Mileage reimbursement rates

It's a competitive issue: what are your key competitors offering their sales people?
I do find it striking that you're reimbursing at less than half the rate the IRS allows - that seems unnecessarily low to me. I mean, really, do you want a reputation as being more stingy than the IRS?

I moved from Colorado and we reimbursed the IRS allowable rate. I don't understand why a company would choose to use less than the IRS rate either; they are usually conservative and the sales reps are using their own vehicles, wear and tear, gas, etc. That is worth (cost) a lot more than $0.27/mile. You may find yourself losing sales reps if they travel a lot and find this lower reimbursement is an anomaly among companies within or outside of your industry. I am in the high tech industry working for a startup.

We reimbursed our Reps in Colorado same as everywhere else, whatever the IRS allowable rate is.

Bob: I suggest you fix this policy in the upcoming year. I have never heard of a company that does not reimburse at the IRS rates. The IRS rates are too low, so your company is being very unrealistic and is creating ill will with the sales staff; not a good plan! And don't think they don't talk and grumble about this. This will be a big winner when you make the change.

We have always paid the IRS rates. For those in leased cards we pay $0.18 per mile to cover gas. We do this nationwide.

Our sales people who use their cars all the time receive a flat monthly allowance for their car, and we reimburse them for all their gas. Employees who use their cars occasionally are reimbursed $0.50 per mile.

In the past few years we have started following the standard IRS mileage reimbursement rate. $0.27 seems very low to me. I would expect you have a lot of complaints about that reimbursement rate and/or have trouble keeping employees in those positions. Our salesmen would not be able to cover fuel, maintenance and other related vehicle expenses at that rate.

We pay our sales reps a $600 monthly auto allowance ($500 for sales managers) and reimburse them for their gas if they travel outside a 60 mile radius from their home office base. Other employees are reimbursed for business mileage at the current IRS rate.

Just to clarify, for the $600 per month auto allowance combined with the gas reimbursement - that is taxable income to them if they do not show enough miles at the IRS rate to justify that amount of payment, correct?

That labor code applies to California; However, IRS rates are a national rate. There is some exception in some states that their rates are allowed to be below the IRS rate. For Example state of Massachusetts is $0.45 / Mile, Colorado 2WD $0.50 / 4WD $0.53, See link below:

https://www.colorado.gov/pacific/osc/mileage-reimbursement-rate

http://www.mass.gov/anf/employment-equal-access-disability/employee-benefits-and-comp/mileage-rates/private-auto-employee-reimbursement-rates-per-mile.html

I encourage each employer to check their State Labor Code and consult a lawyer if it is a must. The lawsuits in regards to that issue can turn very nasty.
If an employer is paying too much to their employees in mileage rates then I suggest a comparison between paying y at standard rate or giving monthly allowances and go with each ever is less

I'm in Colorado and for every company I have ever worked at we have used the IRS rate.

I worked for a couple of companies now that pay a flat rate of $500. a month. Since there is no legal requirement of a "minimum" rate, pay your employee whatever you think minimally you can get away with. Several factors to consider is the type of car they drive, what it gets per mpg, age of car and estimated maintenance costs and finally the average price per gallon of gas where your employee will be driving. You don't want to be buying their car, or paying for their full cost of insurance, only what your company use of their vehicle amounts to. Agreeably .26 per mile is a bit on the low side, when .56 per mile is the standard norm and the legal limit before tax issues arise.

I have a more "liberal" (maybe not the right word) view on the subject. Companies need and should provide it's employees the resources they need to do their jobs. This includes transportation/cars. From my point of view, we should avoid the notion that we are doing the employee a favor by giving them the allowance/reimbursement. Heck, I am even in the position that the employee is doing the company a favor by having them use their cars.

That being said, I acknowledge the need for flexibility and compromise but coming from my point of view, the "arrangement" should be to the advantage of the employee and not the other way around.

I suggest looking at Motus LLC, fka Corporate Reimbursement Services (CRS Inc). They will provide a structured, documented, qualified reimbursement plan for a reasonable annual fee that includes a variable component and a fixed component. Using the IRS as a business guide is like expecting the Feds to know how to run a business. :)

The IRS usually announces the rates 1 to 2 months before a change so 2015 is not yet out.

Our experience with customers setting mileage reimbursement policies is that the overwhelming number of companies reimburse at the IRS rate but we do have some who reimburse below (none above it). We also have customers with non-US employees who usually have a different rate (i.e Canada starts at .54/km up to 5,000 km and .48/km after that).

California is absolutely a special case that you should be aware of:
- If you reimburse below the IRS rate, the employee can claim the difference as a deduction on their personal taxes and the company cannot claim that deduction.
- If you reimburse below the IRS rate, the company takes the liability for any costs related to use of the car for business.

The IRS has occasionally made mid-year adjustments when gas prices spiked suddenly - I think I recall situations where some larger companies decided to increase the reimbursement rates temporarily above the IRS rate to avoid employees from being dinged for the higher price of gas.