For organizations that rely on a deskless workforce to serve their customers, an effective mileage reimbursement policy is crucial. Businesses in a variety of industries must offset the travel costs their workers incur to maintain employee satisfaction, retract and retain talent, and ensure efficient operations. Those in home healthcare are no exception.
With the emergence of more flexible, attractive jobs (e.g. driving for Uber or Lyft), paying employees for their time spent on the road has become a non-negotiable standard. Home health providers expect to be paid for the duration of their travel from one appointment to the next; and employers who fail to meet those expectations will likely begin to see higher turnover rates or struggle to hire top talent.
But offering mileage reimbursement to deskless workers can be a confusing piece of the home healthcare puzzle, especially for organizations who lack the proper tools for support. In order to create a policy that mitigates risk and satisfies workers, employers must first understand how they work, whether their employees are eligible, and how to set their program up for success.
What is Mileage Reimbursement?
Mileage reimbursement refers to the funds that an employer pays its employees to cover their job-related travel costs. Depending on the industry, organization, and job requirements, mileage reimbursement may cover gas, oil, tires, taxes, registration, maintenance, and even vehicle insurance.
A mileage reimbursement policy takes into account the costs associated with using a personal car for work purposes. As such, it generally covers:
- Driving to customer or patient appointments
- Driving to the store to purchase work-related supplies or equipment
- Driving to the airport for job-related travel
A home healthcare nurse, for example, would receive mileage reimbursement for the time they spent driving from one patient’s home to the next. However, the policy typically would not include the travel costs associated with driving to lunch, commuting back home, or taking a personal detour.
Mileage reimbursement requirements differ at the state, local, and federal level. Currently, California, Massachusetts, and Illinois are the only states that require mileage reimbursement. Meanwhile, at the federal level, employers are only required to provide mileage reimbursement if failure to do so would cause their employees’ compensation level to drop below their state’s minimum wage standard. Nevertheless, as staff shortages continue to increase and employees in the home health industry, in particular, have more employment opportunities, competitive organizations are beginning to implement enticing reimbursement policies.
In fact, some use mileage reimbursement as part of an attractive compensation package. They know that care providers with exceptional skill sets have their choice of employers, and therefore offer competitive reimbursement rates as a recruiting tactic—with extra benefits such as:
- Gas cards
- Mileage allowances
- Monthly or quarterly vehicle maintenance
How Does Mileage Reimbursement Work?
Each year, the IRS issues standard mileage rates, which businesses use to calculate deductions. These rates are based on annual studies that reflect both the fixed and variable costs of operating a vehicle.
Typically, organizations use standard mileage rates on a cents-per-mile basis. While the IRS mileage rates help employers estimate vehicle expenses for tax deduction purposes, they’re not intended to be used as a business’s actual reimbursement rate; as doing so can create issues of over- and under-payment.
Because the IRS rate is structured around national averages, businesses are better off using it as a guideline and creating their own policy that more accurately aligns with their specific region. If, for example, your home healthcare employees work in a state with significantly high gas and toll costs (or if their patients are located in remote areas that are difficult to travel to), you may want to increase your reimbursement rate to cover those expenses.
Insurance and Mileage Reimbursement
Another important factor to consider is how payers (i.e. insurance companies) reimburse mileage, and how that process impacts your organization’s billing rates to its customers. While home health care is extremely beneficial to patients—especially those in rural or remote locations—the overhead expense of getting to those patients can affect the cost of care.
It’s a very real concern for business owners, who must evaluate their clinical and overhead costs against the demand from (and access to) certain markets or regions. Depending on your organization’s size, customer base, and costs of care, travel time compensation might need to go to a different cost center. That way, your business can optimize the process and improve profitability without having to increase its billable service charges.
It’s crucial to calculate the average cost of travel across all of your deskless workers against the average amount your customers’ insurance companies are willing to pay. Then, evaluate the resulting expense against your cost of care to patients in each region you serve. From there, you can determine whether increasing your billing rates to cover those expenses is the ideal solution, or if doing so will hinder your patients’ ability to receive quality, affordable care.
Mileage Reimbursement Eligibility
According to criteria issued by the IRS, not every employee is eligible for a mileage reimbursement plan that’s tax deductible. There are three qualifying factors to consider:
- Reimbursement must result from services conducted for an employer, like driving from one appointment to the next.
- Time spent must be adequately and defensibly accounted for, meaning that workers need to keep records of their time and travel
- Any excess funds must be returned within a reasonable amount of time (120 days after the expense was paid).
Employees must also have their affairs in order to properly claim reimbursement. There are several compliance pieces (i.e. a valid driver’s license, a personal car, and accident insurance) that workers need to receive compensation for their travel.
If a business offers a mileage reimbursement policy to its employees, then they’re actually contributing an incremental amount to those employees’ insurance expenses, as the cost of auto insurance is already embedded in the IRS standard rate. So if a worker who receives mileage reimbursement from their employer gets into a car accident while on the job, the organization has no further obligation to cover premium or deductible costs. However, some businesses do choose to voluntarily reimburse some or all of an employee’s personal deductible, usually as an added benefit within their compensation package.
Depending on the course and scope of an accident, employers may be responsible for covering a worker’s comp claim in the case of injury; regardless of their reimbursement policy. For example, if a supervising manager asks a home health care provider to stop at a patient’s home to collect a signature in between appointments, the request could mean any resulting injury from a car accident would be covered in the worker’s comp claim.
For home healthcare organizations that send their providers to a variety of patient locations throughout the day, it’s vital to understand how their policy will address potential accidents. Operations directors should identify and outline the organization’s responsibilities and obligations in the event of employee auto accidents to ensure they’re not overly vulnerable to costly risks.
Mileage Reimbursement Rates and Employer Risk
As you set your organization’s mileage reimbursement rate, be sure to consider the unique requirements and preferences of your specific deskless workforce against IRS standards. Home healthcare organizations, for instance, should evaluate gas and toll costs in the areas they serve, the average distance each care provider travels on a weekly basis, and which tools their employees use to track their travel details.
It’s important to note that employer mistakes when structuring and executing a mileage reimbursement policy can make them vulnerable to litigation. Many employers will reimburse workers who are already at or close to minimum wage at a rate lower than the IRS standard. When taking travel expenses into account, those employees fall below the minimum wage line, thus violating labor laws. Other businesses assume employees can write their expenses off as a tax deduction, essentially causing them to “double dip”.
It’s therefore crucial to take into account all relevant laws and regulations, and to fairly and legally build your reimbursement policy to avoid litigation—which is ultimately much more costly than simply offering sufficient reimbursement rates from get-go one.
Creating a Mileage Reimbursement Policy
An organization’s mileage reimbursement policy can become a competitive advantage in terms of recruiting, hiring, and retaining top talent. This is especially true for industries like home healthcare, where dissatisfaction with current employment has boosted nurse turnover rates to 22.18%.
To implement a strong, appealing policy—and one that protects your organization from potential litigation—first take into account these key best practices:
Consider Different Program Options
There are several different mileage reimbursement program options from which you can choose to best serve your employee base, including:
- Fleet vehicles – Instead of reimbursing your workers for the travel costs they incur when using their personal vehicles, you can invest in a “mobile office.” Companies who use this option purchase or lease a fleet of cars that their employees use to travel from one appointment or job site to the next throughout the work day. This approach enables organizations to link their program to other initiatives, like reduced environmental impact and decreased overhead expenses.
- Flat-rate allowance – Some organizations offer a flat monthly rate to cover employee’s travel costs. For instance, they might allow for a $300 monthly expense for their deskless workers. While this strategy is simple and may seem like a perk to potential candidates, it doesn’t come without its challenges. It’s a particularly tricky option for companies that employ both part- and full-time workers, since that flat rate isn’t flexible enough to fairly compensate each individual. Plus, it doesn’t require workers to track their time spent on the road or the distances they travel, which means the business misses out on key insight that they could otherwise use to optimize workforce operations.
- Cents-per-mile – With a cents-per-mile reimbursement model, organizations compensate their employees based on a fixed rate; typically structured based on the IRS standard. It’s relatively simple to implement, but this option often doesn’t consider regional variables (like gas and toll prices).
- FAVR – If your employees’ costs extend beyond the IRS standard rate, it may be beneficial to use a fixed and variable rate (FAVR) reimbursement plan, as any travel expenses incurred above the federal standard will be taxed. Under a FAVR plan, employers pay a fixed amount that covers workers’ fixed expenses (i.e. lease or depreciation and insurance) and a cents-per-mile rate that covers variable costs (i.e. gas, oil, and maintenance).
To ensure your company is accurately compensating its employees in the most cost-effective way possible, make sure you evaluate the pros and cons of each type of program as they relate to your specific workforce.
Put It In Writing
Your business’s mileage reimbursement policy is only effective if it’s well thought-out and clearly outlined, so take the time to put it in writing and share it with current and potential employees. This will also protect your organization in the case of legal matters, should an accident or dispute occur.
Be sure to include the types of travel expenses that are included, those that are not, and your expectations of the employees who will be compensated (e.g. how they’ll track and submit their mileage). Also include guidelines regarding the timing of expense submissions and when employees should expect to receive compensation.
Use Intelligent Tools
Tracking and submitting travel time and related costs can be a complicated, time-consuming feat for already-busy deskless workers. For organizations that rely on outdated, manual methods, this typically means requiring employees to record travel details on paper-based forms or a third-party app. Then, they have to manually enter that data into a centralized system and submit their expenses to their supervisors within a given period of time.
But this approach leads to inaccurate rates (either purposely or unintentionally), excess time wasted on administrative tasks, and more interruptions to workers’ days—all of which contribute to poor employee satisfaction and productivity.
To ensure accuracy and put more time back in your deskless workers’ days, invest in robust tools that automate the process. Intelligent deskless productivity platforms, for example, automatically track mileage via scheduling and routing tools. Employees can quickly review and submit their mileage to their supervisors on the same platform, so they don’t waste time filling out information their tools have already captured. Plus, they seamlessly integrate with your existing systems (like your HR platform, finance solution, etc.) to help your company close the gap between its key business functions.
Don’t Let Data Go to Waste
Not only does an effective mileage reimbursement policy (backed by powerful tools) mitigate the risks associated with properly compensating your deskless workers, it also provides valuable insights into your business.
By accurately measuring travel time, managers and operations teams have visibility into the work-life balance of their employees. This is especially crucial for organizations in home healthcare, as they must alleviate both the quantitative and qualitative stressors that often drive nurses to quit. With insights into how many miles their providers are driving and how long it takes them to get from one appointment to the next, businesses can better optimize their employees’ schedules to ensure a less stressful, more productive workday.
Plus, collecting and analyzing that data over time means gaining a deep understanding into workforce operations. Armed with that knowledge, organizations can make smarter, data-driven decisions to improve their team’s efficiency, eliminate superfluous, time-consuming steps, and drive profitability.
Game-Changing Tools for Better Mileage Reimbursement
Developing a fair and cost-effective mileage reimbursement program is crucial for attracting and retaining top talent while also maintaining profitability. But to ensure your program is accurate and IRS-compliant, you need robust tools that don’t take precious time away from your workers’ days.
Skedulo’s deskless productivity cloud optimizes scheduling, routing, communication, field data collection, and analytics all in one centralized place. It enables deskless workers—like home health providers—to access their schedules, capture patient data, track their mileage, engage with colleagues, and more without having to toggle between various apps. The result is a more efficient, productive workforce, who can receive fair compensation for their travel while remaining focused on what’s most important: Providing quality care to their patients.