The average commute in the United States is about 27 minutes. This is about one gallon of gas to and one gallon of gas from work on a daily basis. At the current price of about $5 a gallon, federal minimum wage employees work at least the first hour of any shift just to get to and from work. This ignores the costs of owning and running a vehicle beyond the cost of fuel and employment tax withholding. The high cost of gas is not just hurting lower income workers, it is believed that current middle class employees are spending about 10% of their take home pay on fuel. In an effort to help, the IRS increased the mileage reimbursement to 62.5 cents a mile for business miles driven after July 1, 2022. This is a mid-year increase of 4 cents a mile or about $1 per gallon. Unfortunately, gas has increased by about $1.15 per gallon in the last six months. As employers are trying to return staff to the work place, what can they do to help with the fuel crisis? Below are suggestions that may work in certain industries.
Continue Remote Work
The pandemic taught us that employees of some industries can easily conduct business from their homes. This was supposed to be temporary but it may make sense to allow remote work for a little longer. If the employer arranges with the employee to work remotely but return to the office for mail and meetings occasionally, then the costs to drive to the office may be tax deductible expenses.¹ Regardless, the reduction in demand alone could help prices.
Allow Flex Time, Flex Schedule
Allowing employees to arrange their drive time to avoid rush hour cuts down on the likelihood of being in traffic. This could also save gas for the employee. In the same vein, many employers have changed work schedules to allow for longer hours but fewer days. For instance, working four 10-hour days for a forty-hour work week instead of five eight-hour days. This would save an entire day of commuting.
Encourage Carpooling/Employer-provided Transportation
Carpooling is good for the environment and can also allow employees to share the costs. Additionally, in certain situations, employers can provide transportation to employees as a nontaxable benefit. The rules and regulations on the type of transportation allowed are very restrictive. Generally this is only going to apply for vehicles that either cannot be used for personal purposes or are not equipped for personal use. An example is employer provided qualified transportation via a commuter highway vehicle which qualifies if it is for multiple employees, at least 6 persons, not including the driver (max cost of $280/employee/month). 132(f).
For certain employers, like those in the automotive industry, the use of dealer plated vehicles or demonstration vehicles is an option that meets the requirements. For more rules and requirements, see Treas. Reg. 1.132-5.
Provide De Minimis Fringe Benefits
The value of a de minimis transportation benefit is excluded from an employees pay. This would include paying for public transportation, but not in excess of $21 per month, or occasional, not routine, transportation because the employee works overtime. For most employees who commute in a manner where they are buying fuel, this benefit would not work.
The de minimis transportation fringe benefit is not the same as the de minimis working condition fringe benefit. De minimis benefits, either property of services that an employer provides to an employee that are so little in value that accounting for them is unreasonable, can also be excluded. We typically think of occasional employer provided meals on premises, coffee in the break room or birthday gifts, as examples of such de minimis benefits. Cash or cash equivalent items do not qualify as de minimis. If an employer provides property or a certificate that is exchangeable for specific property, it can qualify for de minimis fringe benefit. Generally, this should be no more than $25 per year. If an employer wanted to use this provision, the employer would have to either obtain a cache of gas that employees could use for their vehicles or obtain gas only gift cards that would limit the use to only gas. But, even if done, the limit would be $25, not enough. Additionally, unless employees live in a town with reliable, cheap mass transportation, this is not a workable solution.
Defray Other Costs or Get Creative
Employers could help employees in other ways, such as daily lunch provided on the premises so employees don’t have to go out for lunch. Or, maybe provide cell phones or reimbursement for internet access at home. By deferring these costs, the employees can spend more on fuel.
Lobby for Change
Commuting expenses were not deemed very expensive but that has now changed. The IRS provides that employees can receive parking reimbursements, public transportation reimbursements and other reimbursements, but not commuting costs. If we want people to return to offices, we need to take into account the costs to do so. Perhaps now is the time for commuting expenses to be reconsidered.
Fuel prices appear to be slowly coming down, but still aren’t where they have been in recent years. The suggestions above may help alleviate the price crunch employees are feeling now.
¹ CCA 199948019. To qualify for this, the employees home would need to qualify as the employee’s principle place of business under §280A