Factors in Selecting a Vehicle or Reimbursement strategy
Choosing the ideal vehicle reimbursement strategy for your business can be a difficult proposition, especially if you’re not already aware of the many options available. Fortunately, the ideal options for your situation will begin to narrow when you take into consideration the many important factors such as staffing efficiency, worker morale, risk reduction, insurance expenses, startup costs, and administrative overhead. Today, we’ll discuss these factors, your options, and just what your ideal reimbursement strategy should look like.
Factors to Consider
Staff. Maintaining a fleet requires personnel involved in the management of everything from vehicle ordering to lost gas cards. How much savings are available if you chose a different strategy?
Risk. Off-duty collisions, vehicle failures, and an assortment of other problems become your problems. Low-risk plans, on the other hand, can reduce exposure to a third or less of competing strategies. This matters not only as a matter of gambling your profits, but as a factor directly determining what you pay in insurance.
Expenses. In the end, all vehicle strategies compete on their efficiency in managing expenses. Some offer different benefits in terms of when you spend money—such as high start-up and low maintenance, or consistent medium expenses. Secondary expenses such as administration, staffing changes, maintenance, etc. must also be considered when selecting your vehicle or reimbursement strategy.
Fleet or Reimbursement
Fleet. For most businesses, the problems associated with maintaining a fleet of company cars will well outweigh the benefits. Maintenance and administration expenses, difficulties associated with putting drivers in cars, insurance liability for all hours of the day, and a high start-up cost all make keeping your own fleet a poor investment for most businesses. Utilizing a fleet management service minimizes some of these issues, but the core problems remain: higher costs and excess risk.
Fixed and Variable Rate Reimbursement. A FAVR plan utilizes third-party data to calculate fixed costs and variable costs reimbursements for drivers. This maximizes cost control, minimizes liability exposure, maintains employee satisfaction, and adapts quickly to changes for flexibility other plans struggle with. The increased complexity of the plan does bring back some degree of administrative work versus simpler reimbursement plans, as the employer must be certain all IRS rules are being adhered to despite the variations. Using a on outsourced reimbursement plan can manage the IRS rules. Overall, however, this reimbursement strategy is definitely one to consider for your business or organization.