Commuter Programs - A Unique Employee Benefit

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Commuter Benefit Programs, A Unique Employee Benefit

In today’s tight labor market, chances are your organization is looking to stand out in your recruitment efforts or has been wracking its collective HR brain for new, low-cost ways to boost your appeal to existing employees through your benefits offerings – or both! Particularly if one of your organizational goals is to boost your standing among the less car-dependent, environmentally minded, younger generations now dominating the workforce, then a commuter benefit program might fit the bill.

What exactly is a commuter benefit program?

Commuter benefit programs can include a wide variety of transportation-related amenities, reimbursements, or incentives.

The benefits (and their associated costs) range from reimbursing for daily parking fees incurred by commuters on the slightly higher end of the cost continuum, to providing a secure location for on-site bicycle storage for those employees who choose to bike-to-work at the cheaper end (a spare closet will do the job).

Exactly what benefits you as the employer may or may not decide to include in such a program is entirely dependent on the needs of your workforce. So, before you decide to give up that extra storage closet, find out what it is that your employees will find the most value in and what they will actually use.

Location, location, location.

Like so many things in life, when deciding if a commuter benefit program is right for your organization, the key is location, location, location. If your offices are located in a large metropolitan downtown area, but most of your workforce lives in the suburbs, then maybe reimbursing the partial or full amount of daily parking costs is the right fit.

If your location happens to be close to a public transportation route, then providing reimbursement for bus passes, or looking into the employer purchasing options offered by your local public transit authority might be another option.

Even if your business is in a more remote location, options such as incentivizing carpooling or simply promoting the fact that your parking lot is FREE can make a longer commute seem more palatable to potential and/or existing employees.

Are there any direct financial benefits to the employer for offering commuter benefits?

The short answer is, no, not anymore. One commuter benefit that is likely universally relevant to your workforce is the pretax payroll deduction for transportation expenses.

Administratively, this program is probably more burdensome than most others under the commuter benefit category, as there are specific limits on the amount of the deduction and the specific parameters placed on the funds that must be monitored by the employer.

In addition, the 2018 tax reform law eliminated the direct business incentive that had previously allowed employers offering the pretax program to deduct a certain amount form their taxes.

Passé or an opportunity to stand out?

According to ERC’s research on commuter benefits programs, these programs are not terribly common. Plus, the changes to the tax code mentioned above aren’t exactly building a direct financial case for employers to move ahead with these programs.

However, it is worth noting that slightly more than one-quarter of survey respondents indicated that they currently offer one or more of the following commuter benefits to their employees:

  • Pretax payroll deduction to be used for eligible transportation expenses
  • Partially reimbursed parking fees
  • Fully reimbursed parking fees
  • On-site bicycle storage
  • Incentive for bike-to-work
  • Incentive for using mass transportation
  • Incentive for carpooling
  • Incentive for walk-to-work
  • On-site locker rooms/showers (for bike-to-work commuters)

While the direct financial incentive is gone, instead of dismissing these programs as irrelevant, a more optimistic viewpoint could argue that from a long-term strategic viewpoint, commuter benefit programs are actually an area of opportunity for employers. Unless your organization employs a fully remote workforce, the reality is everyone has to get to work somehow!

So whether it is the element of environmental responsibility that exists inherently in many of the commuter incentives listed above or the opportunity to reduce the financial costs associated with simply getting to and from work on a day-to-day basis that really speaks to your workforce, commuter benefit programs have a wide ranging appeal that isn’t going away anytime soon. (At least not until someone can perfect a transporter device and we can all start teleporting to work.)

Let ERC Consulting help your organization develop a competitive compensation and benefits strategy.

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