Not sure how much information is needed, but let’s say something comes up that requires substantial driving which the employee is willing to do with their personal car.
Beyond their wage what do you think is a reasonable approach to compensating them for the use of their car? Specifically due to depreciation, wear and tear.
If it makes a difference I’m interested in the theoretical approach rather than what I can get away with or something like that.
You pay mileage in accordance w federal rate
Came here to say this. If you follow the irs rate then you are in a good place.
yep, this is all you have to do. When you start getting into all the other variables it can get crazy in a hurry.
One employee drives a $2k shit box and another one has a $90k BMW. The costs to operate each one can vary immensely.
Completely depends on the car, but I wouldn’t drive mine if that was the compensation.
Or a way to set in your policies.
And you may also have a policy that does not pay anything for local trips that occur once in a blue moon
Yeah there’s not much more to it
Our HR always asks for a copy of our car insurance. Every one has to submit, except for those who are assigned a vehicle from work.
Simple, pay their mileage plus a little extra.
$0.67 for first 5000 km $0.63 for the any km above that
The minimum is the US federal rate. What’s fair is 50% on top of that, which brings it to 97 cents per mile. If you think that is too much, then buy a company vehicle.
Make a sheet on MS Word. Start location. end location. Total trip miles. Times .65
This is a struggle. Ensure that your company has an auto insurance policy that covers your employees in their vehicles when using them for work. Our policy covers any rental vehicles (including large box trucks) as well as an employee personal vehicle. The employee is covered in the event of an accident as long as it is while they are working for the company, but does not cover them if they have an accident during their regular commute, to work or home from work (work in this instance is en route to our office, if they are going straight to home to a worksite they are covered).
From there set a geographical radius that they can claim mileage with a base location. For us, we have it set that an employee can file an expense claim for going to a location using their personal vehicle that is >30mi (60mi round trip) from our home office. If a trip is outside that 30mi radius we reimburse the whole amount based on the IRS rates. Anything within that radius though, outside of extenuating circumstances, it is up to the employee to record their mileage and claim the deduction on their personal taxes. We are not going to ask an employee to drive 200 miles round trip and not compensate them for fuel and wear and tear, but it’s clearly stated in our handbook that localized travel is expected and part of the job.
We also put practices in place that if a company vehicle is being used and transportation is provided by the company in a safe and reasonable manner that an employee can’t claim mileage when a viable option is presented (outside of extenuating circumstances). For example, if a box truck with three seats, all with seatbelts and safe common practices, is on its way to a project, the employees are more than welcome to drive their personal vehicles (yet still covered under our insurance) but cannot claim mileage reimbursement for the drive unless requested/granted permission is given before hand.
Consider reimbursing based on mileage.
You pay them per km. The amount may change depending on where you are located. I pay them 0.55$/km.
In canada you can issue a T2200 which is a declaration of exactly this type of usage. The form basically says yes you use your personal vehicle for work. This allows the employee to track mileage, repairs, maintenance and deduct that as a % from their taxes. So they will look at what % of the time is the car being used for work.
I am sure there is a similar form where you pay taxes. (this form is also used if there is a home office, or the person uses their cell phone for work)
Are you talking about using it for work related duties or commuting?
Mileage at the federal rate, plus per diem for meals or hotel at the federal rate whenever they meet the qualifications
Here’s a link to the IRS website describing reimbursement for this very thing. It’s a per mile reimbursement.
how is this documented so they aren’t taxed? or should this be taxed as income?
It’s a business expense. One way of handling this is to have them file an expense reimbursement form and write them a check for the expenses. Pay them for these expenses like you would a vendor rather than on payroll.
Make sure you are insured for this.
Do you mean that the employee has auto insurance or that I take out a policy for the employee?
You need a commercial auto policy that covers non-owned auto. The employees own policy will not cover them since they would be using their vehicle for business use.
What determines “business use”? Travel while you’re clocked into work?
Does typically not include commuting. Usually includes any trips made starting from your workplace and any following trips after that. Trip to home is usually not covered even if from last stop, so go back to workplace (covered) before going home (not covered).
When I did a temporary W-2 driving gig using my own car, they paid me the standard mileage rate, which I think is .65 cents a mile this year, and they were insured in case anything happened while I was driving for them. If the mileage is too high, plus the insurance, it may make more sense for you to rent them a car like one of the other posts said. It would depend on how many miles they were going to be driving.