Food and Drink International - Winter 2016 Volume 1 - 153

Go the Extra Mile

T

The food and beverage industry is part of a growing mobile
workforce that is set to account for 72 percent of the total U.S.
workforce by 2020. With this rise in mobile workers comes
an influx of distributed sales and service personnel who supply, sell and deliver food and beverage products. While extra
drivers alone are no cause for alarm, understanding how they
should be reimbursed for business-related travel costs has increasingly become an area of focus for employers.
Employers who fail to fairly and accurately reimburse drivers for these expenses can find themselves exposed
to potentially costly lawsuits. These
can reach into the millions of dollars
when it comes to inaccurate reimbursements, lawyers' fees and legal
settlements. Starbucks, for example,
recently settled a mileage reimbursement-related class action lawsuit,
paying out $3 million for failing to
reimburse 30,000 employees for mileage expenses incurred when using
their personal vehicles on the job.
Popular restaurant chain Jimmy
John's also experienced a lawsuit
after 300 delivery drivers claimed
they were made to pay for their own
vehicle insurance, maintenance and
work-related phone use - which was
in violation of both the Fair Labor
Standards Act and the Kansas Wage
Payment Act.

The IRS Mileage Rate Myth
When it comes to mileage reimbursement, there are a few options that
food and beverage employers can
choose from, including car allowances, cents-per-mile rates (including the
IRS mileage rate), and fixed and variable rate programs. Many companies
choose to reimburse their drivers using the IRS mileage rate, without truly
understanding how it's calculated and
how the IRS intends for it to be used.
The IRS mileage rate is not a rec-

ommended reimbursement rate, nor
is it in line with the IRS' recommended methodology for calculating fair
and accurate reimbursements. Its
main purpose is to serve as a base
rate for individuals to calculate a tax
deduction for their unreimbursed
driving expenses. The IRS mileage
rate is a fixed, nationally averaged
rate that is calculated once each year
based on the previous year's average
costs of operating a vehicle.
This means the rate is inherently
inaccurate for reimbursing employees, as it 1) is not reflective of current
prices and 2) is based on nationwide
averages, rather than location-specific costs. We can see the glaring issue
with using the IRS mileage rate for reimbursement by taking a look at just
one vehicle expense - fuel. Last year,
the average fuel price in California
was the highest of all 50 states, costing $3.23 per gallon at the pump.
South Carolina had the lowest fuel
prices of the year, averaging $2.18 per
gallon. Companies that reimbursed
based on the national average fuel
price, which was $2.40 in 2015, under-reimbursed employees driving in
California and over-reimbursed employees in South Carolina.
To put it simply, the IRS mileage
rate is meant for employees who do
not drive often for business. It is not
intended to represent the actual costs
that employees incur when driving for

business across different geographic
areas of the United States.

Accurate Reimbursement
The best way to ensure mobile workers are fairly and accurately reimbursed - and avoid costly lawsuits
- is to use a fixed and variable rate
(FAVR) program. In addition to being the only reimbursement approach
recommended by the IRS, it's the only
methodology that that can be used to
reimburse drivers tax-free for both
the fixed and variable costs associated with driving for business.
Fixed costs (insurance, taxes, depreciation) are calculated for each
driver based on where they live,
while variable costs (gas, maintenance, tires) are based on the miles
they drive and current prices in an
employee's driving territory. Taking
unique fixed and variable costs into
consideration makes FAVR the only
approach that allows employers to
calculate reimbursement rates that
most accurately reflect the driving
costs each employee incurs. With the
rise in today's mobile workforce and
a number of technologies available
to streamline the administration of
FAVR programs, the time has come
for food and beverage employers to
take a hard look at their practices.
By reimbursing the right amount,
employers can eliminate over and
under-reimbursements - providing
cost savings and mitigating legal risk.
Most importantly, they can ensure all
employees are treated fairly.
Craig Powell is the president and CEO of
Motus, the most accurate vehicle management
and reimbursement platform available. When
not leading the charge toward the future of
mobile workforce management, Powell sits on
the board of the charitable organizations Your
Grateful Nation and Beat the Streets. He can be
reached at cpowell@motus.com.

food & drink international * winter 2016 volume 1 * www.fooddrink-magazine.com

153


http://www.fooddrink-magazine.com

Table of Contents for the Digital Edition of Food and Drink International - Winter 2016 Volume 1

Contents
Food and Drink International - Winter 2016 Volume 1 - Cover1
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