If you require your employee to drive their personal vehicle for work-related tasks, the best practice is to reimburse them. This is because you are expected to compensate your employee for the financial cost of using their personal vehicle. Exact employment laws around this vary depending on your province. But simply put, transportation reimbursement is compensating your employees to help them offset the financial cost of using their vehicle for work-related travel.

Employee transportation reimbursement is a common practice that involves reimbursing an employee for the amount of driving they do for work using their personal vehicle. Mileage reimbursement provides convenience and financial benefits for employees. Both employers and employees need to consider several factors to implement employee transportation reimbursement properly so that it benefits both parties. 

What is Mileage Reimbursement?

Mileage reimbursement refers to compensating employees for using their personal vehicles to run work-related errands. If you have hired a full-time driver who drives a vehicle owned by the employer, mileage reimbursement does not apply because the driver is not driving their personal vehicle. 

On the other hand, if your housekeeper, house manager, or private chef is using their personal vehicle to run errands for the household, you can create a mileage reimbursement program for them. These errands can include:

  • Bank visits
  • Coffee pickups
  • Drycleaning visits 
  • Picking up supplies for the bathroom and kitchen
  • Grocery runs
  • Pharmacy runs
  • Other house-related errands

It’s important to note that mileage reimbursement programs only apply when the employee drives their vehicle for work-related travel. This does not include commuting to and from work or going out to eat during breaks. You can still choose to reimburse your employees for commuting to and from work if you provide commuter benefits, but that reimbursement will not fall under mileage reimbursements.

How Do You Calculate Transportation Reimbursement?

The most common reimbursement method is to calculate a rate based on mileage. This is intended to help cover the cost of fuel and maintenance. If you are going to reimburse employees for parking or tolls, you will have to specify that reimbursement and track it separately. 

Some employers choose to give their employees an automobile allowance rather than mileage reimbursement. This involves a flat rate intended to help cover gas and maintenance, regardless of the exact mileage driven each pay period. However, this is less common, and generally, mileage reimbursement is considered more effective.  

Mileage reimbursement rates vary depending on the location. Rates are set forth by each location’s respective revenue agency or taxation authority because, in addition to reimbursement, these rates are also used for tax deductibles. We’ll use the rates provided by the Canada Revenue Agency to demonstrate the calculation of transportation reimbursement.

According to the CRA, the standard annual rate in 2024 for a driving allowance is 70 cents per kilometre for the first 5,000 kilometres. After the first 5,000 kilometres, the rate is 64 cents per kilometre for every additional kilometre.

For example, if you have driven 500 kilometres for work on your personal vehicle, you’ll be entitled to receive:

500*0.70 = $350

If you’ve driven 6,000 kilometres for work on your personal vehicle, you’ll be entitled to receive the following:

(5,000*0.70) + (1,000*0.64) 

3,500 + 640 = $4,140

Depending on where you are hiring staff, the rates will be different, so make sure to find the correct formula for mileage reimbursement in your location. 

How Does Mileage Reimbursement Work?

It’s important to understand how mileage reimbursement works before you make a plan for your employees. It’s not a complicated process and can be summed up in a few steps. 

Step 1: Understand the Reimbursable Miles

Not all miles are reimbursable. An employer has the authority to define which miles they will reimburse and which expenses should be borne by the employee. However, a common practice is to reimburse employees for any work-related transportation expenses, not including commuting.

Step 2: Understand the Rates

Mileage reimbursement rates can vary depending on the location. In Canada, standard rates (as of 2024) are 70 cents per kilometre for the first 5,000 kilometres and 64 cents per kilometre for every additional kilometre after the first 5,000. These rates apply to all over Canada except the Northwest Territories, Yukon, and Nunavut, where standard rates include an additional 4 cents per kilometre. Before determining your milage reimbursement plan, research the rates in your location. 

Step 3: Have Your Employees Log Their Miles

Employees can log their miles in several ways. They can log miles manually or use a spreadsheet to track mileage. They can also use a mileage tracking app that automates the process through GPS.

Step 4: Calculate the Reimbursement

Once all miles have been logged, you can easily calculate the reimbursable amount by multiplying the miles/kilometres by the standard rate based on your location. You can also use mileage reimbursement calculators to determine the accurate reimbursement amount. 

Step 4: For Employees: Receive Reimbursement or Deduct Miles from Your Taxes

Normally, your employer will reimburse you for the mileage in addition to your salary. However, not all jobs or employers offer mileage reimbursement. If you do not receive reimbursement, you can deduct vehicle-related expenses incurred for your job from your yearly tax return.

Employee Guidelines for Mileage Reimbursement

If you are an employee, you must understand the mileage reimbursement process thoroughly to be reimbursed accordingly. Here are a few details to determine when you are hired to ensure that you access this benefit correctly. 

1. Eligibility Determination

Your eligibility for mileage reimbursement depends on whether you are using your personal vehicle for company work. However, it only applies to you if you are a salaried employee. It does not apply to independent contractors. If a company is offering mileage reimbursement, the eligibility criteria should be included in your contract. 

2. Record Keeping

It’s important to keep track of your vehicle mileage to ensure you get the accurate amount of reimbursement from your employer. There are several ways to record mileage, including manual note-taking, a spreadsheet, or a mileage-tracking app. Find out how your employer expects you to record mileage so that you have an accurate log at the end of each pay period. 

3. Submission Procedure

Determine ahead of time how your employer expects you to submit mileage for reimbursement. They should outline expectations for the submission timeline and reimbursement period. 

4. Rate Calculation

You can calculate the rate of reimbursement based on your location. If you are in Canada, the standard CRA-recommended rate is 70 cents per kilometre for the first 5,000 miles and 64 cents for every additional kilometer after that. Northwestern Territories, Yukon, and Nunavut get 4 cents additional on top of the standard rates. 

5. Approval Process

Your contract should also specify the approval process for mileage submissions. Your employer should outline the pay period and approval process clearly to ensure that mileage submissions are easily approved. 

6. Updates and Changes

Keep in mind that since mileage reimbursement programs are a common practice and not a legal requirement, your employer may update or change the process throughout your employment. Make sure you understand the rules around reimbursement as set out in your contract or employee handbook, and be aware of guidelines for changing them. 

Why Should Employers Cover Staff Transportation?

When employees drive their personal vehicles for work-related purposes, it’s common practice to cover the costs of that transportation. If employers do not cover staff transportation for business, employees can still record their mileage and deduct the calculated amount from their tax. However, this is less popular and will make your job less appealing to candidates if you do not reimburse their mileage. 

One way or the other, employees should not be expected to cover the costs of transportation if that travel is expected as part of their job. Employees will feel more valued and comfortable taking on more responsibility if they are being fairly compensated for every aspect of their job, including transportation. 

How Do You Categorise Hours in a Car During Your Staff’s Workday?

If a staff member uses their personal vehicle for a personal errand, such as picking up lunch, this should be treated as personal time and excluded from work hours. 

On the other hand, if your staff is using personal vehicles for something that is part of their job, such as going to a meeting on behalf of their employer or picking up groceries, this time should be counted towards their regular hours. In short, whether your staff use their own vehicle or your vehicle for transportation, the duration of the travel should be counted as part of their paid work hours. If you are providing mileage reimbursement, that is in addition to, not instead of, their salary for those hours. 

Conclusion

Employee transportation reimbursement, also known as mileage reimbursement, is a common practice that allows employers to utilise their staff for work-related travel and cover the cost of transportation accordingly. However, it’s important to communicate your mileage reimbursement program and expectations to your employees beforehand. To make sure that this benefit is implemented properly, you must be transparent from the very beginning so that your employees understand the procedure before they sign the contract. 

Charles MacPherson Associates can help you find your next domestic staff worker for your residence. We work with a wide network of qualified personal assistants, private chefs, private drivers, house managers, estate managers, butlers, and housekeeping professionals. This allows us to identify the ideal candidate for you based on your needs and preferences. Contact us today to find out more about our placement services.

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