But when does it make more sense for your employees to rent a vehicle rather than driving their own and being reimbursed? In certain situations — especially for longer trips or frequent travel — renting can provide a more cost-effective and efficient solution. This guide will walk you through the essentials of mileage reimbursement, how to determine when a rental is the better choice, and how to create a policy that benefits both your business and your employees.
Why You Need a Corporate Mileage Reimbursement Policy
Mileage reimbursement policies are more than just administrative tools. These policies can help you manage finances, maintain transparency and ensure your employees are not paying out-of-pocket for business-related travel expenses. However, in scenarios where personal vehicle use becomes more costly or impractical, a rental vehicle can offer additional benefits.
Benefits of Establishing a Mileage Reimbursement Policy
A well-defined mileage reimbursement policy offers several advantages, including:
• Minimizing Confusion: Clearly defined guidelines ensure employees know which trips qualify for reimbursement and how to handle travel-related expenses, reducing ambiguity and setting expectations for all parties involved.
• Providing Consistency: Establishing a fixed mileage rate and maximum threshold for distance traveled when reimbursing employee trips in personal vehicles can allow for more accurate and consistent budget planning. Setting such standards makes travel expenses easier to predict and can help control costs by directing employees toward alternative options — such as renting a vehicle — when longer distances make mileage reimbursement the less cost-effective choice.
• Ensuring Legal Compliance: While federal law doesn’t mandate mileage reimbursement (unless not doing so would cause an employee’s net income to fall below minimum wage), some states do. Make sure your policy complies with local regulations and consult legal counsel if necessary.
When Should You Consider a Rental Instead of Reimbursing Mileage?
While reimbursing mileage may be suitable for short trips or infrequent travel, there are situations where renting a vehicle is more cost-effective and beneficial for your employees and your business. Here are some key factors to consider when deciding if a rental is the better option:
• Trip Length: For long-distance travel, mileage reimbursement for employees driving their own vehicles can quickly get expensive. At a certain point — an analysis of current Enterprise Business Rental clients puts this at about 100+ miles — renting a car often becomes the more economical choice.
• Frequency of Travel: If your employees frequently travel for work, reimbursement at the standard business mileage rate may not be enough to make up for the increased wear and tear on personal vehicles. Offering a rental in these instances can help protect workers from the personal, non-reimbursable vehicle costs associated with any additional or accelerated maintenance, service, or replacement that could be required due to additional use.
• Duty of Care: Prioritizing employee safety means reducing risks, and that includes during business travel. When employees drive personal vehicles for work trips, companies may have little to no insight or control over their cars’ safety, reliability and condition. In contrast, partnering with a rental provider like Enterprise or National can help ensure team members are taken care of with a well-maintained, recent-model vehicle.
• Brand Perception and Corporate Image: On trips where employees will be interacting with prospects, clients or partners — and especially in cases where they could be asked to offer them a ride — the car becomes a representation of their employer’s brand. Opting for a rental can help present a professional corporate image.
• Special Requirements: For trips that require higher capacity vehicles (e.g., transporting equipment or multiple passengers), reimbursing mileage for personal vehicles may not be an option. A rental vehicle can offer the right solution for your specific needs.
With Enterprise and National, business rentals cost an average of 55¢ per mile. Compared to the IRS standard business mileage rate of 70¢, that's more than a 25% savings,1 making the choice to rent an easy one.
Structuring Your Business’s Mileage Reimbursement Policy
1. Start with Clear Guidelines
Your policy should include a straightforward explanation of its purpose, while providing guidelines for when mileage reimbursement is available as well as any restrictions that may apply.
2. Establish a Mileage Reimbursement Rate
Businesses can reimburse their employee mileage at any rate they choose — or even not at all, provided they’re in accordance with state and federal law. However, the IRS standard mileage rate is commonly used for the simplicity and consistency it provides. Whether your company goes with the IRS standard rate or an alternative method, outlining the details in your company’s reimbursement policy can help set clear expectations for your traveling employees.
3. Outline Alternatives to Mileage Reimbursement
If there are situations where mileage reimbursement cannot be offered or is not the preferred choice, it’s a good idea to address them in your policy as well. For instance, if your company finds it more cost-effective to offer a rental car for trips over a certain distance, providing that guidance — along with a cost comparison and instructions for making rental reservations — can help ensure employee understanding and compliance.
4. Specify How and When to Submit Claims
Establish a streamlined process for employees to turn in mileage claims, including any necessary deadlines or requirements for submission. Clearly communicating what information and documentation is needed — such as travel details (e.g. date, destination and purpose) and itemized receipts — can help ensure policy adherence while allowing for accurate tracking and timely reimbursements.
5. Regularly Review and Update the Policy
As the market changes, it’s important to keep your mileage reimbursement and travel rental policy up to date. Regular reviews ensure your policy remains current and cost-effective.
The Bottom Line
Creating a clear and efficient mileage reimbursement policy is imperative for any business with frequent employee travel. However, there are many cases where renting a vehicle instead of reimbursing mileage can save you money and provide a better experience for your employees.