The Perks of a Commuter Benefits Program

The Perks of a Commuter Benefits Program

An awesome way to improve your employees’ commutes to and from work is through a commuter benefits program. Thanks to the IRS tax code, implementing one of these is rather inexpensive and also serves as a recruitment and retention tool for your prospective and current employees. So here’s the scoop:

How Commuter Benefits Work

A commuter benefits program has one big advantage: it saves you and your team money. You can offer commuter benefits in three ways, as a tax-free subsidy paid by you (the employer), a pre-tax payroll deduction paid by employees, or a combination of the two.

Commuter benefits are not a part of employee wages, meaning if you opt to provide a subsidy to your employees, you can save nearly 8 percent in payroll taxes. But let’s break that down a little more for you:

With 10 employees, you’d save an average of $1,863.
With 25 employees, you’d save an average of $4,590.
With 50 employees, you’d save an average of $9,180.

Now imagine what you can do with those extra savings.

As for your employees, if they set aside money for their commute, it’s less money than they would have to pay income taxes on. Not only that, but employees who participate in a commuter benefits program typically save 40 percent on any expense that comes with commuting (e.g. gas, car maintenance, fare hikes, etc.).

The Options

1. Employee Compensation Reduction

As we referenced above, one way to implement a commuter benefits program is to offer it as a pre-tax employee-paid payroll deduction. This is categorized as a fringe benefit. For example, employees could have $75 each month automatically placed onto a fare card. If you go this route, just be sure to have the employee’s decision in verifiable written or digital form. The key information to include: the amount of payroll deduction, the time period for the payroll deduction, and the date in which this decision took place.

2. Tax-Free Employer Paid Subsidy

This one is pretty simple – you decide on the amount of money you would like to give employees on a monthly basis for their commuting expenses.

The qualifying expenses for a commuter benefits program includes transit passes, a commuter highway vehicle (this vehicle must seat at least 7 individuals, including the driver), employer-provided parking, and bicyclist benefits (I.e. reimbursable costs include the purchase of the bicycle, storage costs, etc.).

How to Implement a Commuter Benefits Program

Implementing a commuter benefits program is simple. First, choose which option (as described above) fits best with your company. You can either design your program in-house or work with your benefits broker at Decisely. Working with your broker saves you time and simplifies the overall implementation. Decisely can set you up, and in no time you’ll have an additional retention tool to offer current and prospective employees.