The surge in gasoline prices is pressuring some employers to nudge up the mileage rates they pay for employee travel.
At Runzheimer International, the Rochester, Wis., cost management consultant, John Allenstein has seen a 30- to 40-percent increase in calls from prospective customers seeking advice on travel reimbursements. He's also hearing from current clients requesting monthly instead of quarterly updates on suggested mileage rates.
"There have been increased concerns by employers to do this for their employees," said Allenstein, an automotive cost consultant. "Employees are expressing their concerns to employers, and employers are reacting."
MRA-The Management Association Inc., a century-old employer assistance group in Brookfield, Wis., also has been fielding calls from its 2,200 members as gas prices have surged.
"Many of our calls have been to ask what other companies are doing," said Sandy Reynolds, vice president of employee relations services at the association. "Our members seem to be taking a wait-and-see approach right now, in anticipation that there will be an easing of prices."
A rule of thumb at Runzheimer is that every 20 cents up or down in the price of gas means a penny-per-mile difference in the cost of running a typical car. The impact varies by the area and with the vehicle's fuel efficiency.
Although some companies hire firms such as Runzheimer to advise adjustments to their mileage reimbursements, businesses more typically set employee allowances at the Internal Revenue Service standard, which is 32.5 cents per mile for 2000. Payments beyond the IRS rate could be treated as taxable income. Runzheimer has been calculating that rate for the IRS since 1980.
"Most employers mirror what the IRS says," said Judy Shonborn, a certified public accountant at Arnow & Associates in Glendale, Wis. "They don't want to reimburse employees more than what they can deduct as a business expense in most cases."
Reynolds agreed. "Some organizations are cautious about increasing the mileage reimbursement above the IRS-approved level, since that action could have tax implications for the employer and employee," Reynolds said.
Employees who drive for their jobs and aren't reimbursed for their expenses can claim their work-related car costs or the 32.5 cents-a-mile IRS allowance as an income tax deduction. Generally, though, unreimbursed work-related expenses are considered miscellaneous itemized deductions, which are deductible only to the extent they exceed 2 percent of an individual's adjusted gross income.
The IRS mileage rate has risen less than the overall inflation since 1973, the earliest year for which the federal tax agency could find data. Then the rate was 12 cents a mile, which would be worth 46 cents now, adjusted for inflation.
Over the long haul, the cost of gas doesn't amount to much in total driving expenses, which include fixed costs such as insurance, depreciation, licensing and registration.
Variable operating costs, including fuel, oil, tires and maintenance, account for only about 23 percent of the total cost of driving a car, according to Runzheimer. That's down from 45 percent in 1975.
Gas prices contributed little to the 4.8 percent increase in the IRS business mileage rate this year. Runzheimer attributed the rise — to 32.5 cents from 31 cents last year — mostly to higher prices for new vehicles and partly to higher costs for maintenance and new tires. And the cost of insurance — not gas — plays a major role in Runzheimer's national analysis.