what is mileage reimbursement

Mileage Reimbursement: What is it?

Written by Renata Taunay
Renata is Content Marketer at Rydoo.

Mileage Reimbursement can be a confusing topic for many business travellers. Different rules and regulations per country, as well as a variety of T&E Policies can create a lot of confusion. To help demystify the world of travel and expense and all the jargon that comes with it, let’s answer once for all “What is Mileage Reimbursement?”. 

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Let’s start from the beginning

Mileage Reimbursement means compensating employees for using their personal vehicles for work-related journeys Employees are reimbursed by their employers on the basis of a rate set by an official body like the IRS in the USA or HMRC in the UK. 

The math is simple: if the standard mileage rate for the year is set at 55.7 cents per mile, the finance team would need to multiply this rate by the number of miles you drove over a set period – for example, if you drove 1000 miles in June, you’ll be reimbursed $557.   

Each country has its rules

Each  country has its own rules related to the reimbursement of mileage, including maximum reimbursement rates per mile or kilometre.  If a company decides to  pay a higher mileage rate than the maximum set amount, this will be considered as “income” for  the employee and be taxed accordingly

mileage reimbursement rates

When should employees be reimbursed for miles driven?

Every time an employee uses their own car for work purposes, they should be reimbursed for the miles/kilometres driven.

You may reimburse mileage when employees drive to meet customers, go to the bank for a business transaction, pick up office supplies or even go on a short business trip by car.

Much more than just gas

Contrary to what many believe, the mileage reimbursement rate doesn’t solely take into account the price of gas. Oil, tires, registration taxes, car insurance, maintenance and even depreciation is also taken into account. As each country has its own regulations when it comes to mileage reimbursement, the process to define the rate varies.

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Mileage reimbursement is soon to be on the rise

Due to the Covid-19 pandemic, we’ll be seeing employees opting to drive for business trips rather than travel by train or plane, as they would have done previously.

They will feel safer in their personal car and won’t have to deal with new lengthy procedures at airports and train stations. 

If you think about it, it makes perfect sense that once business travel gets back on track in a post-pandemic world, business travellers will decide to travel by car to avoid contact with thousands of people coming from different parts of the world. 

Travelling by car is likely to be more relaxing and stress-free for many. It might even be faster if you consider the added procedures that lie ahead for airports and train stations: longer queues, temperature checks, etc.

How can companies easily keep track of miles to reimburse?

The best and most accurate way to keep track of mileage reimbursement is by using an expense management solution like Rydoo!  A top-notch platform will automatically calculate the mileage reimbursement rate according to the jurisdiction you’re in and your company’s policy. It will apply it to the number of miles/kilometres driven, as logged by the employee and that easily, the employee will be reimbursed and the finance department is freed from another headache. 

To learn more about how you can optimize your mileage reimbursement process, book a demo with one of our specialists and discover more about this and many other benefits Rydoo can bring to your company.

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