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Pay You Back

Your employees may be better off driving their own cars.

Do your employees balk at driving boring company cars? Let them drive personal cars on business under a company reimbursement program.

In addition to conserving your capital for other expenses, reimbursing your staff for using their own cars instead of a leased or company-owned fleet can ease administration, eliminate the expense of cars sitting idle, reduce exposure to insurance liability, and even lower your taxes. Employees benefit, too, because record-keeping is minimal, and mileage can be calculated using monthly changes in local gas prices rather than the flat national annual rate that often results in inequities.

You can set up your own internal reimbursement system, but efficient alternatives are available to relieve you of the time and effort involved. Better still, some are completely nontaxable under the IRS' Fixed and Variable Rate program if you have five drivers or more. By contrast, if you set up your own program and reimburse your drivers, say, $500 a month, that money is taxable as compensation, and you must pay FICA on it.

Runzheimer Management Services, for example, offers program implementation, administration, calculating and tracking mileage, checking car insurance, and figuring out the cost of fuel, maintenance and tires at a typical cost of about $280 per driver for the basic 12-month program. For more information, visit or call (800) 558-1702.

Editor and consultant Jill Amadio has been reporting on the automotive industry for 24 years.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the October 2002 print edition of Entrepreneur with the headline: Pay You Back.

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