Cheapity, Cheapity, Cheap

by Evil HR Lady on February 27, 2009

I know what the IRS mileage rate is ($.55 per mile for 2009). My question is what is the LEAST amount I can pay an employee for mileage reimbursement? She hardly ever drives but needs to a couple times a month for client meetings. Can I pay ½ the IRS rate? Seems like labor law 2802 is very vague about this so I thought I’d come to your HR department since we don’t have one.

I so do not know the answer to this and furthermore, I’m not even going to attempt to look it up. So, you might ask, why am I bothering to even post about this?

Well, the title I’ve chosen might give you a clue.

If your employee is a good one, your attempt to save a few dollars will increase the probability that she will leave you for another job.

I know, I know, the economy is in the toilet, so you can treat your employees like–ummm, like toilet contents. (Okay, I’ve crossed into crude territory. I should stop now.) This is false, false, false. This is the time when you need to treat your good employees as well as you possibly can. Your good employees are going to be able to pull your business through tough economic times.

Everybody says, “there are no jobs out there!” True, there are fewer jobs available. But, fewer doesn’t mean zero and your good employees are far more capable of finding a new job than your bad employees.

Let’s say your employee has to go 100 miles month to meet clients. At the IRS rate of $0.55 per mile, that’s $55 a month, or $660 per year. Do you want to have a disgruntled employee over $660 a year? Do you? Do you? Because while it’s only a little bit of money, she’ll complain about it–maybe not to you, but to her husband and her friends. And once you’ve decided there is something that annoys you about your boss, everything else begins to grate on your nerves.

And so, what if it’s not 100 miles a month, but 1,000 miles a month. Is $6,600 a year worth having to find and train a new employee? This, by the way, is far more expensive than $6,600.

Stop trying to figure out how to be cheap and start figuring out how to maximize your employees’ productivity. And remember, a happy employee is a good employee.

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{ 16 comments… read them below or add one }

Anonymous February 27, 2009 at 2:08 pm

The accounting answer to your question is that you can choose to reimburse your employees at absolutely any rate you choose to for mileage incurred on the job –from zero to, say, $2 a mile.

The IRS figure is simply the maximum deductible reimbursement for mileage, so if you paid zero per mile, the employee would fiddle with the deductibility of their business miles on their own tax return, and if you paid $2 per mile, your business can only deduct the IRS max, so the additional $1.45 per mile would be a non-deductible expense.

The IRS figure is the standard across all types of businesses for reimbursing employees.

There are other issues here, though, like whether the reimbursement is under an “accountable plan”–if not, zero is deductible to the employer and a few other little things.

I think this is a real answer to you though, and coupled with EHRL’s very real and true response, you should be all set.

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Anonymous February 27, 2009 at 2:09 pm

Just to amend, the IRS figure is the standard across a lot of businesses, not all. Sorry.

One other consideration is that whatever you choose, you have to be consistent across all employees.

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Anonymous February 27, 2009 at 5:05 pm

and if you consistently cheap out all your employees…

…oh dear!

As EHRL says- your best people will go elsewhere and that leaves the rest, who are now irritated by your treatment of them but have nowhere else to go.

Are you sure these remaining employees will generate the best returns for the owners/shareholders?

I thought not.

If you must trim expenses now- EXPLAIN EXPLAIN EXPLAIN and make sure you bring those pennies a mile back just as soon as there are a few more pennies in the bank.

People make profits.

Lois Gory

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no longer working there February 27, 2009 at 10:30 pm

My favorite cheap employer experience is the boss initiating the new policy of NOT paying employees to attend MANDATORY 1 hour meetings.

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John February 27, 2009 at 11:17 pm

These are some rates from Ireland and they are calculated at a $1.28 Euro exchange rate. I can see why Dell moved to Poland as we have become a very expense country to do business in.

Motor Travel Rates circular 25/07

Rates per mile Effective from 1 July 2007

Official Motor Travel in a calendar year up to 4000 miles
Engine Capacity up to 1200cc – 107 cent
Engine Capacity 1201cc to 1500cc – 127 cent
Engine Capacity 1501cc and over – 162 cent

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Anonymous February 28, 2009 at 8:17 am

“The accounting answer to your question is that you can choose to reimburse your employees at absolutely any rate you choose to for mileage incurred on the job –from zero to, say, $2 a mile.”

Not in California which is where the questioner is, since they cite CA Labor Code §2802 which requires reimbursment of all employee expenses.

Using the IRS mileage rate is fine, but only if it covers all costs.

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Sadistic Manager February 28, 2009 at 3:32 pm

Want to save money on travel? Stay home. I was just reading an article the other day about how web and video conferences are getting more popular these days.

I can just see trying to explain that to a boss or an investor. “Yes! We saved over six grand on travel last year. Now, true, we did lose our top performer and have to replace her with someone who brings in about $20,000 per month less than she did, but he’ll get up to speed in no time and he doesn’t complain about paying for travel. By the way, can we up his commission, because he’s finding the cost of doing business a little prohibitive….”

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I. Barry Goldberg March 1, 2009 at 6:31 pm

I have a different question altogether. If this question is posted about one employee who does not drive much- how much of your time and attention are wasted on trying to save a few bucks? Aside from the great counsel you got from EHRL, I wonder if your business would not benefit from spending that time and attention on things with greater return and scale.

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Charles March 1, 2009 at 6:47 pm

You don’t want to pay the IRS standard for mileage driven on a business trip in an employee’s car?

How about next time you pay for her RENTAL car? See how many bucks that will save you.

Or do you not reimburse employees for business travel expenses such as hotels, airfare, and rental cars?

When you nickle-and-dime employees those that don’t quit WILL find a way to nickle-and-dime you back; even if you don’t see it they will do it.

I’ll sign this with a snippy “why is good help so hard to find?”

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Charles March 1, 2009 at 7:29 pm

The more I thought about it the more I think my above snippy comment was less than professional – sorry.

I also realize why – the original poster’s question about how little he could get away with is not the problem; rather it is a little symptom of a bigger problem – lack of respect for the employee!

It reminded me of a company where I worked years ago. The boss also used to do stuff like this. One day I had finally had it and gave 30 days notice (the only job I have quit without something else lined up – that’s how bad it was).

I told him that I was NOT travelling for the last two weeks of employment and would use that time to train a replacement. The internal person who replaced me as a trainer was enormously grateful for my professionlism in handling this matter and said so several times. The boss was nothing but angry and couldn’t understand my frustration despite my several attempts at communicating issues like this to him.

About six months after I left I got a call from a friend who still worked there and told me that they had a great day because, unannounced, the President of the holding company flew into town, showed up with a locksmith to change all the locks on the external and internal office doors, and told the director (the jerk) that he was immediately fired – one of the reasons was due to a 37% turn-over rate of employees in the last year.

So, I would suggest to the original poster to take a look around to see if this isn’t a symptom of a larger problem.

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Anonymous March 2, 2009 at 5:11 am

no way an employer only thinking about money!

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Marsha Keeffer March 2, 2009 at 5:36 am

It’s never a good time for companies to abuse employees. If you’ve got good people – keep them, they’re worth their weight in gold. If not, consider making changes. Thanks for a great post!

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TAD March 3, 2009 at 3:47 am

I can’t believe anybody is cheap enough to ask this question. Just pay it dude. However, what about the reverse?

I run the errands for my office and only ask employees to do things like go to the bank if I cannot. I had an employee who I asked to run two errands a month apart. One was 6 miles round trip to Office Depot to pick up a new toner cartridge after she had ruined a toner cartridge by running clear labels through twice. Since I was working on things to print for a meeting the next day I asked her to go. A few weeks later I asked her to return something to our PR firm less than a mile away and she asked me about reimbursement for mileage.

This employee was a college student who I did not make take leave when she took an extra half hour at lunch for classes. Her total mileage for both trips would have been less than $5, which was less than half a lunch hour’s pay.

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Anonymous March 3, 2009 at 6:23 pm

I think the questioner is just asking if they HAVE to pay the IRS rate. My old company paid me a portion of it and my account told me to just write off the rest as a deduction. Everyone is being so harsh. I fill up my Honda for $25 and can go like 400 miles. That’s $.06 a mile. If I got $.10 a mile I’d feel like I’m making out… Now I run a business and we pay $.25 cents a mile because we can’t afford more quite frankly. So, in response I agree with the 1st commenter who says you can pay anywhere from $0 to $2.00.

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Anonymous March 12, 2009 at 9:21 pm

One of my “favorite” bosses–and a LAWYER at that–outsourced my HR, because I was his only employee. When we got the first bill, he asked (and was serious) if the Worker’s Comp was optional. Way to value me, buddy!

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calisara June 19, 2009 at 1:06 am

I wonder if this was my employer who posted this questions? I was offered .25 cents and I showed them the IRS standard. I was willing to negotiate the exact amount, but I was comparing what my corporate company paid me 8 years ago, which was .35 and figured why should I accept less when gas has gone up, repairs have gone up, incur mileage on my leased car, all while making sales that will last longer than my employment ever could. I found it very strange, that we could not come to an agreement on it.

Yes the ROI is far more important than trying to get away with half of the average amount on mileage.

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