Employers Hesitant To Subsidize Workers’ Commutes

By Kathy Gurchiek Nov 4, 2008
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Employers are concerned about the cost of employee commutes but fear raising salaries to help workers pay for their transportation, according to a recent survey.

Despite being “profoundly concerned” about high commuting costs of their employees, including the cost of gasoline, employers don’t think they have the resources to soften the impact, according to the 2008 Commuter Impact Survey from TransitCenter Inc., a nonprofit based in New York City that promotes mass transit use.

Conducted in June 2008 with 1,283 people, the online survey was fielded among three groups, two-thirds of whom work at organizations with 100 or fewer employees.

Respondents were HR professionals attending the 2008 Society for Human Resource Management Annual Conference in Chicago, HR decision-makers contacted through third-party mailing lists, and customers of TransitCheck, a tax-free commuter benefit program TransitCenter offers.

The survey focused on employers based in Chicago, New York and San Francisco—cities with the highest concentration of mass transit users.

Among the findings, released Oct. 7, 2008:

  • Nearly 90 percent of survey respondents report that their companies are very or somewhat concerned about the impact of fuel and commuting costs on employees.
  • Two-thirds think organizations should take an active role in easing the financial difficulties of employee commutes.
  • 59 percent are not able to help employees with higher fuel and commuting costs.
  • More than 40 percent are concerned about the impact high commuting costs will have on recruiting and retention.

In addition to their concern over the need to raise salaries to offset commuter costs, key concerns among employers include the impact on attracting and retaining workers; providing incentives to employees to leave their cars at home, and adding programs that help workers find those alternatives.

Flextime and telecommuting are the top commuter-related benefits employers offer. Strategies include ridesharing and vanpooling (10 percent); providing preferential parking for carpools and vanpools (10 percent); providing incentives to bike to work

(7 percent); obtaining carbon offsets for business travel (6 percent); and offering tax-free commuter benefits (27 percent) to encourage mass transit use.

“The good news,” TransitCenter President and CEO Larry Filler said in a press release, “is that pre-tax commuter benefits can save each employee hundreds of dollars a year, lowering the amount that employers would have to pay to offset higher gas and transit prices.”

Since 1993, the Internal Revenue Service has allowed workers to set aside up to $115 per month of their gross income to pay for transit and van pool commuting costs.

It’s a benefit that can be offered only through a worker’s employer and typically is delivered via debit card, transit pass or payment voucher on a monthly or quarterly basis, according to TransitCenter.

Tax-free commuter benefits can be structured as an employee-funded tax-free payroll deduction, as an employer-funded benefit, or as a shared employer/employee cost, TransitCenter says. How it’s offered “appears to be a significant driver of adoption” by workers, the report notes. Offering it as a pre-tax benefit is less attractive than as a subsidy or fringe benefit.

More workers are likely to use a tax-free commuter benefits program if employee commuting costs increased by 20 percent; they could share all or part of the benefit with family or others; the cost of gas increased by 20 percent; the benefit included a financial incentive to commute by bicycle; and the individual monthly amount of their gross income the IRS allows workers to set aside to pay for transit and vanpool commuting costs increased from $115 to $200, the survey found.

Two stumbling blocks for employers: Only 53 percent of employers are aware of tax-free commuter benefits, and there is a lack of mass transit that would allow workers to take full advantage of such a program, TransitCenter found.

Kathy Gurchiek is associate editor for HR News. She can be reached at kathy.gurchiek@shrm.org.

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