How Commuter Benefits Will Give Your Firm an Advantage
By the end of this year, a whopping 90% of employers will have some type of return-to-office requirement, according to a survey by Resume Builder. With more people traveling to work again, to boost your employer value proposition, it might be time to consider offering commuter benefits for employees not able to work remotely. Here’s why.
The costs of commuting aren’t leveling off. The American Public Transportation Association said gas prices increased 25% last year due to constricted supplies and higher demand.
According to MarketWatch, commuters currently spend an average of $37.41 in fuel costs each week.
And based on data from 170 cities nationwide, Chamber of Commerce concluded the average employee now spends approximately $5,750 over the course of a year just on expenses related to their work commute, including public transportation fares, tolls, personal vehicle wear and tear, and parking.
In 58 cities, those annual costs are even higher, including:
- San Francisco – $12,650
- Fremont, CA – $12,048
- Washington D.C. – $11,067
- Jersey City, NJ – $10,903, and
- New York City – $10,831 (The Big Apple’s also infamous for having the longest average round-trip commute at an hour and 20 minutes).
No wonder employees aren’t all that enthused about coming back to a worksite! Adding a commuter benefits program is a good way to reduce the stress of daily commuting, which can make your employees happier.
So What Are Commuter Benefits?
Commuter benefits programs allow employees to get reimbursed or otherwise financially supported for the money they spend on their daily commute to the worksite.
Employees who decide to enroll in a commuter benefits program can use pre-tax money to pay for these benefits. A monthly cap on transportation fringe benefits is set by the IRS and adjusted for inflation. In 2024, that maximum monthly amount is $315 (compared to $300 in 2023).
This ends up translating into savings for employees, as these contributions are deducted from their taxable income. It’s a fringe benefit that can make your company a more attractive employer.
Benefits can be distributed via direct payment or pre-paid vouchers, smart cards and debit cards.
A good commuter benefits plan should be beneficial for all employees who regularly commute, and not just the car drivers. Depending on your geographical area, offerings can include:
- Transit passes: This includes pre-tax contributions toward bus passes, train tickets, subway fares and ferry passes.
- Vanpools: Employees can save on commuting costs by sharing a ride in a vanpool operated by the employer or a third-party provider. Contributions towards vanpool expenses can be made with pre-tax dollars.
- Qualified parking reimbursement: Employers can offer employees pre-tax contributions towards the cost of parking at or near the work location, with limitations on the monthly amount.
- Bicycle commuting: Some employers offer programs that allow employees to contribute pre-tax dollars towards qualified bicycle commuting expenses, such as bike purchases or bike commuting memberships.
How the Company Benefits
Commuter benefits don’t just benefit employees; they save the company tax dollars too. Because commuter benefit dollars are all considered pre-tax, they aren’t subject to payroll or income taxes. This means that your company is paying less for commuter benefits than it would for giving your employees the same amount in a bonus.
Partnering with a reputable commuter benefits provider can simplify administration and ensure compliance with IRS regulations. You should be able to customize your program to fit your budget and employee needs, offering a variety of eligible expenses and contribution limits.
Getting Started
If you’re still not sure whether commuter benefits are worth it, try asking employees in a survey to calculate their commuting costs online and submit their results.
Meanwhile, here’s a sample of commuter benefits providers to get your research started:
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