According to the Washington Post, a proposed gas tax increase by 25-cents gained bipartisan support earlier this month. Currently this tax is 18.4 cents on gasoline and 24.4 cents on diesel fuel, a figure which has remained unchanged for almost 25 years.
The proposed gas tax increase is increasingly being seen as a likely option to help provide the needed funds for the $1 trillion infrastructure investment proposed in 2018 by the White House. Some argue that this tax is long overdue to be increased in any case, due to inflation since 1993 having reduced the purchasing power of each dollar raised by approximately 40%.
The need for urgent infrastructure spending in this country is without doubt. The government’s own figures put the annual cost of highway congestion at $160 billion in lost productivity, and note that the Word Economic Forum ranks US infrastructure in 12th place globally, behind other countries such as Japan, Germany, the Netherlands, and France.
Potential Impact on Employers
Based on current average fuel prices, a 25-cent fuel increase would equate to a 10% fuel cost increase at the time of writing. (Check the latest national average gas prices here.) We have previously shown how fuel makes up 30 percent of the overall cost per mile driven by an employee. This would then translate to an increase in the mileage reimbursement cost of 2 cents per mile, a 3.7% increase on the current rate.
With this in mind, how should employers with mobile employees be preparing for a gas tax increase? The publicity that is likely to surround any gas tax increase will ensure that it doesn’t go unnoticed by employees who use their own vehicles to travel for work. Many employers pay less than the recommended IRS rate per mile to reimburse their employees for mileage incurred in the course of their work, and the increased cost of gas may cause this to become a point of tension for loyal employees.
Also, as the recent job reports show an increasingly challenging hiring marketplace for employers, the rate per mile that an employer is prepared to reimburse can form an important component of the overall package on offer, with the best candidates more likely to take this into account when making job choices.
How Employers Can Save Money on Mileage Reimbursements – While Ensuring Compensation is Fair for Employees
It’s completely understandable that an organization might choose to reimburse less than the recommended IRS rate. After all, one of a company’s largest expenses is vehicle mileage reimbursement for its employees. A typical system for managing this relies on employees filling out hand-written logs with mileage estimates, which are notoriously unreliable.
Even if the employee overestimates their distance by a fraction of a mile, when multiplied by the number of trips and the number of mobile employees, the end result can be many thousands of dollars in additional expense for the employer.
This is exactly the problem that we developed our system, SureMileage, to solve – allowing employers to fully reimburse employees for their costs while also delivering huge time and material savings to the employer through increased accuracy of reporting. In one example, we were able to save a large national employer over $2M per year through implementation of our system!
How does SureMileage help you track and reduce these costs?
SureMileage is the complete mileage tracking solution for organizations with mobile employees that automates the mileage reimbursement process. The system uses a mobile app to allow employees to quickly and easily record their journeys on the go. This method is far more reliable than any manual systems, with precise point-to-point mileage calculations made automatically by our system. With SureMileage, administrators can now utilize a secure and accurate system that also integrates accounting and payroll.
The data is automatically fed into an expense reimbursement program, thus eliminating potentially inflated odometer readings. Mobile employees can easily input mileage and save new destinations for the future, using the convenient and secure mobile app.
The cost savings for employers vary widely but are typically can be 25 to 30%. You can calculate your organization’s potential savings on mileage reimbursement costs by clicking here, or call us 877-677-0377 to schedule a live demo today.