employee is upset about losing mileage reimbursement when we give him a company car by Alison Green on June 25, 2015 A reader writes: My question is about how to treat a great employee fairly when faced with a company financial decision. I have a growing small service business with 1 full time and 3 part time employees. They’re out in the field most of the time and drive their personal vehicles. They’re reimbursed $0.56 a mile. My goal has always been to get a company vehicle for our full time person because he drives over 1,700 miles a month and the mileage reimbursement no longer makes sense for the business – I’m reimbursing him $1,000 a month. We can provide him with a company car, pay for the gas and save $300-350 a month. Money that can be reinvested in growing the business. I’m proud to say I can finally afford to buy our first vehicle. My employee sees it differently. He considers the mileage reimbursement part of his compensation and thinks his pay is being cut. I get that and have explained that mileage is intended to compensate for wear and tear on his car as well as cover gas costs. I also realize it’s been profitable for him (he drives an old car that no longer looks good for company use) and that he relies on the money. I don’t want to lose him over this. In our industry it’s common for employees who drive company vehicles to pay for their own gas (they can deduct it on their personal taxes). I’ll pay for his gas (bought a Prius!). Any suggestions how to deal with this? “Because of the amount of driving you do, it’s much more cost-effective for the company to pay for a car and gas. I understand this is a change, but the mileage reimbursement has always been intended to cover gas and wear and tear on your car — the expenses you bear from using your car for work. It’s not intended to result in extra money in your pocket, and it’s not part of your compensation. Your salary reflects the market rate for the work you do. (Hopefully that’s true — if not, see below.) But if you’d like to, we could take a look together at industry norms on this. Would you like to do some checking into that and then we can discuss what you find?” That said, he’s being a little unreasonable so a reasonable explanation may or may not get through to him. The only other thing you could do is to take a look at his salary — hopefully it is indeed in line with the market (if it’s not, take out that line in the language above), but if it’s not, this would be a good time to remedy that. You may also like:surprise interview projects, turning down optional training, and moreemployee "works" after playing video games all night, what does mileage cover, and moremy employee pressures coworkers for rides everywhere { 174 comments }
JHS* June 25, 2015 at 2:05 pm Good and fair advice, Alison! It could also be helpful in having the conversation for OP to discuss the fact that the IRS itself does not consider mileage reimbursement to be part of compensation, otherwise they would tax it as income.
baseballfan* June 25, 2015 at 2:47 pm This would be a useful way to make that point. This guy is really being a tool.
Adam V* June 25, 2015 at 3:23 pm Let’s be generous here – this was additional money this guy was getting and won’t be getting any more. The fact he was counting it as compensation makes some amount of sense in that perpective, so please let’s lay off the name-calling.
Steve G* June 25, 2015 at 4:04 pm I just did the math on this and now I see why the subject of the letter sees it as additional income. **** there are a million ways the math can work out, so it can be in or not in their favor.. If I expect my car to last 7 years for example, my total cost of the car is $39K, or $.49 cents per mile if I expect another 80K miles (I’m including gas, insurance, maintenance + purchase price for my personal car). But if I drove those 80K miles in only 3 years because I was using it for work, my cost per mile drops to $0.37, because the recurring cost of insurance is going to occur for 4 years less. Of course you are going to have A car insured, but that isn’t the point. The point is that the life of the car dropped by 4 years because I drove 45,700 miles for work, and thus got $25,600 reimbursed mileage. The total cost of keeping my car drops from $650 (this is excluding the $180/month spent on gas for work trips) to only $117, so I technically made an extra $530 per month. Of course this doesn’t take into account long-term financial planning, only the cost of owning this one vehicle.
Professional Merchandiser* June 25, 2015 at 6:45 pm That’s better than what happened to me. I do merchandising work (thus my screen name) and every company I have worked for gave mileage (at a minimum) and sometimes car allowance, which can add more than $1,000.00 a month. I accepted a job with a new company and after I had been there three months I get a message from HR that to keep my car allowance I was required to drive a vehicle newer than seven years old. Of course my car was coming up on that dead-line. Like new, perfectly maintained but didn’t matter. And THEN they told me I had to triple my insurance coverage. Well, I crunched the numbers, and with what they were paying for reimbursements plus mileage it was doable (no, it didn’t cover EVERYTHING, but it’s not supposed to) Well, three months after I got said car and insurance, they dropped the 7 year requirement. Three months LATER, they cut my reimbursement IN HALF. Not thrilled, but okay, I wasn’t driving as far. Six months later they completely A. Took away my reimbursement, B. Cut amount paid for mileage and C. Cut my work week by 10 hours a week. So not only did I lost all that, I was stuck with a car note, more expensive insurance and over $1,000.00 a month in regular income. That really sucked. I know you’re asking did I quit? No, because they give generous vacation, sick leave, and personal days. Not to mention paid holidays. Most companies who hire people for this type of work do not offer any of that.
Professional Merchandiser* June 27, 2015 at 10:14 am I need to proof-read better. I meant to say, “I was stuck with a car note, more expensive insurance AND over $1,000.00 a month CUT in income.”
OriginalYup* June 25, 2015 at 3:39 pm Exactly. He’s not paying taxes on it. The company doesn’t have to financially account for it if unused (a la PTO). All money received is not compensation, and not all compensation is received as cash. He needs to clear that mental hurdle quickly.
Hotstreak* June 25, 2015 at 6:14 pm His paycheck will be $1,000 less per month. Expenses will decline, but not nearly that much, so at the end of the month he will have less money in his bank account under the new system. Presumably he took the job knowing the reimbursement policy & having calculated how much he would come ahead on it each month. Whether the business & IRS account for this as a reimbursement or pay doesn’t matter to the employees bottom line – the terms of his pay structure have changed, for the worse, and he’s understandably not happy.
JHS* June 25, 2015 at 8:42 pm I appreciate your thoughts and I understand that is how some people think about these things and other types of stipends, but it is, as the name says, a reimbursement. It is to reimburse you for gas and wear and tear on your car. The IRS treats it that way for exactly that reason, which is why you get the tax benefit and I think that is significant. The terms of the employee’s pay structure haven’t changed at all, because it isn’t “pay.” It also shouldn’t affect his bottom line because the expenses that the reimbursement would be reimbursing will no longer be expenses he has to carry. It may not be how he thinks about it, but that’s the reality of the situation. That being said, I definitely agree with Alison though that if he is somehow not being paid for his worth as an employee, that is a separate issue and the OP should ensure that he’s getting paid what he’s worth, especially as a great employee.
Collarbone High* June 25, 2015 at 8:48 pm Thanks to everyone who recognizes this. I had a similar situation once — I got night differential pay, then my schedule was changed and I lost it. The company thought I should be happy, because I was working “normal” 8-5 hours. But I took the job partly because I cannot fall asleep before 2 a.m. and prefer working nights, and partly because the hiring manager had assured me the night differential would add $5,000 a year to my pay. (Without that, it would have been a slight pay cut.) So from my perspective, my quality of life was ruined AND I lost five grand a year.
JHS* June 26, 2015 at 6:54 am That stinks and I’m sorry that happened. However, I think there is a big difference in what happened to you and what is potentially happening to the employee in OP’s situation. In your case, it was an actual loss of differential “pay” which was a clear cut to your compensation. The employee in OP’s situation is receiving a carved out reimbursement for mileage.
PEBCAK* June 25, 2015 at 2:10 pm He may also be able to reduce the insurance rates on his personal car if he is driving it so much less, so there could be saving there.
Treena* June 25, 2015 at 2:17 pm Nope. When I was answering “how many miles to you drive to work, roundtrip?” I always say well, its 5 miles to my office but I use my vehicle for work travel. Every agent in 3 states always says, ok, that’s 5 miles.
Elizabeth West* June 25, 2015 at 2:24 pm Well, if he has to maintain full insurance on an older car in order to use it for the business, he could save money by switching to liability only. It’s not practical to keep full insurance on vehicles past a certain age because you will never get back what you paid in if something happens to them.
Side note* June 25, 2015 at 3:06 pm I think for the OP’s situation this sounds good. But in general… I don’t know. I guess it depends on how much income you can have available, (or proof of income in the case of financing), to front for a replacement if something happens to your car. In my last job, I was making so little and was paid so sporadically that it was actually easier to bear the full coverage cost as an expected insurance bill, rather than an unexpected and much larger bill to replace the car entirely. YMMV
alexa* June 25, 2015 at 4:30 pm Yeah, this actually happened to me. I’d just switched to liability only, and one stinking month later my husband hydroplaned on his way to a job interview (because he’d just been laid off) and totaled the car. Unfortunately we didn’t have the cash laying around for a down payment or another car. I will never again do liability only unless I’m sure we can fund/partially fund another car.
Side note* June 25, 2015 at 5:01 pm Ugh, that’s just horrible. So sorry to hear this happened to you :-(
Keep_Your_Insurance_Liable* June 25, 2015 at 5:07 pm Not to mention having collision coverage also insures your insurer has some skin in the game to defend you if the other party is at fault. I was rear ended in a snow storm and didn’t have collision coverage. Guess who was found 60% at fault? That’s right me. Why? Because it only cost my insurance agency $2,000 to pay for the other persons damages and it would have cost them more to argue it in court. The damage to me and my vehicle exceeded $50,000 despite being an old car because I got injured and had to attend physical therapy. Keep collision! It’s so worth it!
Side note* June 25, 2015 at 5:43 pm Coming from a no-fault state, I never looked at it that way. I was rear-ended years ago and unfortunately, couldn’t do anything with fault. Found out later that you can add the option to a future policy, but I couldn’t afford it. Never realized the intricacies, and sorry to hear you went through all of that. Yikes!
Judy* June 25, 2015 at 2:25 pm Using your car for work travel is much different than using it for 50-80 miles a day to visit clients. I’d certainly be concerned if I were insured for “commuting and personal use” when the majority of the mileage was used for business use. I’d think it would come out when filling out the paperwork with the mileage when you renew, that’s 20k miles a year on top of your personal use.
Helka* June 25, 2015 at 2:55 pm ^ Yeah, this. When you’re answering the question of how you use the car, there should be a separate question for whether you use your vehicle for work — that is what driving to client locations covers. It’s distinct from a daily commute to the office.
Treena* June 25, 2015 at 8:29 pm Well, I don’t visit clients, but I put a solid 500-2,000 miles/month on my car, depending on our seasons. Believe me, I asked, because I didn’t want to get screwed over, and everyone insisted it was the 5 mile commute to the office.
A Bug!* June 25, 2015 at 3:08 pm Although it’s possible, I don’t think it’s a given that there wouldn’t be a change in premiums. It’s not uncommon for an insurer to have different rate classes for pleasure use and commuting use, or based on annual mileage, either of which measure could result in a reduction for the employee.
MsChanandlerBong* June 25, 2015 at 4:31 pm My insurance agent actually told us not to change the number of miles driven to/from work when my husband started working from home. She said the insurance companies then assume that you are a SAHM/SAHD who then drives all over the place, picking up kids from school and running them to soccer practice and such. It would have *raised* our rate instead of reducing it. He might save some money on premiums by reducing his mileage a bit, but it can actually hurt him if he goes from saying he drives 120 miles to/from work each week to saying he doesn’t drive for work at all because he uses a company car.
grasshopper* June 25, 2015 at 2:13 pm It is true that paying for mileage does seem to put extra money in your pocket at first, since the price per kilometer is more than the weekly (gas) or monthly (insurance) cost of having a car. My partner got a new job that pays for mileage and it does make a bump in the paycheque. However, when it comes time for maintenance costs that come up infrequently that is where the extra money gets spent. More driving = more maintenance costs. Having to spend $400 for a new fuel pump pretty much eats up any gains from the mileage payment, but that might not be evident at first.
Treena* June 25, 2015 at 2:19 pm Ye, but it sounds like this employee has an older vehicle, and those repairs are likely to come up whether or not he’s using the vehicle for work. (Still unreasonable to be mad about it, but it is a real loss that can’t be talked down).
Doreen* June 25, 2015 at 2:40 pm A lot of maintainence/repair issues are mileage based, though. Making up numbers, if I need an oil change every 5000 miles and I drive 20k miles for work each year, that’s 4 extra oil changes attributed to the work mileage. If my tires last 40k miles, I’ll need a new set at least every two years due to the work mileage where it msy have been 4 ir 5 years without that mileage.
Laurel Gray* June 25, 2015 at 2:54 pm True, but depending on his car’s age and mileage, there are some milestone repairs that could easily override any additional income he has benefited from in this set up. Replacing a catalytic converter and a new or partial transmission replacement are two that come to mind.
LawBee* June 25, 2015 at 5:01 pm I average 19K miles a year in work travel – lots of 3-5 hour drives from state to state. I bought super expensive tires because the last thing I want is a blowout on the interstate. Blech. I get where the OP’s employee is coming from. It’s really hard not to see these extra checks as part of the budget. But they’re not, and he needs to get past that. In a perfect budget, he’d have been using those to reimburse himself for gas, and then setting the rest aside for future car repairs. (Note: my own budget is far from perfect!)
NickelandDime* June 25, 2015 at 2:15 pm Wow! This is a blessing! I don’t think he’s sat down and done the math. Also, see PEBCAK’s comment about his insurance rates, plus the wear and tear on his own vehicle. If his salary is at market rate, maybe sit down and show him some numbers. I worked at a company that got mad when I asked for current mileage rates. It got ugly. Sometimes people don’t know how good they have it.
Ann Furthermore* June 25, 2015 at 2:17 pm It’s hard to lose money coming in that’s technically not part of your salary, but…it’s not part of your salary. The advice to the OP here is really good. I worked on a consulting project years ago where I was on the road 4 days a week. We got a meal per diem of something like $40 per day, and we got it whether we spent that much or not. It was a long-term assignment, and I had a suite at an extended stay hotel with a kitchen. So every week, I’d go to the grocery store and spend about $40 on food for the whole week, and I got to pocket the rest. It was awesome — that extra money pretty much paid for a vacation to Europe. And when that assignment ended, it felt like I was taking a pay cut. But I wasn’t. In a situation like that, you need to remind yourself that it will eventually come to an end, and it’s better to use the money for something outside your normal living expenses, like paying down a credit card or saving up for something that would normally be outside your regular budget. In the employee’s place, I’d be happy to be able to drive a nice new car that I didn’t have to make payments on, or even pay to put gas in!
Treena* June 25, 2015 at 2:21 pm I was thinking the same thing-why is he mad for getting a new car, essentially? I wonder if he’s permitted to use it for personal reasons. My brother is a regional sales manager, and he can use his company vehicle for personal use within 400 miles of his home office. After that, he lets his manager know and uses his own money for gas.
Bangs not Fringe* June 25, 2015 at 2:47 pm I wondered if he is allowed to use it for personal use as well. With reasonable limits, this could be a good way to make him feel appreciated.
Laurel Gray* June 25, 2015 at 2:50 pm If I was a small business owner, I wouldn’t want the potential liability of giving this perk, and it is definitely there.
NacSacJack* June 25, 2015 at 2:59 pm And remember, in some cases, only the employee is allowed to drive the company car. Would a spouse be allowed to drive it? Maybe, if the owner asks her insurance company, but never anyone else.
Jerry Vandesic* June 25, 2015 at 3:02 pm I was in a similar situation as Ann a few years ago. I was assigned to our office in Japan for six months, and was given a per diem of $157/day (this was in addition to getting a corporate apartment). The assumption was that I would be living my life much like I did in the states, buying all the stuff I usually bought. But I didn’t do that. I didn’t buy much more than food at the grocery story, giving me a major (tax free) windfall. After six months I was able to pay off my student loans in one fell swoop. Besides being a great adventure professionally, I loved the financial benefits of my stay in Japan.
Stephanie* June 25, 2015 at 3:18 pm The Billfold had a great piece a couple of years ago about a guy who moved to Kosovo and Iraq and used the hardship pay to get out of debt. I’ll link in a reply.
Stephanie* June 25, 2015 at 3:18 pm http://thebillfold.com/2012/09/crushing-debt-drove-me-to-kosovo-and-then-to-iraq/
Sandy* June 25, 2015 at 6:08 pm I did something similar. Moved to Afghanistan to pay off my student loans.
Anonsie* June 25, 2015 at 3:51 pm You have just described a dreamlike scenario of amazement and I really want to hear more about the company.
Jerry Vandesic* June 25, 2015 at 4:29 pm I was working for a computer hardware manufacturer. We sold some large scale equipment to a customer near Osaka and as part of the deal they received six months of one of our employees to help them get started using the equipment. I was doing some research with a scientist that they recently hired, so they asked for me. Most of my time was spent continuing our research, but I also gave seminars on how to effectively use the hardware. It was a lot of fun. To be honest I was surprised at the package I received. Going into the conversation I had no expectation that I would receive any sort of per diem. Not only did they pay me $157 per day, they put all my US belongings in storage, they paid for my apartment in Japan (no small feat given the difficulty that foreigners have in getting housing), they paid to ship my belongings back and forth, and even paid for my girlfriend to come over for a visit. They really went above and beyond, and I came away from the experience with a great deal of loyalty to the company.
Anonsie* June 25, 2015 at 5:46 pm Well. I’m jelly. That’s all I can contribute, I now have a large quantity of envy. I have heard of this type of arrangement for organizations within Japan that bring in foreign employees regularly (the gifted apartment plus living expenses, shipping and travel for family members) but I am genuinely surprised that an American company would do it.
Temporarily known as "Heather"* June 26, 2015 at 1:14 am Wow that is a bargain! Talk about living the dream! There have been one or two occasions where my services have been similarly and unexepectedly valued, and boy, it was a rush. I felt like I had made it. Alas, such things are fleeting… at least for me.
Marcela* June 26, 2015 at 12:52 am Something like this happened to us too, when my husband was invited for a month to work with a professor in a small university near Tokyo. They found an apartment for foreign researchers near the university and gave him money to pay for his normal expenses for the month. He was a PhD student then, so we were very short of money, but the money he got from the university was enough, at the end of the month, to pay everything for both of us, including air tickets and travel every single time we could, hotels included. We calculated we only spent 800 euros from our own pocket, in the train flat rate passes.
The IT Manager* June 25, 2015 at 2:23 pm Hmmm … Alison provided a good script, but not much different than what you said already. I agree he’s either failing to understand or just unable to see beyond his lost income. There may be nothing to do here. I can sympathize with his feelings while also thinking he’s not seeing big picture that he’s probably soon have to replace his old car after driving it into the ground for work. The $.56 per mile were for wear and tear and gas. If he was getting more than he needed to do that and using it for something else lucky him, but it also sounds like he wasn’t maintaining a nice, professional looking car either.
CaliCali* June 25, 2015 at 2:29 pm I think there’s another way to look at it — given that he drives a beater and apparently needs the money, per the letter: Few years ago, we had a big hailstorm here that caused a ton of roof damage. Insurance covered the cost of the roof replacement. Thing is, it was close to needing replacement anyways. It ended up being financially beneficial. If the guy’s car is close to needing replacement anyways, he probably isn’t sinking a lot of money into it as is (other than gas and very basic repairs) and if he needed a new car, that reimbursement would likely cover ALL of his car payment. So he’s likely not just seeing it as lost income, which is upsetting in itself, but the loss of ability to leverage his travel into getting himself a new car.
Can't decide on a consistent name* June 25, 2015 at 2:31 pm Where I live if you use your car for work like this you need to insure it that way so you are covered if something happens while driving it for work. If that’s the case where OP lives then he would save on insurance. Of course if OP never insured it properly (if required) then no savings.
Sarah Nicole* June 25, 2015 at 2:34 pm I’m not sure if this would be a popular opinion, but given that he was using this extra money from gas reimbursement as income (even though it’s technically not), could you offer him some other non-monetary benefit in exchange for making the change? I know you shouldn’t have to, but perhaps offering an extra day or two of vacation, or something like that could help retain him and show that you know this is making a difference to him. The only reason I’m sort of leaning toward doing something that might appease him is because of my own experience. I am in the National Guard and we go out for 2 weeks every year for an annual training. One year at the last minute, they decided we had to stay close to home base (and I live very close to it) to save money and it completely cut my per diem to the point of making a lot less. They basically didn’t pay me for meals at all because I was close enough not to stay in the hotel with folks who lived farther away (even though I was working with everyone and had to eat out just like they did). Now, I know that that money is supposed to be for daily meals, but on the low salary I made for those days, it put me in a bind when I was counting on that extra because I usually don’t spend all of my per diem and it makes up for making less during my AT than when I’m at my normal civilian job. All I’m saying is that the change can be stark, and if he’s a great employee, it could be worth offering something that won’t cost you money and may keep him happy, even if he’s not totally in the right about how he would be using the money from fuel reimbursement. But I know this could cause other problems as a manager and company owner, so I wouldn’t blame anyone for not taking this approach.
Bwmn* June 25, 2015 at 3:50 pm I second this. Where I work we’re given transportation costs based on what it costs for us to get from home to work. I’m not sure how this specifically works for people who drive, but for most of us the cost is based on how much it costs us to take the metro to the office. The amount calculated is for back and forth fare, 5 days a week and that’s what you receive including holiday and vacation days or whether you choose to bike/walk to work. I recently moved and was surprised to find that my reimbursement level had changed to a lower rate. My old route included 5 stops and no transfer. My current route is 7 stops with a transfer. Now this is how the metro calculates the fees, so be it – and even though it was ultimately a relatively small drop in my transportation compensation it was irritating and made me alter certain choices I’d been making in that regards. So while it is true that the money was intended for mileage reimbursement – other factors go into that. Maybe he has a relative who gave him gas cards, so he needed even less of the reimbursement for gas? Or perhaps given the amount of gas he’s been buying on a regular basis, his credit card used to buy the gas was giving him other perks that factored into saving even more money? At the end of the day, whether the money was for a company expense or part of his salary – how he ultimately balanced his books was based on that certain amount. And now it will be less. And if the changed amount of money is that significant, I understand the reaction.
Anonsie* June 25, 2015 at 3:54 pm Agreed. While that’s not what the reimbursement is for, realistically he is losing out on income he used to be able to count on. It’s not reasonable for him to insist against a company car, but I absolutely see why he would be miffed at losing that perk even if it was an unintentional one. Some other rewards acknowledging that he’s doing a good job and it’s all appreciated are probably a good idea.
Isben Takes Tea* June 25, 2015 at 9:01 pm I agree. Extra PTO sends the message that the employee is valued and OP understands the loss of a perk while also maintaining the boundary that it WAS a perk and not compensation. (The OP might also get valuable feedback on the employee based on the reaction to the offer.)
First Time Commenting* June 26, 2015 at 9:04 am An idea for a potential perk… OP, think about getting a credit card for the employee to use for all gas purchases – one of those cards that comes with airline miles or some other sort of bonus points. You pay the bills, but let your employee keep the rewards. Costs you nothing, but may help to smooth his ruffled feathers.
IWorkInSockFeet* June 25, 2015 at 2:35 pm In my previous career, I had a job that the mileage was one of the better perks. My territory covered a number of clients throughout California, including many in smaller towns. I would take at least one 1,200 mile road trip one week a month. I would rent a car on my own on Sunday night; pay about 30/day plus gas out of my own pocket and let the company reimburse me.70/mile. $300 out of pocket translated into about $840 in reimbursements.
Mimi* June 25, 2015 at 2:35 pm This: “He considers the mileage reimbursement part of his compensation and thinks his pay is being cut.” It is not part of his salary. It never was, and insisting that it is doesn’t make it so. Period. End of discussion. I wouldn’t discuss it any further than that. It’s a “loss” in his eyes only because he got used to something he wasn’t entitled to. I wouldn’t even address whether his salary is market rate or not, because that has nothing to do with the mileage reimbursement, and as he is already being unreasonable he may take that as opening a discussion where he thinks he can get his way if he just talks/debates/whines for long enough. I’d bet that this employee has other entitlement issues as well.
nk* June 25, 2015 at 2:44 pm I think that’s a little harsh. OP said this guy is otherwise a great employee. A lot of people don’t actually understand this stuff that well – they see money in their pocket as just that, without looking at the bigger picture. When people – especially those not highly paid – get a certain amount of money in their paychecks, they grow accustomed to it, whether they “should” or not. I agree that the way he’s been looking at it is incorrect, but frankly I think it’s probably not an uncommon mindset, and I don’t think it’s necessarily indicative of overall entitlement issues.
LawBee* June 25, 2015 at 5:06 pm +1 Seriously, it is really hard not to see a constant stream of reimbursement checks as not part of your compensation. If he’s an otherwise great employee, and we have no reason to assume he isn’t since the OP described him as such, then yeah – I totally understand his reaction. It’s not correct, and the reimbursement isn’t compensation, etc etc, but assuming he’s got entitlement issues is a bit much.
Marcela* June 26, 2015 at 1:02 am It’s not really that people don’t understand. For example, as a PhD student, my husband used to get a fixed amount of money to pay for food in conferences. It was more than he needed and he used to look for the cheapest option to eat, just to save those extra euros for our daily expenses. Once that extra money helped us to pay the rent. So you can imagine we were not happy when the rules changed so he would be reimbursed exactly what he spent. We were not dishonest, entitled, unreasonable or spendthrift. We were just people with low salaries.
Laurel Gray* June 25, 2015 at 2:45 pm After reading your comment a part of me wonders if the employee’s push back about the new company car possibly has to do with him being “creative” and “generously” estimating mileage in his expense reimbursements. He wouldn’t be the first.
A Bug!* June 25, 2015 at 3:34 pm We just had that letter the other week or so about an entire office full of people (minus one) who regularly took long lunches even though they knew there was plenty of easily-accessible proof in the form of security logs, because they just didn’t expect management to check them. (That is to say, “They have no reason not to trust me… suckers!”)
Ask a Manager* Post authorJune 25, 2015 at 4:51 pm I think it was this from last week’s open thread: https://www.askamanager.org/2015/06/open-thread-june-19-2015.html#comment-782081
Sparkly Librarian* June 25, 2015 at 5:05 pm It was in the open thread, so easily overlooked. https://www.askamanager.org/2015/06/open-thread-june-19-2015.html#comment-782081
A Bug!* June 25, 2015 at 6:11 pm Ah, thank you. I rarely read the open threads since they’re pretty daunting by the time I get to them, so I had assumed it had been in a post! My apologies, and thanks to both of you for the links.
Anon for this* June 27, 2015 at 10:54 pm +1 – I know it’s a bit harsh, but I agree with this. He shouldn’t get his way and get additional perks when he’s already acted unprofessionally. Sounds like this person needs a reality check and to not be appeased and rewarded for bad behavior – reality check in a professional way, of course.
Laurel Gray* June 25, 2015 at 2:40 pm I don’t know the specifics of OP’s business but I am assuming she’s hired people who are as passionate about her business and vision and look forward to it growing and the opportunity it will create. I think that there is a selfishness in this employee in thinking that he is losing income vs seeing the opportunity created in the business being profitable to now afford him a company car (and pay for the gas!). The realistic way the employee should have been looking at these expense reimbursements was as a temporary bonus, not as regular salary. When friends of mine who work for MajorGovernmentDefenseContractor take assignments overseas, food, housing & transportation is paid for. Many are able to double and even triple their savings in 1-2 years upon returning to the states. They know the assignment will not last forever and they make the most of it financially in the meantime.
Student* June 25, 2015 at 3:27 pm …and some people in that position try to maintain two households while on an overseas assignment like this. Those folks end up with much less take-home pay or breaking even on take-home pay after factoring in the extra “overseas” pay.
Laurel Gray* June 25, 2015 at 3:39 pm What do you mean when you say maintain two households? The living expenses overseas are 100% covered. They are still responsible for their household and its expenses in the states.
Temporarily known as "Heather"* June 26, 2015 at 4:37 am I am guessing that Student is refering to overseas job that are not as lucrative as the one you mentioned. When I worked overseas, I had my salary and my expenses there but I also had to help support my husband and household back in the US; this was not a job where he could come with me. Though I was making more than I could domestically, we would have been able to sock away far more if we hadn’t been paying double rent.
Sarah Nicole* June 25, 2015 at 4:35 pm Yeah, but we all work for a paycheck and to make the living we want. Just because he’s pushing back on this doesn’t mean he isn’t passionate about the job, or that he isn’t happy that the business has grown. He is just addressing the fact that this is an inconvenience for him and his budget.
Laurel Gray* June 25, 2015 at 4:38 pm Yes, but an “inconvenience for him and his budget” is not a strong argument here because it would mean that he factored the “extra” he was making from expense reimbursements into his budget. Now if he does not believe he is being paid a fair wage expenses aside, he should definitely discuss it with the OP, but if he’s factored this $1k into his lifestyle, this is not really the OP’s problem.
Sarah Nicole* June 25, 2015 at 4:57 pm Yes, it’s not her (or his?) problem. But that doesn’t stop the OP from being able to approach it in a way that considers that rightly or wrongly, it is a big change for the employee. And perhaps there is some kind way around this, like giving an extra benefit like more paid vacation or something that wouldn’t cost the OP money. I think it’s fine to say it’s not the boss’s problem, but it’s nice to be able to acknowledge that this is a big change for the employee and try to help smooth the transition.
TootsNYC* June 25, 2015 at 10:09 pm “The realistic way the employee should have been looking at these expense reimbursements was as a temporary bonus, not as regular salary.” That might actually be something the OP could say, as a way to express both understanding for the difficulty that the change in cash flow will create, and to point out that this isn’t part of the normal compensation, and the business is entitled to stop “flowing” all that cash out. The guy is probably ignoring any of the “costs” that he’s incurring, just sort of mentally rolling them in with his regular household expenses (especially “wear and tear,” but even maybe gas; he buys his business and personal gas all at once, and doesn’t really correlate it, dollar for dollar with the proper “accounting category”). So getting him to look at it as “a temporary perk, not normal compensation” might help.
Kara* June 25, 2015 at 2:43 pm Kind of off-topic, but just so the OP knows, the federal mileage reimbursement rate for 2015 is 57.5 cents per mile, not 56. That was 2014’s rate.
Emily, admin extraordinaire* June 25, 2015 at 2:48 pm That’s the amount the IRS allows you to claim. It’s up to the employer how much they actually give you. They can do less, they can do none, they can do more. My employer (a state government entity) gives you $.32/mile, and it’s perfectly legal for them to do so.
Mallory Janis Ian* June 25, 2015 at 3:21 pm My state university uses a rate of $0.46/mile, which is the maximum allowed by our state government.
TK* June 25, 2015 at 3:32 pm I work for a public university, and wand our reimbursement rate is $0.37. My mom works for a different, larger, public university in the same state (and travels regularly for work, much more than I do), and has always gotten the IRS standard. I was a little shocked when I started– I just assumed it would be the same, being the same state. So there really is no consistency on this.
Anonsie* June 25, 2015 at 3:58 pm Yes, but a lot of companies intentionally match the IRS rate, so it may be in the LW’s interest to know there was an increase if they wanted to match it as part of their policy.
Kara* June 26, 2015 at 1:10 pm This. That’s where I was going. Since the rate the OP listed matched last year’s rate, I was assuming they were trying to keep up with the federal rate. If not, that’s their discretion.
ConstructionHR* June 25, 2015 at 6:56 pm Yeah, and you can take the difference off your taxes at the end of the year (anything above the 2% AGI threshold)
Stephanie* June 25, 2015 at 2:44 pm I remember in college (in Houston) I opted to drive to Dallas for an interview (I had family there and could stay with them) because I was like “Oh man, they’ll give me $200 just for driving versus nothing for flying!” which was a lot to a broke college student. I failed to understand wear-and-tear to the vehicle (and the boringness and exhaustion of that stretch between Houston and Dallas on that compressed of of time frame).
Temporarily known as "Heather"* June 26, 2015 at 5:22 am “I failed to understand wear-and-tear to the vehicle… ” In reference to the choices of Stephanie of the Day, I think it is possible the old saying: “a Bird in the hand is worth two in the bush” may apply. Who is to say that that wear and tear even would have caught up with you? I don’t know what happened with your vehicle (or the end to this story), but I’d argue that sometimes a person can do better if they focus on coming out ahead in the short term. If your car didn’t break down on the way, and you wound up selling it before having to spill that much and more into extensive maintenance, you may have actually come out ahead. Yup, I am pretty sure I would have risen to your defense had you come under question for this. Even if you just needed the extra windfall at a time when money was scarce, it still may have been the right choice. Sometimes it doesn’t matter that you will one day be a billionaire. Not when you are starving now. Of course this is all hinges on whether or we can ignore the ‘boring scenery’ aspect of your story. Sometimes you just can’t do it.
Ad Astra* June 25, 2015 at 2:44 pm I would much prefer a company car over driving my own car for business, but then all my employers have been stingy with the reimbursement — more like $.32/mile, depending on how gas prices fluctuated. And my car got exceptionally bad gas mileage.
BRR* June 25, 2015 at 2:46 pm You’re doing the right thing and he’s being unreasonable. Really it feels like good money but that’s a ton of wear and tear on a car. In the long run he doesn’t come out a winner. Side note, what industry makes you pay for your own gas (just out of curiosity)?
Mallory Janis Ian* June 25, 2015 at 3:27 pm I’ve never heard of employees paying for their own gas before, so that’s a new one on me (but then again, my experience with gas reimbursement is limited to the two employers I’ve worked for in the past ten years). At the state university, employees could either submit gas receipts or claim mileage (but never both); at the firm with a company vehicle, they invoiced mileage to the client at the federal rate, and reimbursed the employee for gas receipts only.
Betty (the other Betty)* June 25, 2015 at 3:33 pm “Side note, what industry makes you pay for your own gas (just out of curiosity)?” Restaurant delivery (like pizza or subs) and courier, for two examples. My husband has done both in the past. Use your own car, no reimbursement whatsoever. (Well, he might have gotten a small cut (like 25¢) of the “delivery charge” from the restaurants.) For both, he was able to take the IRS mileage deduction on our taxes, which was the only thing that made either job feasible. It still seems strange to me that businesses can pass the cost of their driver’s vehicles on to the taxpayers.
Ad Astra* June 25, 2015 at 3:53 pm And many (maybe even most? I don’t know) people who aren’t getting reimbursed for their mileage are not in a position to itemize deductions, so whatever the difference between what the company pays and what the IRS lets you claim is just lost.
Judy* June 25, 2015 at 3:54 pm I believe the question was about paying for your own gas when you have a company car. It’s not something I’ve seen in my experience. Either you don’t get reimbursed for using your own car, you get reimbursed for using your own car by mileage, or you get a company car that you expense the gas and any other maintenance.
John Doe* June 25, 2015 at 3:00 pm Its mentioned above that the employee “relies on” this extra money $1000/month is probably no small amount to this person. While its true that it technically was never salary, the truth on the ground is that last month the employee was able to afford rent, food, and medicine. This month they have to pick to of the three. Its not like they can just go to their landlord and say “Funny thing happened, the money I’ve been using to pay for rent technically was reimbursement for mileage in excess of what I needed for car repairs, so instead of $1200 /month, lets make my new rent $500/month. The employee took the job and did the math “I get XX in salary plus YY in mileage, I need ZZ to maintain the car, which leaves me with XX+YY-ZZ, compare that to my expenses, looks like a job I should take”. Now the math is very different and it might not make sense for them anymore. They literally may not be able to afford to work for the XX in salary only. I’m not saying that the writer should avoid going to company cars if thats what makes the most sense for the business, but they need to understand that under the new reality, this job may no longer make sense for this employee at this rate. If the employee is really good and they want to keep them, that probably means making up for their budget shortfall in another way, if not it means finding a replacement. They also will probably now find out the difference in quality between the people in the labor market willing to do this work for XX+YY+ZZ and those willing to do it for XX. They may have unwittingly found out what the ‘luxury model’ employee in this role is like and will have to have their expectations adjusted to the $XX Model
Laurel Gray* June 25, 2015 at 3:13 pm To be fair to the OP, just because the employee “relies” on the money does not mean that he is being paid a low wage, he may have just become accustomed to this additional money in his budget. “While its true that it technically was never salary, the truth on the ground is that last month the employee was able to afford rent, food, and medicine. This month they have to pick [two] of the three.” This statement and the rest of your comment is speculation. No where in the OP’s letter did they say that their employee is now struggling without the mileage reimbursement check. Would the employee have been along for the ride as this small business grows if they were not being paid a fair living wage? The job obviously made sense before they ever received their first reimbursement check.
John Doe* June 25, 2015 at 3:36 pm I agree that my comment is speculation, I should have marked it as such that I am speculating on what might be motivating the employee to take this approach. Everyone else seems to be speculating the opposite way (that the employee is just being childish) , and I wanted to counterbalance. I think they really may have backed themselves into this corner and understanding that would be necessary to unraveling the situation. $1000/month is a lot of money and OP does mention that the employee is “relying” on it, so its at least possible that they have come to depend on this non salary to make ends meet.
tango* June 25, 2015 at 5:01 pm Remember the letter from a few weeks ago about the guy who had an unemployed girlfriend he supported and therefore it was one of the reasons he used the company credit card for personal reasons racking up like $20 grand in debt? Just because you rely on something does not make it right. OR without it, being homeless would be the result. There seems so often to be the assumption here that people who are financially struggling are in that situation because their employer pays them sub-par wages verses it possibly being caused by bad personal choices or bad luck.
Laurel Gray* June 25, 2015 at 5:08 pm The letter about the 20k debt definitely comes to mind when I read this letter and the comments. I totally agree about the often assumption that financial struggle comes from low wages. I have never heard of people depending on the perks of a job for subsistence. I don’t think anyone would advise a person to take a low ball salary offer from an employer because they offer free lunch every day.
afiendishthingy* June 25, 2015 at 10:34 pm I think this is a totally different situation. It’s not the employer’s fault and it sounds like the company car is the right business decision, but other than being unreasonable about the company’s obligation to him I don’t see that this employee has made bad decisions. $1000/month is a lot of money and if it’s been in the employee’s paychecks this long, of course he’s relying on it. If you have a fuel efficient, reliable car, mileage reimbursements can be pretty profitable for the employee. When you don’t make much money you’re not “backing yourself into a corner” by stretching that out, you’re just being smart. I do know the reimbursement is not intended as compensation and the employee isn’t entitled to it, but I’m uncomfortable with the idea that this guy needs money because he makes bad choices. My vote is for a company credit card with lots of reward points for gas, and maybe looking at a raise IF it makes sense to do so/this is a really valuable employee who you’re committed to retaining.
Temporarily known as "Heather"* June 26, 2015 at 7:53 am “The job obviously made sense before they ever received their first reimbursement check.” I would argue/agree that many of the contributions on this forum could be viewed as (or based on) speculation, including the above quoted statement. I had a job once where the difference between my regular salary and my regular salary + the per diem was such that the job would probably not have been worth keeping, had the per diem up and vanished. This, and the few other “side benefits” were considered a decent chunk of the total compensation package (whether or not it was supposed to be viewed that way). I know many people who would disagree that the job made sense without the additional bonuses; most any “talk” of eliminating them was hushed, lest the Unions stood up and took notice. Obviously this is a different situation, where the substitution is in theory equal to what it is replacing. Still, I can imagine the disruption this could cause someone needing to make the necessary transition.
Dana* June 25, 2015 at 3:15 pm I don’t know, same as how you can’t go to your landlord when your health insurance rates change and more of your paycheck is taken up with that, I think you shouldn’t be relying on a Christmas bonus or mileage reimbursement to make rent. I’m kind of doubting that the job was pitched as a salary plus $1,000 a month to do what you want with, so more than likely OP’s employee took the job based on the real salary.
Mimi* June 25, 2015 at 3:17 pm Well we don’t know if he was told when he was hired that he’d be able to get *$1000 a month* guaranteed for mileage reimbursement. That’s a lot of money. He may have just been told he’d be reimbursed, then discovered the reimbursement turned out to be a lot of $$, and he got used to it and thought of it as salary even though it isn’t.
John Doe* June 25, 2015 at 3:32 pm I’m sure you are correct and he was never promised $1000 reimbursment. He just looked at the facts, did the math and made the rational choices. Now the math has changed and the rational choice has also changed. I also agree with you that “he got used to” the extra money, but that doesn’t necessarily mean “he got used to splurging on gold plated monocles every week. “Life Style” creep is a real thing, and its very likely that if this has gone on for any period of time, its not as easy for him as spending $1000 less on luxuries each month. At least some of that non salary money has probably been going to occurring bills. This could be a bigger problem than just “the employee needs to suck it up”, and OP needs to be prepared to lose the employee in order to enact this policy. Again, I’m not saying OP should cave and give in to the employee, and you can certainly make the argument that it was dumb of the employee to rely on money that could stop coming in at any point (Though really isn’t this the case with any income, even salary can be cut going forward).
moss* June 25, 2015 at 3:40 pm Lifestyle creep? Might be a legitimate thing but the employee drives an old car that is not presentable to clients. So unless he took out a mortgage on that extra grand (and it wouldn’t show up on his financials so wouldn’t help him qualify) I don’t think that’s a probable case.
Laurel Gray* June 25, 2015 at 3:51 pm I agree with you regarding lifestyle creep but honestly, this is not the OP’s problem, it is the employee’s. The OP has been doing something right if their business has been able to grow and see a profit where she can now have a company car. Who knows, maybe this time next year the OP will be writing to Allison for help with another issue and turned 2 of the part time workers into full time ones. While I do believe that a business should look out for its employees, they still need to look out for themselves, especially a small business with limited resources.
Anonsie* June 25, 2015 at 4:10 pm I agree that it’s not the owner’s problem to solve, but it would still be foolish not to consider the effects and reaction of your employee even if they were using it to buy crates of gold plated monocles.
Laurel Gray* June 25, 2015 at 4:36 pm You are right and I think the OP is very seriously considering the employee’s reaction which prompted them to write to AAM.
Anonsie* June 25, 2015 at 5:41 pm Right. But a lot of the comments are along the lines of “this is the employee’s issue and forget him” which I don’t think is the tack the LW wants to take.
LawBee* June 25, 2015 at 5:13 pm or irrational choices, as the case may be. . . that happens a lot as well. It could be (and I’m honestly sympathetic towards the employee as a fellow recipient of reimbursement checks that can be a lot of extra money) that this guy was spending this extra $1K on other things that aren’t food/rent/clothing – like a high priced hobby, or sending his kids to a more expensive school than otherwise, or keeping up with the Joneses in ways other than his car, or vacations, or whatever. We don’t know. But at the end of the day, he was factoring into his compensation money that wasn’t. Where I do think the OP may have misstepped is if the OP didn’t explain the difference between compensation and reimbursement at the outset. “Remember your reimbursement amount isn’t guaranteed, and it’s not part of your compensation, and look at that, I’ve included that info in your offer letter.” EE maybe wouldn’t have remembered it, but at least he would have been told.
NacSacJack* June 25, 2015 at 3:02 pm Is it possible he might have to pay for parking a second vehicle at home? Or he might not have space for a second vehicle at home.
NacSacJack* June 25, 2015 at 3:10 pm I would also like to point out the employee is representing the company when he is driving around. The owner most likely would like him to represent the company in the most positive light possible. How does the owner feel about being represented by a beater versus a brand new car she paid for out of her company’s profits?
Laurel Gray* June 25, 2015 at 3:14 pm Good point. I pictured this new shiny Prius with the company logo, address, phone number and web address somewhere on the side of it.
Stephanie* June 25, 2015 at 3:24 pm Yeah, I imagine OP wouldn’t want his business represented by someone driving around in ’77 Vega with a passenger door that’s a different color than the rest of the car. I thought that was some of the employee vs contractor argument with Uber—that the drivers weren’t exactly contractors since Uber had requirements on what they could drive.
loquaciousaych* June 26, 2015 at 5:40 am There’s a lot of comments about a “beater” that may not be true. My husband drives an ’05 Ford Focus that is totally paid off, but it’s really nice looking and could pass for a low end new car. Just because the car is older doesn’t mean it’s junky.
dahllaz* June 26, 2015 at 8:10 am “(he drives an old car that no longer looks good for company use)” I think this bit from the OP is why there are comments about the employee’s car being a beater.
Insurance Loophole* June 25, 2015 at 3:19 pm At my old job, everyone drove their own vehicles to trainings and would get mileage reimbursement. They complained about the wear and tear on their cars but loved the mileage. We got a vehicle donated to our organization and everyone raved about it……until they realized the wouldn’t get mileage checks anymore since it wasn’t their personal vehicle. All the sudden people hated the new vehicle and would try to find any excuse to use their own vehicle. It was ridiculous. Even to the point that one person intentionally got a speeding ticket so she wouldn’t be insurable on the company vehicle and would HAVE to drive her own car. Worse part the director had no backbone and let her do it. So glad I’m not there anymore.
Student* June 25, 2015 at 3:21 pm Does your employee realize that he’s been lucky to be able to pocket the money so far? That “extra” money is intended to offset all the extra maintenance costs. Plus, he’s lucky that gas costs have been relatively low for a while – if they return to normal he’d be seeing a lot less pocket money. That’s an extra 20k miles per year on his car. If it’s a lousy car to begin with, it is going to need major maintenance from all that use soon – it’s only good luck that he’s gone without a major breakdown so far. Expenses like major parts replacement can easily cost thousands of dollars. If he gets in accidents, it could also mean thousands of dollars in repairs or in increased insurance premiums from having a bad driving record. If he’s been forgoing major regular maintenance, then he’ll eventually need to buy a replacement car, which is going to eat up all his “extra” money.
Sarah* June 25, 2015 at 3:22 pm If this is your first time providing a company car to an employee, you should consult an accountant about possible tax reporting requirements. I do not know how things work where you are, but in my country you could be required to include a calculated amount related to the company car (personal use + availability) as a taxable benefit from employment on the employee’s annual tax slip.
Jeanne* June 25, 2015 at 3:35 pm I’m wondering what the employee thought would happen when his old car dies. He has to buy another car. Even with a used car, he could have a car payment. His mileage certainly isn’t going to cover car payments. Yet using his own car all the time hastens its death. I think he is using some very short term thinking with his mileage money. I would tell him what you said, that the savings are real and important to the company. Tell him you know change is tough but this is something you all need to try. I would also set a date for the new car. Give him 2 or 3 weeks until the switch. He can work on his budget. After that the money issue is his problem not yours. He did take the job with the original salary. You are doing nothing wrong.
mskyle* June 25, 2015 at 3:40 pm At $1000 a month, I would hope that his mileage *would* cover car payments, unless he’s expected to drive a very fancy (and inefficient) car indeed! Also, he could already be banking a portion of the mileage payment for his next car. Not everyone buys cars on credit.
LawBee* June 25, 2015 at 5:15 pm It would cover my $400/mo payment with room to spare! I think I want your car buying budget, haha.
Jeanne* June 25, 2015 at 5:41 pm Mileage is for gas and maintanance. Mileage only pays for your car payment if you count gas and repairs as separate expenses. You’re treating mileage as income just like the employee. It is not. You need to get oil changes and tire rotation. You need to save for tires, brakes, hoses, etc. Your car is depreciating so much faster than it would normally compared to how fast you’re paying the loan. This is why this guy is mad. He hasn’t done the numbers. He doesn’t see what it’s costing him to use his own car, only that he is “earning” more.
mskyle* June 25, 2015 at 6:38 pm Mileage also covers depreciation, which is a large part of what a car payment pays for. It is very likely that this guy *has* done the numbers and knows that there is no way his business use of his car costs him $1000 a month.
mskyle* June 25, 2015 at 3:39 pm I’m a lot more sympathetic to this guy that other people. Assuming he still needs to keep his own car (for non-business use), this guy is going to be getting like $500 or $600 less in take-home income per month (assuming his car was getting OK gas mileage and needing moderately frequent repairs), and all he gets in return is a nicer car to drive around in… big freaking whoop. If my income dropped by $600 a month, I would be pretty pissed. Especially when it’s only saving the company $350 a month! Although if it’s really important for him to be driving a nicer car on company business, that’s kind of a separate issue.
moss* June 25, 2015 at 3:43 pm If my salary dropped by $600 I would be pissed but this is not his salary. And how is this “only” $350 a month? That’s can be a lot for a small business.
mskyle* June 25, 2015 at 6:40 pm Yeah, but they’re saving $350 and it’s costing him (let’s say) $600. Overall the cost of business has gone UP by $150 a month. I wasn’t saying $350 is insignificant, I was saying it’s less than $600.
Laurel Gray* June 25, 2015 at 3:55 pm Expense reimbursement checks are not income and honestly should not be treated as such. No one should go signing up for any type of debt or service factoring in expense reimbursement checks. Company policies change all the time. Maybe people are seeing this as an issue because this is a small business. Many big businesses lease in fleets and issue company cars for the very reason the OP did.
JB (not in Houston)* June 25, 2015 at 4:19 pm yes, exactly. This employee is understandably not happy, but he has no right to be angry. He has not had something taken away from him that he was promised or that he is entitled to.
Anonsie* June 25, 2015 at 4:06 pm I agree. I think the fact that he’s not necessarily entitled to it and the purpose was not compensation and etc. is really irrelevant to the fact that, practically, what is happening is that he is losing money he used to be able to expect. There was an arrangement that got him some extra cash, now that arrangement is going away. Even when that situation is totally reasonable, as I think it is here, losing income for any reason still sucks. That doesn’t mean they shouldn’t switch him to the company car or that he has any room to push back on that (since the switch is a good idea for a lot of reasons), but the owner here should be sympathetic that they are essentially removing an unintentional perk. I think it would be wise to consider replacing it with something else, I like the couple extra vacation days suggestion above.
JB (not in Houston)* June 25, 2015 at 6:43 pm But he couldn’t reasonably “expect” it. He could only hope for it. Since it wasn’t his actual salary, it could change at any time. What if she’d decided to switch his duties so that he wasn’t driving nearly as much? What if she started making two employees go together, so he’d have to alternate driving with someone else? I’m sympathetic to him, I’d hate to lose money that I had regularly been getting. But you can’t expect it. If you start counting on something that you haven’t been promised, you’re setting yourself up for unpleasantness later on.
Anonsie* June 25, 2015 at 9:22 pm I mean, I feel like this is an overly punitive interpretation. You can reasonably expect things while still knowing they can change. You can also let your company know when a change is going to mess with you, or just decide that a change makes a job not worth it for you. None of that is out of line. Here’s an example: I have a lot of doctor’s appointments. I expect to come in every day at a regular start time because even though my schedule is overall meant to flex, it usually doesn’t. So I schedule my appointments for before I’d normally start. While I don’t expect I will never have to reschedule an appointment, I can expect the time will be free with enough regularity that I believe it is quite reasonable to schedule appointments for the mornings. Further, if they made a rule change where I always had to be available every morning and that meant I would have to start taking chunks of PTO for appointments, I would hope they would be kind enough to help me work around the problem a little bit, like with coverage so I can at least get away during the day. Partially because this adds stress and partially because it would eat up my PTO quickly, I would not be happy about it and I don’t think the fact that it was possible to happen makes that less reasonable. The fact that this is common in a lot of jobs doesn’t negate the fact that we’d very consistently had a better arrangement before. I’d let them know this was going to be an issue, and if they brushed it off I would probably just get another job. I don’t think that’s a crazy overreaction.
BRR* June 25, 2015 at 4:29 pm I’m wondering if he calculated this when he started or it just sort of happened. I totally understand the concept of “Hey this less money” and that sucks. There was an article on cracked about things we think we’re entitled to for no reason (like getting an extra chicken nugget for free and mad when that doesn’t happen) and this reminds me of that.
Laurel Gray* June 25, 2015 at 4:34 pm I am making an assumption here – I think the expense reimbursements increased as the business and clientele increased. I do think the employee’s reasoning and push back on this partially falls under entitlement. I think a part of it is just not understanding reimbursements/expenses from the business’ point of view, similar to the OP that racked up 20k on the company card a few weeks back.
Anon for this* June 27, 2015 at 11:02 pm You’re making this personal. The business is entirely in their right to have a company car, especially one that is professional and presentable! So, I disagree with you’re opinion, respectively.
Laurel Gray* June 25, 2015 at 4:05 pm When you click the first link under “You May Also Like” it is the letter about reimbursing mileage for the receptionist who worked 32 hours a week @ minimum wage and the reimbursement was .15 a mile. The boss’ argument was that she was on the clock so didn’t need to be reimbursed. Whoa!
Esperanza* June 25, 2015 at 4:15 pm Honestly, I sympathize with the employee. His income just unexpectedly dropped by several hundred dollars per month. Technically, the business owner is correct that this is not a “pay cut” — but it’s still a change that will reduce his income by $1000 per month. That’s a big deal, and I don’t get the sense that he was making a very big salary in the first place. Most people would be in trouble if their income unexpectedly dropped by $12,000 annually, regardless of where that money was coming from. I get all of the technicalities, but the whole reason this change benefits the business is that you found a way to pay him significantly less. And that sucks for him. It just does. You have every right to make this change, but personally I would offer him a raise in acknowledgement of how this negatively affects him.
Laurel Gray* June 25, 2015 at 4:30 pm You are making some assumptions here. We do not know what the employee’s salary is. We do not know if they are being paid significantly less. They are a service oriented business which means the employee spends most of their time out in the field and on the road to get to clients. The employee agreed to their salary when they took the position. The business grew which means his mileage grew and his checks grew. This is not income, there is no $12k pay cut going on here – the perk, pocketing a large expense reimbursement because he drives an old beater car with low maintenance – has gone away since he now has the company car. Yeah, it sucks to lose the perk, but I do not think we should be tying this perk to income/salary. Many start ups offer free breakfasts and/or lunches. I don’t think people are willing to take a low ball offer in the salary negotiation stage only to hear “but we give you free food!” And I don’t think a raise is the answer simply because he no longer gets to benefit from large expense reimbursements. How is this negatively affecting him? If anything, couldn’t the OP assume that he was able to build a sizable savings or nest egg with this extra income that was not part of the salary package the same way some are assuming he needs this additional money to make ends meet?
Ashley the Nonprofit Exec* June 25, 2015 at 4:34 pm I see what you mean, but you can’t account for the $12,000 decrease in income without accounting for the decrease in expenses. It may be hard to exactly calculate oil changes, new tires, and repairs, but you can account for the cost of gas. And that is significant with this amount of mileage.
mskyle* June 25, 2015 at 7:05 pm 1700 miles at 25mpg with gas at $2.50 is $170 a month… the operating costs are significant but it’s entirely possible that he was coming out many hundreds of dollars ahead. To me it just feels like shifting costs onto the employee.
Isben Takes Tea* June 25, 2015 at 8:55 pm I’m not sure I follow your conclusion about shifting costs; as far as the company is concerned, they are reducing costs across the board: the company’s car cost was $1000/month, now it’s $700/month, and the employee is no longer responsible for any driving/wear-and-tear costs associated with the company. The employee is not seeing any increase in cost, what they’re seeing is a decrease in perk, which, while disappointing for anyone, is absolutely reasonable from a fair business perspective. (Also, just for the numbers, the company could be operating in a location with much higher has prices/urban parking fees. For example, in my area, gas is rarely below $3.50/gallon.)
mskyle* June 26, 2015 at 9:39 am Yeah, I picked a low-side mpg and a low-side price per gallon to make the math easier. If gas is $3.50 a gallon and his car gets 35mpg it’s the same thing (I put gas in my car maybe once a month so I have only the vaguest idea how much it costs!). I thinking I’m beating a dead horse and very much not preaching to the choir here, but this is sort of the math I’m thinking of: Actual cost of gas/maintenance/additional insurance/depreciation/etc. when the employee uses his car – we don’t actually know this number but if he drives a small, old, reliable car there’s no reason it needs to be over $500 a month. Cost to employee: -$500; cost to company: $1000 Actual cost when the employee uses the company car: ~$650 a month ($350 less than $1000) Cost to employee: $0; cost to company: $650
Mimi* June 25, 2015 at 5:07 pm I wouldn’t offer him a raise – that would just reinforce the idea that the extra $$ was something he WAS entitled to, and he wasn’t.
Esperanza* June 25, 2015 at 5:43 pm It would be an acknowledgement that she’s making a change that is going to result in him making $12,000 less than he made last year. Entitled or not, his income is going to drop significantly, and that would be demoralizing to anyone.
Laurel Gray* June 25, 2015 at 9:10 pm But the reimbursement money he has been receiving is NOT income. He isn’t being taxed on it. It has been a covered business expense that had an added perk that unfortunately has come to an end. Giving him a raise would be acknowledging that this perk was indeed salary and would be playing to the entitlement this employee has regarding this perk.
Esperanza* June 26, 2015 at 11:31 am I fully understand that it’s not “salary” or “taxable income.” So let’s call it “money.” That $12,000 per year is real money that was going into his bank account — money that he spends on rent, food, and bills just like the money he earns from his salary. This change is going to result in him having $12,000 less money next year — or, generously accounting for his expenses, let’s say $6000 less money. This is very different from taking away free food or some other “perk.” With a complete and full understanding of how this was not his salary, I think the human response here should be to understand that the owner is making a change that is going to decrease his total money significantly… and that really sucks for him. It’s not entitlement to be unhappy about a sudden reduction in the money you’re getting from work, especially when it’s $1000 per month.
Tinker* June 26, 2015 at 12:04 pm I think the “avoid playing to the entitlement” thing is the wrong framing for this situation, although it certainly seems to be common. The employee had a certain amount of money coming in, probably a certain amount over the operating expenses of the car (and rental car companies don’t rent out at cost, after all), and now they don’t anymore. Disappointment in this state of affairs is a natural reaction, regardless of how the money is technically classified. While it’s certainly within the employer’s rights to frame the matter as a power struggle that they are determined to win, to not bend in any way, to argue that the employee is not allowed to be dissatisfied with the fact that they previously had more money and now have less, and even to assert that the employee’s reaction constitutes a character flaw, I don’t see how that contributes to the stated goal of the OP: that they want to RETAIN this person, presumably as a satisfied employee. Unless the guy is not likely to have other options, in which case it really doesn’t matter what strategy to employ (Why not actually cut his salary in that case? He’s not entitled to the same rate of pay going forward either, after all, and it’s important to make sure his face is thoroughly rubbed in all the things he’s not entitled to), selecting an adversarial framing of the situation is unlikely to produce the desired result.
Chriama* June 25, 2015 at 6:14 pm The thing is, reimbursements aren’t taxed. Increasing this employees salary by 12k per year could easily cost the OP double that — increased salary means increased employer’s share of taxes as well as unemployment premiums. So now we have to ask — is this position actually worth that much money? “The whole reason this change benefits the business is that you found a way to pay him significantly less.” This is not true. They didn’t find a way to pay *him* slightly less, they found a way to pay less money in transportation expenses. It has nothing to do with his value as an employee. That’s why it’s unreasonable for him to act this way — not because it doesn’t suck to lose out on that money, but because that money on the business’s income statement falls under transportation, not employee expenses. The bottom line is that this isn’t about him, but he’s acting as if it is.
Hannah* June 26, 2015 at 7:30 am I agree. I recently lost a benefit that was resulting in extra money in every pay check. Salary or not, it all goes to the same bank account and the benefit helped subsidize what I think of as too low of a salary. I don’t need that money to eat or pay rent but… It’s money that I used to get that now I just won’t get for doing the same job. How am I supposed to just be fine with that? If my management hadn’t acknowledged this loss by increasing other benefits, it would have been a serious slap in the face. I think it’s disrespectful to play dumb and pretend that because it’s not technically their salary this employee should have no problem with what amounts to a pay decrease.
Windchime* June 26, 2015 at 10:39 am This is my thought as well. Just because it’s not technically “salary”, it’s still real dollars that he used to have in his hand that he will no longer have. And whether or not he is buying golden monocles (really?!) or putting it in savings or keeping his kids clothed and fed with it, it is still real money that he no longer gets. So it seems strange to me that people are aghast that he’s not socking it all away in a Car Tire And Fuel Pump Replacement Fund. Maybe he should have been, but that’s not the way things usually work in reality.
Ashley the Nonprofit Exec* June 25, 2015 at 4:24 pm I agree with Alison and most commenters – thinking about mileage as part of your salary is problematic for a number of reasons. That said, LOTS of people think about it that way. We (charity) currently do 40 cents/mile because that’s all we can afford. We’ve gone up from there over the years as we have been able to. Interestingly, when we’re at 40 cents, I generally only see requests for trips that are 5 miles plus (although any mileage is reimbursable). At 55 cents, people include every 1 mile trip on their reimbursement request. I guess it feels more “worth it” to bother with the little stuff. I also see more mileage in general – more people taking advantage of opportunities to drive somewhere and notice that some of this extra driving is entirely unnecessary. So, if we increase from 40 cents to 55 cents (a 37% increase), we actually have to increase our budget by nearly 50% to account for the actual reimbursement that will be requested (assuming we don’t effectively stop the extra/unnecessary driving). This tells me that people DO perceive that they are earning income from the mileage reimbursement.
afiendishthingy* June 25, 2015 at 10:16 pm Yeah, my non profit only pays 40 cents too, but I deduct the remaining fifteen on my taxes. We get paid biweekly but get mileage reimbursement monthly, and we definitely get excited about the paycheck with the reimbursement. I’m still putting fewer miles on my car than I was at my last job, which didn’t require driving on the job but my commute was thirty miles each way. So I do see it as a perk.
The Accountant* June 25, 2015 at 4:47 pm I hate to be the accountant here, but: She said he is being reimbursed at the IRS mileage rate for miles driven but also mentioned that the employee writes off his gas as a business expense. She may misunderstand what he’s doing but if not, he can’t do that! If you are being reimbursed at the IRS rate then you can’t deduct gas from your taxes, so he’s being shady. My guess is that she didn’t word this carefully and got the details wrong but if not then this guy needs to get his financial affairs in order.
Delyssia* June 25, 2015 at 5:13 pm I think you misread. The OP said “it’s common for employees who drive company vehicles to pay for their own gas (they can deduct it on their personal taxes).” She did not say that’s what the employee has been doing.
The Accountant* June 26, 2015 at 8:58 am You are right, I missed that nuance but see that now. That makes much more sense now.
Karen G* June 25, 2015 at 5:47 pm What is you live in a place – like New York City – where one must typically pay $200 or even more each month to park one’s car (at your building or in a neighborhood lot.) If one already has a care, then is required to also take on a company car, that would mean a monthly loss of an additional $200+. It would be a huge burden for an employer to expect an employee to pay (i.e. lose) $2400 a year. And yet, for them to pay those cose on behalf of the employee would surely negate the saving over otherwise reimbursing for mileage. Even if one lives in the suburbs, what is an employee supposed to do if the driveway/garage space at home is already taken up by the family car(s) they have? Should they have to walk 4 miles to a parking garage? Drive their own car 8 miles r/t to get their work car – and pay for the reparking of their own car? There seems to be many issues with this system that could effect many employees adversely.
Chriama* June 25, 2015 at 6:38 pm We don’t know the set-up. It could be that this company car is kept at the office, where the employee drives to every day. Or, the employer could just factor the cost of parking into owning the car and pay for it directly. The point of having a company car is so the employer can directly pay for transportation expenses without worrying about transferring the cost of doing business over to their employees. Lots of people drive company cars, so it’s not like this is an unusual situation.
Teapot Engineer* June 25, 2015 at 5:51 pm First comment, long time reader. I drive my personal car to move from customer to customer, and I easily I rack up 1k+ miles per month. I see why the OP wants to give a company car to employee, and he is angry because he got used to the fictional raise he got. My thoughts about that: could be that the employee recently bought a car witch certain specs that fits his needs and the needs of the company, and he is using the mileage reimbursement to pay it off – a lot of my colleagues are doing that, they have small fuel efficent cars or big station wagons/kombis to carry all the tools for work. Giving him a company car without a transition time will mean that he will need to sell it ASAP, with the depreciation of a vehicle that has a lot of miles in so little time. Please keep in mind that I live in Europe so laws are a little different here.
Alistair* June 25, 2015 at 5:52 pm I’ve been there, done that, quite literally. It sucked losing the mileage reimbursement, and our company car was a joke for some years. But these days, I see that continuing to drive my old Jeep Cherokee for work would likely have put it in the junkyard, and would have cost me the time and money of finding and buying another vehicle. Instead, that Jeep has turned into a cheap little around-town beater. It doesn’t need much gas, its last inspection was $100 and it’ll last me a good few more years. Plus, I can load it down with smelly mulch and nobody cares! In the end, driving the company car has probably saved me money. If I get into an accident with the company car (God Forbid) the costs aren’t on me. And we’ve had two newer work trucks since then, which is something I’d never have been able to afford on my own. So, TL:DR, losing the mileage sucks now, but will likely work out better in the long run in a number of minor ways that all add up.
Chriama* June 25, 2015 at 5:55 pm I’m kind of torn between 2 different responses here. #1 – Looking at the employee’s perspective: I think the employee isn’t unreasonable for being unhappy because they’re losing an unintentional perk. However, it’s not income and shouldn’t be thought of as such. The fact that reimbursements aren’t taxed means that, if he wanted a few extra hundred in take-home pay every month, he’d probably need a raise of at least a few thousand. It’s easy to think of it as ‘losing’ money, but could he really make the case for raise of $5000 over his current salary? If not, then his position (either due to their performance or the nature of the job itself) doesn’t really command that much money and he should get over himself. I feel like giving the employee something to make up for it, like some commenters have mentioned, is rewarding him for an unreasonable sense of entitlement. A company car means less wear on his personal car and lower insurance premiums. The only ‘punishment’ is he doesn’t get to pocket extra cash. That’s like a kid who gets sent to the store to buy something for his mom and usually spends the leftover change being mad because the thing she told him to buy was too expensive and he couldn’t get his candy with it. In that situation, should the mom give him extra money to buy something for himself? It was a nice little perk, but it’s not something that should be counted on. And by trying to replace it with something else, it’s like implicitly acknowledging that his perspective is reasonable. It just rubs me the wrong way. #2 – Looking at the OP’s perspective: they’ve said that this is a good employee. How much would it cost you to bump up his salary enough that his take-home pay would remain similar to what he’s getting now, including the mileage reimbursement? Or do you think he could be pacified with a smaller raise as long as you clearly explain the position to him? Depending on the cost difference between what it would take to keep him, what it would take to hire another employee of similar quality, and how much he’s worth to you overall, it might make sense to just give him more money even if his request isn’t quite reasonable. That also rubs me the wrong way, but I’m sympathetic to the OP as a small business owner trying to do right by their employees as well as themselves.
ScottySmalls* June 25, 2015 at 7:30 pm I get paid drive and mileage, but I tend to see mileage as compensation for wear and tear and stuff. My supervisor tends to see it as extra money, is it really that beneficial?
afiendishthingy* June 25, 2015 at 10:10 pm I mean it’s intended as compensation for wear and tear and whatnot, but I do tend to see mine as extra money also. It helps that we count the mileage as round trip from the office, even if I’m actually going to see a client who’s on my way home, or if I work from home and go see a client who is two miles from my house and ten from the office. so there’s a little extra but the extra driving is not great for the car.
Jerry Vandesic* June 25, 2015 at 8:51 pm “In our industry it’s common for employees who drive company vehicles to pay for their own gas (they can deduct it on their personal taxes) …” It might be common, but it is clearly wrong. Employers need to pay employee expenses while they are on the job. You shouldn’t have to buy your own paper, your own desk, or the gas to drive a company car. If the company can’t pay for the gas, leave the car in the parking lot.
Megan* June 25, 2015 at 9:05 pm I seldom use my own car for work but when I do I make a fortune – my works mileage rates are very generous (like .80c a kilometer). But I can count the number of times I’ve done that on one hand – it’s sort of like bonus pay because it’s way more than the petrol I spent. I’d never see it as regular income but I can see how OPs worker could start seeing it as income after all this time. Still, it’s a bonus not expected.
afiendishthingy* June 25, 2015 at 10:05 pm I think it’s understandable that the employee’s unhappy but it isn’t reasonable to expect the company to make a bad financial decision because of it. To soften the blow a bit, could payment for the gas for the company car be a credit card with good rewards for gas? It’s in the employee’s name so he gets the frequent flyer miles or cash back or what have you. Not going to be as good as the mileage reimbursement but better than nothing.
mel* June 26, 2015 at 12:08 pm This could almost be a relationship question. The speculation about the employee’s motivations isn’t really necessary. This sounds like an important development that will benefit your company. Not only that, but you’ve already made the decision and purchased the company car without even pitching the idea to your Great Employee. (If the employee is truly so much greater than making good long-term decisions for your business, why not let him in on the conversation that so greatly affects him?) Let’s say you buckle and return the prius just to make your employee happy. So a year or two later, when your employee resigns (as employees tend to do), and suddenly you’ve got 2 or 3 other Great Employees who also don’t want to change to a company car – will you regret not taking the leap now when it was relatively easier with fewer feathers to ruffle?
Scott* June 26, 2015 at 2:13 pm I feel for the employee. Not only would he loose some cash coming his way in the form of the lost reimbursement, but he or she will also be hit for the taxes on the company vehicle. I had a company vehicle for 10 years while working at a Fortune 500 company. Under federal tax law I was liable for the tax on the value of the vehicle as a perk. I think it was over $500 a year on my taxes. Company vehicles are considered a form of compensation and taxed as such, regardless of how it’s used – even if only used for business. I should emphasize that not all employers are up on this, so if you currently have a company vehicle and are not taxed on it, it’s probably because they don’t know to report it. It does allow the business to further reduce their tax liability, via off loading/assigning the taxable value to the employee. It’s a lame tactic for an employer to take IMHO.
Editor* June 26, 2015 at 8:20 pm While I understand all the people saying that the reimbursement money isn’t income, I’ve had jobs with reimbursements that really did help with my finances. It’s all about the cash flow. For those who don’t get it, I can think of several scenarios where the reimbursement matters even if it isn’t actually income. For instance, the employee may be part of a couple whose rent or mortgage payment or student loan etc. falls due just before the other partner’s check arrives because one is paid biweekly and the other is paid monthly, and the reimbursement makes it easier to pay the large expense on time and then pay other expenses throughout the month while living paycheck-to-paycheck. Or the reimbursement is smoothing the cash flow because the partner has a freelance business with erratic cash flow. Having a smoother cash flow may allow the employee to use autopay for all bills, but losing the reimbursement may mean the monthly bank account craters occasionally, so bill payment has to be manual for some bills. While it’s ideal for everyone to be responsible about finances, some people dread paying bills, either because they’re afraid of math, they procrastinate and haven’t licked the problem, they don’t write well and don’t want to fill out checks (my late husband bought expensive checks at one point just so he could feed them through the printer instead of using a pen), they’re stressed by having small children or sick family members and miss deadlines because of the latest crisis, or other reasons. We’re not all perfect. The additional money from the reimbursements may allow the employee to maintain a premium bank account with more perks because there are large direct deposits coming in and a larger minimum balance can be maintained. If the employee can’t keep up that deposit rate or minimum, the cost of the bank account could be painful (my bank had an account with some nice perks that turned out to cost basically a dollar a day if you didn’t make the monthly minimums). Then there are the gains from using depreciation money for ordinary expenses or somehow being able to rack up credit card bonus points or other reasons why the cash flow makes a difference. It could also be that the employee drives a beater but can repair it or is related to someone who can repair it for only the cost of parts. In that case, the employee is making money because he or she isn’t paying market rate for repairs even though the reimbursement budgets for them. So the oil change is only the cost of the oil or the tire rotation gets done at brother-in-law’s garage on a Sunday afternoon. (This kind of mutual aid is pretty common among blue collar trade workers. I was around construction workers for a while, and they were always swapping expertise — the electrician and his building trade buddies would get together and work on his co-worker’s sister’s house, and her husband the auto mechanic would do someone a favor in return; sometimes money changed hands for jobs but it all kind of evened out in the end.) I think the employer is in the right and is making a sensible change. But people who are scornful of the employee who is upset about changing financial circumstances are not being fair. There are plenty of reasons why losing cash flow can seem like a painful reduction in income.
jay* December 9, 2015 at 10:38 am I go through a similar situation I usually drive more than 200 miles a day but I only get reimburse for 100 miles ,and most of the times I drove more than 2 hours each way so sometime I drive 6 hours on my own time and I dont get paid other than the .56 cents per mile, I hope anybody can tell me if theres a law that can approach this situation Thank I appreciate any comment
Lisa* December 22, 2016 at 3:21 pm Maybe a compromise? You said the savings to the company was $350/month and he was getting approx $1000 per month. Maybe say he can keep driving his car but the mileage amount would drop to make it approximately $650 per month. You get your savings, he still gets some additional money for driving his old car.
David* January 13, 2017 at 7:43 pm What’s not being accounted for is the replacement costs of my vehicle, depreciation and lost value. I pass on any job that requires me to use my own vehicle, carry super high insurance coverage and then requires that I have a newer model vehicle.
William Pollard* February 9, 2017 at 12:52 am I drive a company car. I work primarily in the field. My employer allows us to use the vehicle for personal use. My company has their logo on both sides of their vehicle. On my time, off company time, I enjoy and utilize this perk. However, this is again, MY TIME! Many months ago I purchase plain car magnets to cover the company’s logo on vehicle when I drive the car on my time. Today, I was called in to the office. Sort of odd and I have no guilty conscience. Apparently, someone had seen me over the weekend diving the car and reported that I was driving safe and have plain car magnets covering the company logo. The magnets match the cars color. I did not remove, damage, or modify the company car in any way. I simply choose to do this on my time. I did not deny I was doing this. I was more surprised and really had no valid excuse. A lawyer friend of my husband advised that I should had told my employer my HOA does not allow promotional material in the neighborhood and I put these plain magnets on car for that reason. I am not a lawyer and honest their is no HOA in my neighborhood here in San Jose. The lawyer friend said they can be in trouble if the contact the HOA to confirm. I would rather be honest! My question is, “can I legally cover the company cars logo on the company car off duty?” Is that really such a employee violation? I feel my freedom has been taken! I should ask my managers if they wear clothing on their time off with our company logo? And then tell them they should because I have to advertise the company off duty! I probably sound like a problem employe, but am not. I just do not feel I am required to show off the company off duty. Please advise! Thank you all