What are commuter benefits?

Commuter benefits are a type of additional compensation that helps employees offset the financial cost or time cost of traveling to and from work. These benefits, which are also known as transportation benefits or transit benefits, are typically part of an employee’s compensatory package.

There are many types of commuter benefits. For example, you might offer a monthly stipend that employees can use to cover gas or ride-sharing expenses. Alternatively, you might help cover the cost of a bike or a vehicle.

You can offer commuter benefits pretax or after-tax. Pretax commuter benefits are deducted from your employee’s pay before taxes.

Who can offer commuter benefits?

Companies aren’t the only organizations that can offer commuter benefits. Many large cities, particularly those with comprehensive public transportation systems, provide city-based commuter benefit programs. In these cases, the city sponsors and oversees the commuter benefit plan rather than the employer.

Reasons to offer commuter benefits to employees

A commuter benefit plan helps both your organization and your team. The perks you choose can have benefits, including:

• Lower costs: The biggest advantage of commuter benefits is that they reduce employees’ transportation costs. Whether you choose to pay for a portion of employees’ transportation costs, reimburse parking fees or participate in city transit subsidy programs, the financial benefits can help improve job satisfaction.
• Reduced frustration: Commutes can be long and frustrating, particularly if you’re located in a large city. Commuter benefits help alleviate the challenges associated with these daily trips, which can improve employee morale.
• Lower taxable income: If you offer pretax benefits, it can reduce employees’ taxable income and help them save on tax payments.
• Smaller carbon footprint: A benefits program that provides funding for carpooling and public transportation can encourage employees to plan an environmentally friendly commute.
• Customizable options: Allowing employees to choose between several transportation benefits enables more people to participate.
• Decrease employer taxes: Offering some benefits pretax to your employees may lower your company’s payroll taxes.
• Increased flexibility: Some commuter benefits allow employees to work from home periodically, which can reduce stress and improve their work-life balance.

Required commuter benefits

Some state and local governments require certain companies to offer commuter benefits for employees. These requirements are often based on company size. Check state and municipal law to find out about any rules that apply to your organization.

Examples of commuter benefit programs

Commuter benefit programs can vary significantly depending on the type of commute employees have and the specific travel challenges in your area. Companies in major cities might offer compensation for public transportation, while employees in smaller towns could benefit more from gas reimbursement.

As you select commuter benefits for your organization, consider these common program types.

Pretax purchasing

Allow workers to purchase their public transportation cards, tokens or passes with pretax income. You can also provide subsidies to employees to reduce costs further.

Carpooling perks

Offer special perks to employees who choose to carpool. For example, you could give a monthly fuel allotment to people who regularly commute to work with another employee. To help increase participation, consider creating a system to help organize carpooling groups for your employees.

Remote work

If your employees can do their jobs from outside the office, consider giving them the option to work remotely or use a flexible schedule. For example, they might work from home once a week or once a month. This option reduces transportation expenses, alleviates stress and saves time on non-commuting days.

Company vehicles

In some cases, it may be practical to provide certain employees with company vehicles. Usually, you pay for the vehicle and incidental costs, such as gas and maintenance. Company vehicles are particularly useful for employees who travel by car frequently for work. It saves money and reduces wear 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. This type of commuter benefits program can be effective in cities without reliable and safe public transportation.

Toll reimbursement

For employees who regularly drive on toll roads or incur fees on their drive to and from work, offering reimbursement for tolls can be a valuable commuter benefit.

Free parking

If your company is located in a downtown area where employees 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 large cities, most people travel to and from work using their personal vehicles. Providing monthly or annual fuel credits can reduce the cost of gas, making commuting more affordable.

Vehicle maintenance

Some employees must travel over challenging terrain or drive in bad weather to get to and from work, which can cause vehicle damage. This is a common situation for people who work in the field, outdoor job sites or remote industrial facilities. You can offer basic vehicle maintenance as part of your employee benefits to help reduce the cost of repairs.

Bike maintenance and repairs

Encourage employees to cycle to work by offering compensation for bike maintenance and repairs. You might also help cover the cost of the bike itself.

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. If that’s the case for your team, consider providing a shuttle service from central parking lots or train stations to help your employees save time and money during their commute.

What to consider when deciding if your company should offer commuter benefits

Commuter benefits make more sense for some companies than others. Here’s what to consider before committing to a commuter benefits program:

• Location and distance: Commuter benefits are usually most valuable for employees who have long or complex commutes. If your team members live nearby and have an easy time getting to work, the benefit may not be necessary.
• Volume: The number of employees you have might also inform your decision to provide commuter benefits. Costs increase quickly with each additional employee when you offer perks such as fuel funds.
• Transport style: Consider the way most of your employees get to work. If most of them drive, offering reduced-price bus tickets probably won’t be appealing.
• 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 can’t use traditional transportation methods.
• Employee desires: Commuter perks have the biggest impact if employees want and need them. If not, you may want to invest in more valuable perks. Taking a quick employee survey is an easy way to gather opinions. The results can also help you decide what to include as part of your transit benefits.

Tips for establishing a commuter benefits program

When you’re ready to add commuter benefits to your compensation package, use these tips to build a program that’s effective and easy to use:

• Budget: Establish a budget before selecting benefits. This helps you determine how much you can offer each employee on a monthly basis.
• Policy: Establish a commuter benefits policy that outlines the details of the program. Describe each benefit, and include limitations, qualifications, amounts and other information employees need to participate.
• Management: If you’re offering reimbursements or travel funds, create online accounts for your employees that are easy to access and manage.
• Delivery: When you’re providing public transportation passes, have them delivered to the office or the employee’s home. Allow employees to choose digital passes when possible.
• Awareness: If you’re offering pretax commuter benefits, consult a legal professional to make sure you’re adhering to applicable federal and state regulations.

Commuter benefits reduce costs for employees, which can help improve your company’s recruiting, hiring, employee satisfaction and employee retention. By designing a program that addresses your employees’ most pressing transportation concerns, you can increase participation and maximize the positive impact.