As employers look for new additions to their standard benefits package in order to attract top workers, they usually focus on common pain points. The daily commute is a prime example. Commuting to and from work each day eats up both time and money, making a commuter benefits program an attractive perk.
What are commuter benefits?
Commuter benefits refer to any employee benefits that help workers with the costs of commuting. Examples of commuter benefits include the following:
- Paying for tolls. If the area has toll roads, employers can reimburse workers for the tolls they pay on the way to and from work. If tolls can be prepaid, employers can pay in advance.
- Paying for miles driven. When workers use their own car to commute, they have to pay for gas, and their car suffers additional wear and tear. Employers can offset these costs by offering a monthly stipend or reimbursement based on the number of miles driven to and from work.
- Providing a stipend for taxis or ride-sharing. If workers often use Uber, Lyft or other companies to get to work, employers can offer a stipend or reimbursement to cover the costs.
- Giving workers bus or train passes. Many cities offer transit passes or tokens that can be purchased in advance, and companies can buy these for workers as a benefit.
- Paying for parking. If free parking is not readily available, employers can provide pre-paid parking passes or reimbursement for parking fees.
- Carpooling assistance. Carpools can be a wonderful way to save money while reducing the environmental impact of commuting, but setting up carpools can be difficult. Employers can help by connecting people who live nearby and providing financial incentives for participation.
Easing the Pain of the Daily Commute
For many workers, the daily commute is the worst part of the workday. The U.S. Census Bureau says the average one-way commute is 27.6 minutes. In total, that’s about an hour spent commuting every day, and if you live far from work or have to deal with bad traffic, it could be much longer. And, that’s if you’re taking a car – the average commute for people who ride the bus is 46.6 minutes one way.
A poll from RingCentral found that 40 percent of workers would rather clean their toilet at home than commute to the office. Clearly, commutes are not popular.
Long commutes aren’t the only reason many people prefer remote work, but for many, it’s likely part of the problem. If employers want to convince workers to return to the office at least part of the time, they need to make the return to the office more attractive. Offering commuter benefits is an effective way to do this.
Employees Need to Save on Transportation
Daily commutes don’t just take up a person’s time. Commuting also drains a person’s wallet.
According to the Bureau of Transportation Statistics, the retail price of gas reached an all-time high of $5.03 in June 2022. Since then, gas prices have gone back down somewhat, but filling up at the gas station remains expensive.
To make matters worse, gas prices are far from the only costs that have gone up recently. The Bureau of Labor Statistics says consumer prices for all items rose by 6.5 percent in 2022, and food prices increased by 10.4 percent. High inflation rates have left many people struggling to make ends meet.
Many employees have received raises, but according to Fortune, these raises have not kept up with inflation. As a result, many people have less available money even though they’re earning more. They need help, and commuter benefits are a logical way to provide that help.
Pre-Tax Commuter Benefits
If you’re still not sure whether commuter benefits are worth the effort, consider the fact that commuter benefits can be provided on a pre-tax basis.
According to the Balance, costs associated with commutes are not tax deductible for employees. In other words, if employees spend their own money on their commute, they can’t deduct this from their income taxes. However, qualified transportation benefits can be provided without these benefits being included in employees’ taxable income. Offering commuter benefits is therefore a way to increase total compensation without increasing taxable compensation, which benefits both the employer and the employee.
Some commuter benefits may not be eligible for tax benefits, and the amount that is eligible is subject to limits. The IRS says qualified transportation benefits can be paid directly or offered through a bona fide reimbursement arrangement. Qualified transportation benefits include the following:
- A ride in a commuter highway vehicle between the employee’s home and work
- A transit pass
- Qualified parking
Some Places Mandate Commuter Benefit Programs
Oftentimes, companies offer commuter benefits voluntarily because they believe it’s a cost-effective way of increasing compensation, improving morale, reducing turnover and making their company more attractive to potential employees. However, in some places, certain employers are actually required to offer commuter benefits.
According to Indeed, New Jersey requires employers with at least 20 employees to offer commuter benefits, and it’s the only state to do so. Some cities also have commuter benefit requirements, including Seattle, New York City and Washington, D.C.
Which commuter benefits program is right for your employees?
Commuter benefits are a great option for any company with employees who commute to work, regardless of the industry or company size. However, there are many different options to choose from, so you need to select the commuter benefit program that fits the needs of your workforce. When picking your commuter benefits, consider the following questions:
- How do employees get to work? If the majority of employees drive their own car to work, you’ll want to focus on things like carpooling and fuel reimbursement. On the other hand, if you live in a busy city where mass transit is the norm, a transit pass may make more sense.
- Do you want to pre-pay or reimburse? Pre-paying can require less paperwork, but you might end up paying for benefits that aren’t actually used. For example, you might hand out bus passes and find that half of them get thrown away or forgotten. Cash reimbursement requires more paperwork, but it means that you’re not paying for any benefits that go to waste. Consider what the participation rates are likely to be before deciding.
- Is parking a hassle? In some areas, parking is plentiful and free. If your company is located in one of these places, you probably don’t need to offer parking benefits. However, if parking passes are expensive or if street parking requires workers to continually feed the meter to avoid tickets, you might want to cover qualified parking expenses as a benefit.
- Are more creative options needed? Depending on the size and location of your company, the existing transportation options may not be adequate. If that’s the case, brainstorm less common transportation benefits. For example, you might consider offering a company shuttle that picks up and drops off workers.
Are you ready to offer commuter benefits?
A strong employee benefits package can help you boost engagement and retention, and it may also help with recruitment. A commuter benefits program is just one of many options to consider. Higginbotham can help you develop a package that meets the needs of your workforce. Talk to one of our employee benefits specialists today and experience the Higginbotham difference.
