What are commuter benefits?
How do commuter benefits work? Commuter benefits, also known as transportation benefits or transit benefits, are perks or other compensation for employees to help offset the financial cost or time cost of traveling to and from work. Most businesses that provide commuter benefits do so as part of an employee’s compensatory package to provide both cost savings and an enticement to work for the company.
You can offer commuter benefits pretax or after-tax. Pretax commuter benefits are especially helpful, since they reduce taxable income, saving your employees money in tax payments and providing them with an additional benefit.
Many large metropolitan cities, particularly those that offer comprehensive public transportation options, provide city-based commuter benefit programs. In these cases, it’s the city, and not the specific company, that sponsors and oversees the commuter benefit plan.
Reasons to offer commuter benefits to employees
A commuter benefit plan helps both you and your team in various ways.
General benefits
Regardless of whether the commuter benefit you offer is pretax or after-tax, all transportation benefits provide these advantages:
- Diminished frustration: Recognizing the frustration of a commute and providing resources to offset the challenges associated with it can improve employee morale.
- Improved affordability: Some companies pay a portion of their employees’ transportation costs, while others participate in city- or state-run programs that subsidize the cost of transportation. Either way, the employee benefits financially, which can improve job satisfaction.
- Increased environmental awareness:Some commuter benefits programs provide funding specifically for carpooling, public transportation or other environmentally friendly commuting options.
Pretax benefits
Some of the advantages of commuter benefits are specific to pretax arrangements:
- Lower taxable income:Using pretax income to secure the commuter benefits decreases your employee’s taxable income.
- Provide reimbursement:Some employers reimburse employees for parking or other commuter expenses with pretax funds.
- Decrease employer taxes:Offering some benefits pretax to your employees can also lower your company’s payroll taxes, saving you money.
After-tax benefits
After-tax commuter benefits can also provide advantages to you and your employees:
- Provide flexibility:Some commuter benefits allow for flexibility in where the employees work from to save them from having to travel to the office every workday.
- Encourage carpooling:Carpooling is a great way for employees to get to know one another and share the expenses of driving and parking.
Related:10 Perks and Benefits for Your Business to Consider
Required commuter benefits
Some state and local governments require that companies of a certain size offer commuter benefits for employees. New Jersey is the only state that requires commuter benefits if you have 20 or more employees. Some cities also require employers with 20 or more employees to offer commuter benefits. This includes Seattle, New York City and Washington, D.C.
Examples of commuter benefit programs
Commuter benefit programs can differ tremendously depending on the type of commute and specific travel challenges in your area. Compensation for using public transportation is beneficial in a large city, but it’s not a perk that most people need in smaller cities and towns, for example. Review a few of the most common types of commuter benefits to see what makes sense for your employees and your organization:
Pretax purchasing
Many cities and states allow workers to purchase their public transportation cards, tokens or passes with pretax income. Some companies also provide subsidies to their employees who use public transportation and purchase these passes to help reduce the cost further.
Carpooling perks
You can offer perks to employees who choose to carpool together. For example, you could give a monthly fuel allotment to groups who regularly commute to work together and help organize carpooling groups for your employees.
Remote work
If work can be done for your organization remotely, consider allowing employees the option of a flexible schedule of working from home once a week or once a month. This will reduce their commuting expenses and save them time on non-commuting days.
Company vehicles
In some cases, it may be practical to provide some employees with company vehicles. Usually, you pay for the vehicle and any incidental costs like gas and maintenance. Company vehicles are particularly useful for employees who travel by car frequently for work and don’t want to put the miles on their personal vehicles.
Ride-sharing funds
If your employees travel to work via taxi or ride-sharing services, you can provide a monthly or annual stipend to help offset the cost of using these services for the commute.
Toll reimbursement
For employees who regularly drive on toll roads or incur fees on their drive to and from work, offering reimbursement for tolls is a fantastic commuter benefit.
Free parking
If your company is located in a downtown area where you have to pay for parking, you might offer passes for free parking in a nearby lot or parking garage. This reduces expenses for employees who drive personal vehicles instead of taking public transportation.
Fuel funds
Outside of large cities, most people travel to and from work via their personal vehicles. Providing monthly or annual fuel credits to reduce the cost of gas can help those with longer commutes lower their travel expenses.
Vehicle maintenance
Some employees must travel over challenging terrain or drive in bad weather to get to and from work, which can damage their vehicles. You can offer basic vehicle maintenance as part of your commuter benefits to help reduce the cost of repairs on personal vehicles used for work purposes.
Bike maintenance and repairs
If you have employees who bike to work regularly, consider offering compensation for bike maintenance and repairs.
Shuttle programs
Some businesses, particularly those in cities, have employees who utilize off-site parking or public transportation to a central location before walking or hailing a cab to get the rest of the way to work. Consider providing a shuttle service from central parking lots or train stations to help your employees save time and money during their commute.
Related:Employee Benefits: Types of Perks to Offer Employees
What to consider when deciding if your company should offer commuter benefits
Commuter benefits make more sense for some companies than others. Review these considerations before committing to a commuter benefits program:
- Location:The location of your business is vital in determining if a commuter benefits program will be worthwhile. If employees live nearby and it’s easy to get to work, the benefit may not be necessary.
- Volume:The number of employees you have should also inform your decision to provide commuter benefits, as the cost goes up exponentially for perks like fuel funds with each additional employee.
- Transport style:Consider the way most of your employees get to work. If most drive, offering reduced-price bus tickets won’t be too appealing.
- Commute length:If most of your staff members have a short commute, these benefits may not be as attractive as other types of employee perks.
- Employees with mobility limitations:Employees with mobility issues may need special transportation. Someone in a wheelchair might use a van service with a wheelchair lift, for example. Consider reimbursement options for people who fall outside traditional transportation methods.
- Employee desires: Taking a quick employee survey is an easy way to gather opinions on what to include as part of your transit commuter benefits.
Tips for establishing a commuter benefits program
If you’re ready to create a commuter benefits program, use these tips to help you implement one:
- Policy:Establish a commuter benefits work policy that details the program. Include limitations, qualifications, amounts and other details employees need to know about the program.
- Budget:Set your budget before deciding on benefits. This helps you determine how much you can offer each employee on a monthly basis.
- Management:If you’re offering reimbursements or travel funds, create online accounts for your employees that are easy for both of you to access and manage.
- Delivery:If you’re providing public transportation passes, have them delivered to the employee’s home.
- Awareness:If you’re offering pretax commuter benefits, ensure you’re adhering to all federal and state regulations.
Offering your employees commuter benefits is an excellent tactic for both recruiting and retention. Look at all the potential options before establishing a plan for your company.
FAQs about commuter benefits
Are there limits on commuter benefits?
If you’re offering pretax commuter benefits to employees, you’re subject to the current IRS limits, which as of 2021 are $270 per month for a combination of transit passes and commuter highway vehicle transportation, and $270 per month to cover qualified parking. Any benefits below this amount can be offered pretax without being counted toward an employee’s wages. Benefits you offer over that amount have to be added to their wages. Be sure to check the latest IRS guidelines and talk to your tax accountant for guidance.
How do employees receive commuter benefits?
You can distribute the benefits in a variety of ways. You might purchase parking or transit passes for employees and hand them out. Some employers use vouchers or debit cards preloaded with the agreed-upon amount of money. You can also provide direct payments to your employees, or you can reimburse them for commuting expenses they’ve already paid after they complete an expense reimbursement form.
How can you evaluate your commuter program?
A new commuter benefit plan may have a few kinks you need to work out before it runs smoothly. Looking at the participation rate among your employees can help you determine if the specific commuter benefits you offer are valuable to them. If very few people participate, you may need to rethink your options. Conduct surveys about the program at least once a year to get feedback from your employees. Use that information to determine if you need to change the program or offer different benefits.