For businesses with a high volume of mobile employees, it’s vital that tracking business mileage is an easy and reliable process, both for employees and their employers. When the process of calculating mileage for reimbursement becomes too much of a hassle, problems begin to pile up! Employees might make silly mistakes, or perform parts of the process wrong if it’s too complicated. Or they might give up on trying and forgo mileage tracking altogether—meaning they won’t be reimbursed—running their employers the risk of violating the Fair Labor Standards Act (FLSA).
On the administrative side of things, an unorganized, inefficient, or overcomplicated mileage reimbursement system could drag the process on and on, taking managers and supervisors too long to review and approve mileage, or even result in employees being compensated the incorrect amounts, or worse—not at all!
When you have a clearer understanding of how to calculate mileage reimbursement for employees, you’ll be able to determine what is and isn’t working about your process. Then, you can take the needed steps to make a simpler process that fits better with your business.
Why Should Employees Track Mileage in the First Place?
Before pondering how to calculate mileage reimbursement for employees, it’s worth asking: why should your employees spend time and energy tracking their mileage at all?
Well, for one thing, having accurate mileage calculations means that your employees can be fairly reimbursed for the mileage they’ve traveled over their workday in their personal vehicle. Mileage reimbursement is a great incentive for employees who perform jobs that require the use of their own vehicle, as it ensures that they can pay for gas, maintenance, and any other costs they may accrue while doing their jobs.
Mileage reimbursement is also crucial to ensuring that employees don’t fall below the federal minimum wage as it’s defined in the FLSA. If employees qualify for mileage reimbursement that they are not paid, it’s understood that the reimbursement amount is subtracted from their wages to pay for operating their personal vehicles. If their wages already put them close to the federal minimum wage, this could potentially bring them under that amount. For example, last year, a federal judge in Michigan ruled that pizza delivery drivers using their own vehicles to make deliveries were entitled to reimbursement, as payment without reimbursement was under the minimum wage.
It should also be noted that while there is no federal law requiring employers to reimburse employee mileage, there are several states where you are legally required to do so. These include California, Massachusetts, and Illinois. If you employ mobile employees in any of these states, you have a legal obligation to ensure your mileage tracking and reimbursement process is doing its job.
How to Calculate Mileage Reimbursement for Employees
Still wondering how to calculate mileage reimbursement for employees who use their personal vehicles to complete their jobs? Let’s go over the entire reimbursement process at a high level.
First, work-related mileage needs to be tracked by each employee who uses their personal vehicle for their job. Then, the mileage for the employee’s work-related trips needs to be documented and submitted in the form of an expense report. Next, managers and/or supervisors within the organization review and approve the mileage in the report, and approve it as being both accurately reported and covering only work-related mileage. Finally, accounting needs to reimburse employees.
In this process, there are multiple pain points that might cause trouble for your organization if you and your employees aren’t careful. The first of these is logging the mileage itself, which may sound simple, but there are multiple ways to calculate mileage, and some of them might not be the most accurate, or provide a way to ensure that employees aren’t padding their numbers.
Other pain point areas include:
- Submitting expense reports for review: If employees aren’t sure how to submit trip expenses for review or who to submit them to, they may simply give up. If submitting them is a hassle—for instance, if employees have to submit expense reports in person even though they’re rarely at the office—then they may simply skip the process and go home.
- Managing approval workflows: If you have multiple levels of approval in your organization (and you absolutely should), there needs to be a plan for staying organized while moving expense reports from one person to another. If there isn’t, reports are likely to be lost in the shuffle before making it to Accounting.
- Communicating reimbursements to Accounting after approval: Once trip mileage has been approved, there is still one more step (arguably the most important step) that shouldn’t be overlooked. If you don’t have a clearly defined pipeline for delivering approved mileage reimbursement amounts to Accounting so they can pay employees, you run the risk of not reimbursing employees on time.
If it’s starting to seem like pain points can rear their heads at any point in the process, you’d be right, and the larger your mileage reimbursement process is, the greater the chance you’re experiencing some of these issues right now. After all, the more employees you have, the more expense reports there are to approve, and the more reimbursements to pay, and if you’re not careful, things could get lost in the shuffle or slip through the cracks.
How Can You Simplify Mileage Tracking?
Never forget one of the main tenets of business: KISS (Keep it simple, stupid)! Here are some methods businesses use when considering how to calculate mileage reimbursement for employees, both in terms of milage calculations and mileage logging.
Calculating Mileage
How is your business committed to calculating the mileage employees travel in their personal vehicles for work? There’s a handful of popular options. The first, and most complicated method, is the use of odometer readings, which requires employees to record the readings on their vehicle and subtract the difference at the end of each trip. While it’s the most analog popular option, it’s also one of the most time-consuming, and, as it requires employees to do math, the one with the most potential for error.
Some employers choose to use GPS tracking to monitor their employees’ movements and calculate their mileage from there. While a more accurate and automated method, GPS is still not intuitive enough to differentiate between work and personal mileage—that’s usually left up to the employee’s discretion. Another method is point-to-point calculation, in which employees mark the starting and ending locations for a trip, and then an automated system uses those points to calculate the best route, and calculates mileage from there.
Reporting Mileage
The IRS requires that mileage logs for reimbursement must be able to prove the amount of miles driven for each trip, the date and time each trip took place, the destination for each trip, and the business-related purpose for traveling to this destination. The IRS also prefers these logs be as timely as possible, although weekly updates are generally considered good enough.
While some businesses use the old-fashioned, complicated and error-prone method of requiring employees to track mileage using paper logs, others prefer digital solutions. Digital mileage tracking lets employees log their work travel mileage via an app, and then expense reports are moved through an automated workflow for reimbursement, so that the process is less dependent on human action.
Streamline Mileage Reimbursement From Start to Finish
For businesses wondering how to calculate mileage reimbursement for employees in the most simplified, streamlined way possible, have no fear, because CompanyMileage is the answer! Our suite of digital solutions, SureMilage, SureMobile, and SureExpense, are designed to give customers an innovative, customizable way to manage mileage reimbursement without having to worry about managing stacks of paper, or manually adding up trip mileage.
SureMileage uses the point-to-point method to calculate the cost of reimbursement, ensuring accurate mileage tracking while avoiding inflated numbers from non-work related travel. Our app, SureMobile, also makes it simple for employees to log trips right from their smartphones. They simply have to take a few minutes every day to organize their trips, take photos of any relevant receipts, and submit expense reports for their managers to review.
Once submitted, expense reports move through an automated workflow that can be customized to best meet the needs of management and supervisors within your organization. After all parties have approved, our software integrates seamlessly with any major payroll and accounting systems, so you and your employees can be assured that reimbursement payments will arrive in a timely manner.
The mileage reimbursement process may have a lot of moving parts, but it doesn’t have to be complicated. Request a demo with CompanyMileage today and to see how our software solutions can benefit your business!