non-taxable car allowance. By eliminating the large chunk of expenditure that went to the government instead of employees, the organization freed up resources to boost the car allowance to more accurately reflect the employees’ vehicle cost needs.
mBurse also helped the company craft a new set of policies surrounding fuel consumption. By implementing our fuel consumption tools, they achieved compliance with IRS regulations and charged back employees for personal usage of fuel.
Solutions allowed reinvestment of savings into employee benefits
In the first year, the oil and gas company netted $165,000 in savings. By eliminating taxes on the car allowance along with the expense of personal fuel usage, the organization was able to increase employees’ net car allowance by an average of 35%.
The car allowance now sufficiently reimbursed vehicle expenses, reducing the pressure employees felt to rely on the fuel card to offset unreimbursed expenses.
To provide a robust car allowance while controlling company costs, adopt a non-taxable plan. The savings in eliminated tax waste will more than pay for administrative costs, and it is possible to provide a better employee benefit while paying less overall. It is also vital to avoid paying for personal fuel usage, either by eliminating the company fuel card or putting in place fuel consumption tools that allow for personal use chargebacks.