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Commuter Benefits Are an Investment in Employees

Long, expensive commutes can drive workers to new jobs

A man sitting in the driver's seat of a truck.

Commuters in the U.S. make more than 50 billion solo commutes to and from work each year, averaging 26 minutes each way. Typical commuters now spend 20 more minutes a week commuting than they did a decade ago, researchers say.

Employees are desperate for better commutes and prepared to take extreme measures to achieve quicker, easier and less expensive ways of getting to work. Twenty-three percent of workers in the U.S. have quit a job because of a tough commute, a Robert Half survey reported, while 85 percent would be willing to take a pay cut in exchange for a shorter commute.

Offering a commuter benefits plan is one way that employers can help.

"Commuter benefits are an especially attractive recruiting and retention tool in metro areas where parking and/or transit expenses can be costly to employees," said Andrea Toben, manager of total rewards and well-being at human capital management company Paycor in Cincinnati. "At the end of the day, contributing toward all or a portion of commuter expenses shows that you're invested in employees and what they provide to your business."

According to Toben, having to worry about commuting logistics and expenses can impact employees' day-to-day lives and stress levels, which then has a negative impact on productivity and retention in the workplace. Employees can be much more efficient, she said, when they don't have to factor commuting costs into their routines.

"We want happy employees," said Robin Blacksmith, manager of corporate operations at Seattle-based technology company F5 Networks, which recently launched a commuter benefits program. "The most difficult part of an employee's day is their commute to work, which sets the stage for the day. How it begins matters, and Seattle traffic can be very challenging," said Blacksmith.

What Commuter Benefits Plans Should Cover

When developing a commuter benefits plan, there is no single approach that will work for every company. Managers and HR professionals have to take into account their geographic area, how people are currently commuting, the environmental impact of the options they're offering and the preferences among their workforce.

"A key element in building a commuter benefits plan is realizing that different generations want different things," said Toben. "Designing a benefits plan that fits a multigenerational workforce isn't easy but will both attract and retain talent."

Typically, a plan for commuters may fund parking fees and the use of public transportation, ride-hailing services, car pools and van pools. At F5 Networks, an employee can choose to drive his or her own car to work and obtain a generous subsidy to pay for parking, or receive a loaded card to pay for public transportation, as well as a small subsidy to cover parking in case he or she has to drive to work a few times throughout the month. F5 also fully covers vanpool costs for employees.

Kevin Bopp, vice president of parking and mobility at Bedrock, a commercial real estate firm based in Detroit, uses Scoop, which allows commuters to find car pools heading in their direction. Bopp said offering Scoop to Bedrock employees has contributed to his company's mission of enhancing life in the city.

"As we continue to support a vibrant urban core, we wanted to develop a program to provide alternative commuting solutions to decrease drive-alone rates and single-occupancy cars," he said. "This helps to reduce overall parking demand and allows us to focus on making Detroit a more livable and walkable city."

When developing a commuter benefits plan, companies should provide a range of key features to employees:

  • Make the program easy to set up and manage online.
  • Make it user-friendly, with both automated and personal customer service.
  • Provide home delivery of transit passes and smartcards.
  • Be fully compliant with IRS regulations.
  • Include monthly payroll reporting so the accounting department knows what amounts to deduct from employees' pay.

Tax Exempt for Employees

Employer-provided parking and mass-transit subsidies are tax-exempt for employees up to monthly limits set by the IRS. The dollar caps for 2020 were announced in November.

Qualified Transportation Benefit Exclusion
(monthly limits)
Transit passes and van pool services
Qualified parking

Source: IRS Revenue Procedure 2019-44.

[Update: The IRS announced in Revenue Procedure 2020-45 that for 2021 the monthly limits for both transit and qualified parking benefits would remain at $270.]

Paying for a Commuter Benefits Plan

Companies may be concerned about the cost of providing a commuter benefits plan, but when factoring in the tax savings to employees, it's often worth it financially.

"The fees typically charged to implement and administer this program are well below the potential savings employers will receive from offering the benefit," said Kerrie LePage, a director at Edenred Commuter Benefit Solutions in Waltham, Mass. LePage explained that if at least two employees participate in the program, it pays for itself, because employers can save up to 7.65 percent on their payroll taxes per participant.

Additionally, employers will save by lowering their turnover rate. According to a Society for Human Resource Management survey, it costs an average of $4,129 to hire a new employee and 42 days to fill a vacant position. Employers cannot risk losing thousands of dollars on hiring costs and over a month of lost productivity if a new hire's commute isn't manageable or cost-effective.

The Response from Employees

If companies have a robust commuter benefits plan, research shows that employees are much more satisfied in their jobs.

LePage said that at Edenred, which offers a shuttle service, a $75 subsidy toward transit costs and a pretax deduction option, "employees appreciate not having to worry about how they're going to pay for their commuting expenses."

The feedback on Bedrock's new commuter program has been positive, said Bopp, with more than 1,000 team members signing up to become carpoolers since last May.

When a company has a commuter benefits program in place, it communicates to employees that the organization is invested in them and wants them to be happy at their jobs.

"I think everyone agrees that it's a great perk and reason to work here," said Blacksmith. "It's also great to know that your company cares about you as an employee and how you get back and forth to home and work."

Kylie Ora Lobell is a writer living in Los Angeles.

Related SHRM Articles:

Commuting and Adoption Benefit Amounts Rise in 2019, SHRM Online, November 2018

Commuter Transportation Benefits Plan Presentation, SHRM Tools & Samples, September 2018


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