When you think of employee benefits, you probably think about health insurance, fitness center memberships, retirement plans, etc. But what about transportation?
Though the rate of freelancers and self-employed workers is growing and tools like remote desktops and cloud software is helping others telecommute, most American workers still physically travel to get to work. Using planes, trains, automobiles, bikes, and their own two feet, workers must exert energy and often money to reach their workplaces. Perhaps envious of those with the freedom to work from home, these traditional commuters are beginning to bemoan their wasted funds and time.
Therefore, a growing number of employers, especially in major metro areas, are implementing transportation benefits. Employers who enact such programs expect the benefits to encourage their employees to come to work ― especially on-time ― and perhaps cut down on toxic emissions, congestion, and other traffic-related issues plaguing their cities. However, not everyone fully understands the concept of transportation benefits. This guide should clear the air about transportation benefits programs.
What Transportation Benefits Are
Transportation benefits aren’t new; in fact, they are so well-established that the IRS defines and regulates them, limiting monthly benefits to $255. Despite an overwhelming wealth of terminology pertaining to transportation benefits ― to include commuter benefits and transit benefits, both of which are used interchangeably with transportation benefits ― there are just two types of benefit that employers and employees should worry about: subsidized and pre-tax.
With subsidized benefits, employers deposit the cost of commuting directly into an employee’s paycheck, much as it takes out the costs for insurance plans or retirement. Assuming an employee spends $255 every month to get to work, that employee would be reimbursed the full $3,060 she would otherwise spend annually. However, because this benefit is subsidized, the employer only spends $1,724. It’s a relatively cheap way to incentivize employees to come to work.
The other option, pre-tax benefits, allows employees to dedicate amounts of their paycheck to commuting, and because that money is pre-tax, it will not be factored into their annual income taxes. In the same situation described above, the employee using all $255 of her benefit will save about $1,175 on her taxes (depending on her tax bracket) and her employer will save about $400, too.
Most benefits providers offer transportation benefits programs that fit employers’ needs, so employees can receive benefits regardless of whether they drive, use public transit, or take ride shares. Still, some employers might be interested in trying something different.
For example, ride sharing existed long before Uber and Lyft transformed it into a paid, on-demand service. For decades, car-less commuters have been meeting in designated locations to find rides with car-owning commuters heading in similar directions. Some businesses are using that model in emerging vanpools, which are similar to carpools except they are paid and the carpoolers tend to be strangers. Employers might consider designing their own ride sharing or vanpooling system, using ride sharing software to organize the program and make it easily accessible for employees.
Employers might also consider encouraging employees to use cheaper commuting options, if they are available. Bicycles cost much less to purchase and maintain than automobiles, and they are more convenient than scheduled public transit. Plus, cycling is an excellent form of exercise that can keep employees healthy and health insurance costs low. Employer reimbursements for bikes are much less than for cars and trains.
Some cities already require employers to provide traditional transportation benefits, but employers outside those cities can experiment with transportation alternatives that might help their employees get to work.
How to Add Transportation Benefits
Incorporating a transportation benefits program into an organization’s existing benefits isn’t difficult; at least, it isn’t more difficult than giving employees other benefits. First, employers should consult their benefits brokers, providers, or PEOs to determine which transportation benefits packages are available. In areas where transportation benefits are required by law, it is likely that there will be more diverse options to choose from. Then, employers should consider which options fit their budgets and their employees’ needs best. Business leaders might consult with their employees to determine their existing transportation costs and future transportation interests.
Transportation benefits should not interfere with other benefit programs offered. Rather, they should add to the perks already enjoyed by employees. Done right, transportation benefits will improve employee retention, improve overall productivity, and increase an employer’s competitiveness in the job market.