How Much Do You Reimburse Employees With Electric or Hybrid Cars?

Gas is still king, but electric vehicles have their eye on the crown. More and more Americans are choosing electric vehicles (EVs), with over 1.4 million new electric car registrations reported in 2023 – that’s over a 40% jump from 2022. While EVs are an exciting and environmentally friendly alternative to gas, they do raise the question: how does mileage reimbursement work when mobile employees use electric or hybrid vehicles? Let’s take a closer look at how an employee’s electric vehicle could affect reimbursement.

Reimbursement For Gas Vs. Electric: What’s Different?

Charging Costs

Operating a car powered by electricity means you’ll never have to pump gas. On the other hand, the cost of charging an EV is a serious consideration. Besides factoring in the price of electricity, which differs based on location, there is also the matter of charging the vehicle. Using public charging stations instead of charging a vehicle at home can affect the rate of electricity. Additionally, based on how popular EVs are in your area, finding a charging station while out and about might take a little more time than finding a gas station, which could incur extra costs, both in money and time.

Depreciation and Maintenance

One of the biggest cost factors in owning and operating a vehicle is the cost of maintenance and depreciation on that vehicle. However, rates of depreciation differ vastly in EVs and hybrid vehicles from gas-powered cars, which could affect reimbursement. According to a 2020 analysis by Consumer Reports, EVs cost about half as much in maintenance and repair costs as their comrades with gas engines. Additionally, while older electric vehicle models depreciate at faster rates than gas cars, newer models are much better at holding value, approaching the rates of most gas cars. 

Government Incentives

Because EVs are substantially more eco-friendly than your average Toyota Corolla, the federal government offers tax credits and incentives for purchasing hybrid and all-electric vehicles. These factors could make EVs an attractive option for long-term cost saving, which could impact strategies for reimbursement.

How Do You Calculate a Mileage Reimbursement Rate For EVs?

Another factor complicating reimbursement for electric vehicles is that usage differs from traditional mileage calculation. Instead of measuring by miles per gallon, a common way to measure the energy consumption of an electric vehicle is to calculate its efficiency in miles per kilowatt-hour by dividing its range by its energy consumption. For example, if an employee with an EV has a range of 200 miles per charge and driving that distance consumes 50kWh of energy, that vehicle’s efficiency is about 4 miles per kWh. 

For calculating potential rates of reimbursement for an employee with an electric vehicle, the usual method is to find the electricity cost per mile. This can be achieved by dividing the cost of electricity per kWh by the vehicle’s efficiency. Therefore, if the cost of energy in an area is $.094 per kWh on a vehicle, and its efficiency is 4m/kWh, by dividing the cost by the vehicle’s efficiency you’d reach the cost per mile, $.0235. 

Even once reaching the cost per mile of operating an EV for business expenses, additional costs specific to electric vehicles, such as the depreciation of the vehicle’s battery may need to factor into the rate of reimbursement. Although your business may choose not to use it, the IRS standard mileage rate – which currently rests at 67 cents per mile – can be used as a benchmark against which to determine the rate of reimbursement. 

Reimbursement Reimagined With CompanyMileage

Electric and hybrid vehicles differ from gasoline cars in ways that can greatly impact reimbursement costs. Yet, to ensure fairness, it’s crucial to calculate an appropriate rate for mobile employees using their electric vehicles for work-related tasks. It seems like it has the potential to get pretty complicated, right?

Before you let your head start spinning, consider contacting CompanyMileage! Our suite of mileage reimbursement software makes it easier than ever to track, calculate and log mileage for fair and fast employee reimbursement. Don’t want to use the standard mileage rate to reimburse EV drivers? No worries! CompanyMileage lets you customize the process, including rates of reimbursement,  in whatever way meets the needs of your organization. In fact, we can even help you save money doing it. To learn more, reach out to CompanyMileage to schedule your demo today!