“I’d like to provide a bonus for employees to counter the rising gas prices. How do I set it up?”
Your HR Survival Tip
You don’t want to provide a bonus just because gasoline prices are high. Increasing the employee’s pay by either providing a bonus or raising their wage can cause a ripple effect you really don’t want.
An increase in pay means your payroll costs go up, your workers’ compensation insurance costs go up, and the “regular” rate for the employee increases, potentially affecting overtime, sick pay, meal premiums, etc. Plus, it’s very hard to pull back that increase when/if gas prices return to the previous rates. Providing a bonus to employees has similar effects because it is just another type of pay. Once you repeat this bonus, you have a non-discretionary plan that also has ripples.
Keep in mind you are not required to pay anything toward an employee’s commute. However, if you are in an industry where the job site changes periodically, your employees may have to travel further for certain job sites. The company receives a benefit if the employee is willing to drive their own vehicle to that distant job site rather than providing the employee with a vehicle or finding employees nearer to that location. A partial reimbursement might be considered but it may still end up as taxable income.
You need to be specific about any reimbursement. Perhaps a flat amount as a car allowance for employees who must travel beyond your offices to do their job. Perhaps a reimbursement based on the distance of the job site from your offices. You don’t want to get into the administrative nightmare of reimbursing based on their home address or the type of vehicle they drive… these were personal choices they made. Think in terms of your office location and/or job sites.
As you know, the Internal Revenue Service (IRS) updates its per-mile rate at least annually, based on the cost of living changes. This is a reimbursement rate when the employee must use their vehicle for business and is not intended to be a commute rate since commutes are not paid. If you want to help out employees, speak with your accountant or the IRS first to ensure you do it properly. It won’t matter what you call it if the money appears to be extra pay and needs to be considered taxable earnings. The financial experts should determine the legalities of what you can do, then HR can write up the policy and implement it.
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