What Are Commuter Benefits and How Do They Work?

Commuter benefits can help alleviate some of the stress and costs your employees experience when traveling to work. Expenses like parking fees, transit passes, and ride-sharing costs may be covered under employer-sponsored, pre-tax commuter benefits plans. As transportation and other related costs rise, companies may want to consider the value of adding perks for commuters.

What Are Commuter Benefits?

Commuter benefits for employees may include programs or financial incentives aimed at easing the cost and time related to traveling between work and home. Depending on the dollar value and type of programs offered, employee transportation benefits may be provided in pre-tax or after-tax dollars.

Pre-tax commuter benefits plans allow employees to use their elective contributions to pay for eligible parking expenses or transit passes. Additionally, companies may choose to contribute funds to the plan on behalf of employees.

Other types of commuter benefits may include company-provided vehicles or paying for fuel and maintenance costs for work-related use of an employee’s personal vehicle. Non-monetary assistance can also be provided through flexible or hybrid scheduling or coordinating carpooling among employees looking to share a ride to work.

Ultimately, commuter benefits may depend on factors such as your budget for employee benefits, how employees travel between work and home, and the costs of transportation in your area.

Are Commuter Benefits Worth Offering?

Company location and workforce demographics may play a role in the decision to offer commuter benefits. Employees working at a suburban worksite with ample free parking may not incur a great amount of commuting expenses. But workers who use public transit to commute to a city office might appreciate a commuting reimbursement.

The number of employees working in the office versus those who work remotely may also affect a company's decision to offer commuter benefits. If your employees prefer, or are required, to work in the office, you might consider adding a more expansive commuter program to help improve employee satisfaction and retention.

Additionally, some cities and states have enacted commuter benefits laws that apply to certain businesses. When considering commuter benefits, you should determine if you are a covered employer under any of these laws and therefore required to provide benefits.

Examples of Commuter Benefits Programs

A commuter benefits program can offer numerous options for employees to take advantage of, based on their transportation needs. Some popular commuter benefits include the following:

Pre-Tax Commuter Benefits

For 2023, a commuter benefit plan allows employees to contribute up to $300 per month on a pre-tax basis to pay for mass transit expenses such as bus fare, subway or train passes, and vanpools, along with eligible parking expenses.

In addition to sponsoring a pre-tax commuter benefits plan, employers may also contribute funds to the plan on behalf of participating employees. However, the combined employee and employer contributions must not exceed the annual IRS limits.

Company Vehicles

Companies may provide a company vehicle to an employee, along with payments to cover gas and maintenance costs. Car allowances are another option that may be included in an employee compensation agreement. If an employee uses a company-owned vehicle or their personal vehicle for work, you'll want to find the best option to optimize the tax benefits for both the employer and the employee. This could be a commuter benefit program or a policy for expense reimbursement related to vehicle expenses.

Remote or Hybrid Work

Remote or hybrid work arrangements may help an employee reduce their transportation expenses by allowing them to skip their daily drive or train ride to work. In lieu of contributing to a commuter benefits plan, employers may need to provide employees with technology to work remotely, as well as office furnishings and equipment.

Flexible Schedules

Like remote or hybrid arrangements, flexible schedules can save employees both time and money. A primary benefit to this setup is that workers can avoid sitting in traffic or paying peak fare prices if they travel to work outside of rush hour. Companies may also want to extend or shorten the workday to accommodate a more commuter-friendly schedule. For example, giving employees the option to work four ten-hour days could cut one day's worth of transportation costs for a full-time staff member.

Ride-Share Allowance or Reimbursement

If employees participate in eligible vanpools through ride-share services, they may be able to use up to $300 per month on a pre-tax basis to cover this cost. Companies can also contribute to a pre-tax plan that will reimburse employees for their expenses related to eligible vanpools. If an eligible vanpool service is not available in your city, companies may decide to offer financial assistance to employees who travel to work via rideshare as a taxable benefit.

Highway or Bridge Toll Reimbursement

Inflation has caused many transportation costs to rise, including the price of highway and bridge tolls. To help keep commuting costs down, employers may offer to reimburse the costs of tolls for employees as part of their commuter benefits.

Fuel Funds/EV Chargers

With gas prices on the rise, companies can offer to cover a portion of this expense for their employees. As more drivers purchase alternative fuel vehicles, companies may also want to consider installing charging stations in their parking lot to allow owners of electric vehicles to replenish their car battery during the workday.

Commuter Transit Benefit

Discounting or reimbursing the cost of transit passes can help employees who take public transportation to work. When a pre-tax commuter benefit plan is in place, employers and employees can contribute up to a combined $300 per month to pay for mass transit passes or fares.

Parking Assistance

In cities where finding affordable parking can be a challenge, employers can typically reserve parking for employees at discounted prices. Eligible parking expenses incurred close to work can also be reimbursed up to $300 per month from a pre-tax commuter benefits plan.

Improve Employee Morale With More Benefits

A great way to improve employee retention and morale is to assist with transportation costs, particularly since the price of gas and transit fares continues to rise. Offering employees, a commuter benefit for mass transit or vanpooling can also reinforce the company's goals related to environmental responsibility. Contact your Paychex representative or reach out to learn more about employee commuter benefits.