Learning About Vehicle Reimbursement Programs: 5 Guidelines

By Jess Penner

Your company is growing and now you need to meet the needs of your firm with more staff.Once you bring on more personnel, you need to decide if you should reimburse your employees for the use of their personal automobiles or offer them a company car. It certainly isn’t an easy decision to make because there are many advantages and disadvantages of both options.

That said, if you should decide to reimburse your staff members for use of their own cars, then you need to be aware of the various facts behind this selecting this option.Remember, it isn’t as easy as simply giving your employees money at the end of each week.

Here are five vehicle reimbursement program facts your firm needs to know:

1. Flat Car Allowances for All Employees

It is true that flat car allowances are suitable or even accurate for all of your employees, especially if they underpay or overpay employees. However, if you provide your drivers anywhere from $250 to $500 per month, this can clamp down on administration costs. You just need to be ready for the tax man because flat car allowances are subject to income taxes.

2. Cents-Per-Kilometre Rates

The cents-per-kilometre program generates mixed feelings among businesses and drivers alike. Similar to flat car allowances, this endeavour can be difficult to accurately gauge and estimate because of the multiple fixed and variable costs of driving and owning a vehicle. Your company may pay their employees $5,000 for $1 kilometre reimbursement, but this doesn’t include the insurance premiums, taxes, gasoline, maintenance and so much more.

3. Is a Fixed & Variable Rate (FAVR) the Solution?


Ultimately, you and your associates may need to ask the question: is a fixed and variable rate, otherwise known as FAVR, program the solution to all of your quandaries? Perhaps.

Here is how this initiative works:

  • Your business selects the vehicle for reimbursement.
  • The business chooses the insurance requirements.
  • Employees can pick a car; pending company approval.
  • Workers receive a fixed payment that covers everything.
  • Personnel are also reimbursed cents-per-kilometre and other costs.

This seems pretty reasonable, does it not? But this is only good if you are a corporation.

4. You Need Accurate Vehicle Reimbursement Technology


No matter what program you opt for, it is important to install accurate vehicle reimbursement technology. This technology will keep proper track of the kilometres, costs and even driving habits of the employees. It may be considered spying by some, but it provides great accuracy.

5. Do Not Tolerate Fraud by the Bad Apples


Lastly, you must remember that you should never tolerate fraud by some of your employees. Indeed, 98 percent of your staff will be honest, trustworthy and clean under this program, but it is the other two percent who will try to commit some sort of fraud and make a few extra bucks.

Should this happen to your firm then you must react by giving them the pink slip. It is important to never give them a second chance – if possible, try to recoup the costs that were lost.

Again, most of your employees can be trusted, but there is always one in every organization.