From the September 2005 issue of Entrepreneur

Bob Begle opened his business in downtown Atlanta because that's where his customers were. But the employees needed to staff the 37-year-old entrepreneur's company mostly lived in the suburbs. "Nobody lives in the downtown area because of the cost of housing," explains Begle, co-founder of design firm Urban Collage Inc., which has $1.6 million in projected 2005 sales.

To make it easier to attract and retain employees, Begle offers a free monthly transit pass to workers. The company picks up the $52 monthly cost of each pass, which employees can also use on weekends and after hours on both buses and trains. Six of the company's 13 workers take advantage of the transit passes, and Begle reports that the benefit is highly valued by those who do.

"The last two people we've hired indicated it was a significant factor in their decision [to take the job]," Begle says.

A 2000 survey by Mercer Human Resource Consulting found 27 percent of companies financially support employees who use public transit to commute, up from 13 percent in 1998. Eighteen percent subsidized commutes using nonpublic transportation, including private automobiles, up from 17 percent in 1998.

The trend has accelerated since the IRS changed commuting-benefits rules in January 2004, says Lori Elder, who administers commuting reimbursement programs for Ceridian Corp., a Minneapolis HR administration firm. The IRS lets employers give employees up to $105 a month for transit passes and vanpool expenses, plus $200 for parking. The benefits are pretax, so neither employer nor employee has to pay income taxes on them. "It not only saves the employee money, it saves the employer money," Elder says. "It's a win-win situation."

The arrangement works best in major metro areas with long commutes, Elder says. "New York City, Chicago, Boston, Los Angeles, San Francisco--anywhere employees either have to pay to park their vehicles to get to work or while at work, [or] they have to pay to commute back and forth." And it does have limits. Commuters who drive their own vehicles can't, for instance, get pretax benefits for auto expenses unless they use vanpools carrying six people or more.

Costs add up for larger numbers of employees, too. Begle's cost, for instance, is more than $2 a day per commuting employee. To save money, some employers sell fare passes to employees at a discount instead of giving them away for free. Those with sizable numbers of employees commuting from a single geographical area sometimes set up their own mini-transit hubs to make vanpooling easier and cheaper.

One key to making commuting benefits popular is making them easy to use. Begle says his employees like being handed transit passes each month rather than having to purchase them. Elder says services that allow employees to purchase transit passes online, without having to stand in lines, are also popular.

If you offer commuting benefits, take care to avoid charges of discrimination by offering them to employees of all levels who live a certain distance from work. Make sure employees know about the benefit by marketing it effectively. Study transit routes and schedules to see if existing public transportation can solve commuting problems. And think ahead. You may be able to locate your business almost anywhere if you think through commuting issues before signing a lease. "We chose this location because it's close to a Metropolitan Atlanta Rapid Transit Authority rail line," says Begle. "That was part of the decision-making process for putting our office here."


Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.