Nobody likes a long commute, especially when that commute is expensive. While inflation may be slowing down, prices for things like gas or transit are still high. Taken alongside the still-high prices of everything else, the length of the commute to either someone’s current job or a prospective job is becoming a key factor in retaining or attracting top talent.
As an employer, you may feel lost as to what you can do to alleviate this problem for your employees. After all, you can’t move your employees closer to the office nor influence economic policy to cause drastic reductions in everyday living costs (unless maybe you’re Bill Gates reading this, in which case why aren’t you doing that?).
Regardless, it’s a tricky problem, and we here at Payday HCM have seen numerous businesses encounter it in recent years. We want to ensure that you feel your company is doing everything possible to support its employees while also providing solutions that don’t come at a great cost to the employer. For most of these businesses, the solution lies in commuter benefits.
In this article, we’ll go over what commuter benefits are. We’ll get into why you should offer commuter benefits and just how exactly they work. Then, we’ll get into the how of it all. That way, you can spend more time addressing your employees’ needs and less time worrying.
In this article, you will learn:
- What commuter benefits are
- Why you should offer commuter benefits
- How commuter benefits work and how to offer them
What are Commuter Benefits?
Firstly, we need to understand commuter benefits. While the name is relatively self-explanatory, some details still need to be provided to paint a more complete picture.
Understanding Commuter Benefits
Put simply, commuter benefits help employees cover or offset commuting costs to and from work. They are designed to alleviate the cost of getting to work, whether by car, train, or bus. These benefits can also be known as parking benefits, transportation benefits, or employee transit benefits.
As the name implies, commuter benefits are offered through a company’s benefits package. They can be offered either as pre-tax or post-tax benefits.
Are Commuter Benefits Required?
As their popularity increases, more cities and states are implementing legal requirements around commuter benefits. These regulations are more prevalent in cities or states with more established public transportation systems, but the benefits still go beyond just public transportation.
Cities with commuter benefits regulations include Chicago, Los Angeles, New York City, Seattle, Philadelphia, and Washington, D.C. These regulations usually come with stipulations regarding the size of the business measured in the number of employees and what the benefits need to cover.
Why You Should Offer Commuter Benefits
Before we discuss the nuts and bolts of commuter benefits, it’s important to understand why you should offer them.
Attract and Retain Top Talent with Commuter Benefits
A poll published by Newsweek found that 58 percent of employees think their employer should cover their commuting costs. Offering commuter benefits can help attract prospective employees whose current job doesn’t provide them and retain those employees looking elsewhere for them.
According to Clever Real Estate, the average commuter spends about 19 percent of their annual income on commuting costs. Offering these benefits can help to slash that percentage for members of your team.
Doing What’s Best for Your Mind and Your Environment
Outside of cost, commuter benefits can also help to improve employee mental health. Offering commuter benefits may encourage employees to utilize public transportation or carpool, lessening the amount of cars on the road and improving traffic flow. And nothing is more frustrating than a traffic-filled morning commute.
Less cars on the road also means less carbon emissions. For Gen Z, showing that your company cares about the environment can be the deciding factor between two prospective jobs. Commuter benefits can be one way to demonstrate your company’s commitment to a better tomorrow.
How Commuter Benefits Work and How to Offer Them
Commuter benefits come in all different shapes and sizes, from pre-tax and post-tax to reimbursement and offering the benefits directly. These solutions can be customized to better fit your business’ needs.
Pre-Tax and Taxable Benefits
Commuter benefits can loosely be divided into two categories: pre-tax and taxable benefits. A pre-tax benefit means the cost of this benefit is deducted from an employee's check before taxes. These benefits include:
- Transit passes
- Ride in a commuter highway vehicle
- Qualified parking
- Mileage reimbursement
A “commuter highway vehicle” is defined here as a vehicle that seats at least six, with employees making up half of those seats. Qualified parking only includes parking on or near the workplace or where employees can commute via public transit.
The Internal Revenue Service has outlined specific limits for some of these benefits, particularly for qualified parking and transit passes, each capped at $315 a month.
On the flip side, you have taxable benefits. These benefits include things like toll reimbursement, vehicle maintenance allowance, and use of a company vehicle.
Reimbursement Versus Direct Benefits
Employers can also choose between offering these benefits directly or through a reimbursement system. When offering these benefits directly, you are able to pay for them pre-tax as outlined above. However, this option has its limits and can only help up to a certain amount.
Offering reimbursement or a transportation stipend, while taxable, does prevent issues surrounding cost limits. This provides more flexibility for your employees while still providing the same benefits.
The Elephant in the (Zoom Meeting) Room
Of course, it’s hard to discuss commuting without mentioning one of the more obvious solutions to the problem: remote and hybrid work options. With the COVID-19 pandemic demonstrating that going into the office was an almost entirely obsolete concept, it seems only fair that the best way to tackle issues of commuting is by removing the possibility entirely.
With initial concerns about productivity now having been dispelled, shifting your organization’s work environment to one that emphasizes either a hybrid or entirely remote model is an equally viable solution.
Commuter Benefits Benefit Commuters (and Employers Too)
The drive to and from work can sometimes be as stressful as the work itself. Remember when you said you’d get gas in the morning? Well, now you’re running even later than you were, and this isn’t including the construction you forgot about that’s gonna set you back another thirty minutes. Had your employer offered commuter benefits, you probably would have been more inclined to get gas the night before, saving yourself lots of stress in the morning.
Commuter benefits are only one piece of a larger puzzle to attracting and retaining top talent within your organization. Learn more about other ancillary benefits that you can offer to take your benefits package to the next level.
Topics: