Guide to commuter benefits
Published: January 23, 2024
Employees are the lifeblood of your business. And when you treat them right, they’ll likely be happier at work, be willing to sing your company’s praises, and build their career within the comfortable walls of your organization.
Of course, “treating employees right” means paying a competitive salary and offering standard benefits like healthcare, paid time off, and retirement. But if you want to sweeten the deal, consider offering fringe benefits—especially commuter benefits.
This guide will dive into everything you need to know about commuter benefits, including:
- What are commuter benefits?
- Why offer commuter benefits?
- How do commuter benefits work?
- How to decide if your company should offer commuter benefits
At the end of this article, you’ll be ready to evaluate various solutions for putting together an outstanding commuter benefits package.
What are commuter benefits?
Commuter benefits are employer-provided travel benefits that offset or replace the cost of employees’ travel to and from work. Commuter benefits can include offering subsidies for public transit, providing bicycles or scooters, or arranging carpools. Some commuter benefits packages even include company-sponsored access to rideshare apps. Employees can allocate a portion of their pretax earnings to cover commuting costs. This reduces taxable income, benefiting both employer and employee.
A commuter benefits package alleviates commuter expenses and can make company travel more efficient, better organized, and eco-friendly.
Why offer commuter benefits?
Building a corporate culture where it’s clear you value your employees may be the best reason to offer commuter benefits, but it’s not the only one.
Tax benefits for employers
Offering commuter benefits might come with tax advantages for businesses. To fully understand these potential savings, you should consult with your accountants.
Employee happiness
Employees who spend more time commuting experience more negative physical and health problems. And those who spend less time commuting tend to be happier and more satisfied. Reducing or eliminating daily travel expenses boosts morale.
Competitive edge
In a competitive job market, unique benefits can set a company apart. Providing commuter benefits makes your job offer more enticing to candidates.
Environmental benefits
By promoting eco-friendly commuting options, companies support sustainability. This reduces your company’s carbon footprint and aligns with any corporate sustainability goals you may have.
How do commuter benefits work?
You can’t get around it: whether you’re hailing a taxi, hopping on an e-bike, or requesting a ride with Uber, you have to pay for it. Figuring the logistics of how you’ll settle up for these rides is the first step in building a commuter benefits program. Thankfully, plenty of options are available to you, including:
Business rideshare accounts
Create a company Uber for Business account and send your employees an invitation to link their personal account to the business. Then they can set up their business profile and request rides that are billed to the company.
Pre-payroll deductions
Employees can allocate a portion of their pretax earnings to cover commuting costs. This reduces taxable income, benefiting both employer and employee.
Stipends
Employers provide a set amount of money monthly or annually to offset commuting costs. It offers flexibility, because employees can use it as they see fit.
Vouchers
These are specific credits that can be used for a designated mode of transit. Vouchers allow you to tailor and customize your offerings to help ensure that the benefit can be spent solely on commuting.
Prepaid transit passes
Employees receive passes or cards loaded with funds for transit systems. It eliminates the hassle of daily or monthly ticket purchases.
Reimbursements
Employers can choose to reimburse employees based on the documented commuting expenses they incur. This method makes sure benefits are used for their intended purpose.
Company-provided transportation
Some companies offer shuttles, buses, or carpools. This ensures a direct and often more comfortable commute for employees.
Commuting options
The next step in setting up your program is to decide what commuter benefits you’ll provide. There are several different benefits options you can offer, and they may vary depending on your location, the commuter policies of your region, and your employees’ preferences. Here are some options to consider as you build your program:
Public transit subsidies
Offer allowances for bus, train, or subway passes.
Rideshare benefits
Partner with a popular rideshare company like Uber to offer discounts or credits to employees.
Carpooling programs
Organize carpools or provide incentives for carpooling, such as preferred parking spaces or gas vouchers.
Vanpooling
Have multiple employees share a ride in a larger vehicle that you or a third-party vendor provide.
Bikes or scooters
You can provide a financial incentive for those riding to work, or even supply free bikes or scooters and storage instead.
Walking incentives
Similar to biking incentives, offer financial perks for people who live close enough to walk, recognizing the health and environmental benefits.
Telecommuting
Allow employees to work from home on certain days to reduce the need for commuting altogether.
Emergency ride home
Alleviate concerns about not having a car in case of an emergency by offering a guaranteed ride home.
Tax considerations inside the US
When it comes to the financial side of commuter benefits, you’ll want to decide whether you’ll offer pre-tax or post-tax benefits. When deciding, look into your regional and local regulations regarding limits and eligible expenses (the next section offers some advice). Being familiar with policies in your location will ensure that you’re compliant and maximize the potential advantages.
Pre-tax benefits allow employees to set aside a portion of their gross income (before taxes) to pay for commuting expenses. By using pretax dollars, employees can reduce their taxable income, potentially saving money on income taxes.
Post-tax benefits, on the other hand, are offered using after-tax dollars. While the benefits don’t offer the same tax advantages, they can still be valuable, especially if the employer is subsidizing or covering the cost.
How to decide if your company should offer commuter benefits
Determining whether your company should offer commuter benefits involves weighing legal mandates, company dynamics, location considerations, and employee preferences. Below are key factors to consider when evaluating the need and structure for such a program.
Ordinances and legal requirements in your area
Several regions, particularly within the US, have legislated mandates requiring companies to offer commuter benefits, especially if they exceed a certain number of employees. Make sure you keep current on your local regulations to stay in compliance.
If you live in one of the following areas, here’s some information (including a link on the name of the law/ordinance to get more details) to help you with your research:
Location | Law/Program | Employee threshold |
|---|---|---|
San Francisco, CA | 50+ full-time | |
New York City, NY | 20+ full-time non-union | |
Washington, DC | 20+ in DC | |
New Jersey | 20+ | |
Berkeley, CA | 10+ | |
Richmond, CA | 10+ | |
Washington State | 100+ full-time in urban areas |
Company size
The scale of your company can also play a pivotal role in determining the type of commuter benefit solution you implement. Small companies might opt for simpler, more direct solutions like rideshare credits or bike-to-work incentives. Large companies should consider more elaborate systems like corporate rideshare accounts for employees or subsidies for public transit.
Locations
If your company operates across multiple regions or countries, your commuter program may need to be tailored for each location. Urban centers, for instance, might prioritize rideshare app vouchers or public transit subsidies due to the availability and convenience of buses and trains. In contrast, suburban or remote areas might focus on bikes, carpooling, or telecommuting incentives.
Employee preferences
Your employees are the primary users of commuter benefit programs, making their feedback invaluable. Consider running surveys, conducting focus groups, and participating in your company’s online community to learn what your employees value most. Then tailor your program according to their needs.
Reshape the commute
Help your employees say goodbye to road rage, limited parking, and waiting for the bus. Lessen their commuting woes, provide a creative alternative to traditional transportation, and make it easier for them to get where they need to go with ridesharing.
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