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What are Commuter Benefits?

Why are commuter benefits a necessary part of doing business in the 21st century?

In a time of changing trends, commuter benefits offer businesses a creative way to attract top talent and improve employee job satisfaction.

A growing number of businesses, including both established enterprises as well as start-ups, have been choosing downtown locations in major metropolitan centers in recent years. This signals a reversal from previous patterns, which saw the suburbs and city outskirts favored over the central core.

Experts point to several reasons for the trend. Some cities are offering aggressive tax benefits to businesses that choose downtown locations in an effort to rejuvenate their flagging cores. Others, meanwhile, are earning commitments from businesses because downtown areas are easily accessible and dynamic, with a wide range of activities and amenities for employees to enjoy outside of working hours.

There’s also another angle to consider: the downtown cores of big cities are usually where the top available talent can be found. Attracting the best people is one of the keys to the long-term success of any enterprise, and a company’s location can be a game-changer for prospective employees when weighing job opportunities with otherwise equal merit.

These trends have direct tie-ins with transportation demand management, for both practical and competitive reasons. With people changing the way they get around, more and more companies are positioning themselves within easy distance of major commuter hubs and public transit. Employees, especially young millennials just entering the workforce, consider a lot of factors beyond just the opportunity at hand when deciding whether or not to accept a particular job offer. Millennials are also well-known for preferring to align themselves with companies that share their values. And in cases where wage and salary offers are roughly equal, benefits can tip the scales one way or the other.

This is where commuter benefits enter the equation. Commuter benefits are a powerful tool for building a positive company culture and creating the kind of workplace people are proud to be a part of. They also help foster a more equitable environment while addressing the practical, everyday needs of commuters. Properly managed, they are also effective tools for change and promoting all the benefits that come with encouraging people to get out of their cars and use alternative modes of travel.

With that in mind, here’s a detailed look at what commuter benefits are, why they’re important, and how businesses can make them an effective part of their employee commuter management strategies.

What Are Commuter Benefits?

Commuter benefits can take a lot of forms, but the many different programs out there all have one thing in common: they are voluntary, employer-sponsored initiatives that offer incentives to employees who use alternative modes of transportation to get to and from work.

Tax incentives are among the most common and straightforward type of commuter benefits. To encourage more people to use smart options like public transit, ridesharing, and vanpooling, the Internal Revenue Service recently updated and expanded its tax-free benefits program. Under the new tax rules, employees and businesses both win.

Here are the basics of how these programs work:

Employees can set aside a specified portion of their pre-tax earnings to pay for their commutes. To qualify, commuters have to use one or more approved modes of transportation, which include public transit, ridesharing, and cycling. Parking costs may also qualify if the vehicle is used as part of a carpool.

This portion of the employee’s pre-tax earnings is not counted towards his or her income, meaning the employee isn’t taxed on it. Actual savings vary from state to state, but under federal rules, tax experts estimate that employees can save as much as 40 percent on their daily travel costs by participating in an employer-sponsored commuter benefits program. In many cases, the commuter’s take-home pay also goes up, since they are no longer taxed on the income they earmark for commuting, which is money that ends up getting spent either way.

Businesses benefit through payroll tax savings. Because the money employees are spending on their commutes are not counted towards their income, companies can shed those dollars from their payroll tax obligations. According to statistics gathered in late 2016, American-based businesses that participate in commuter benefits programs are saving an average of 7.45 percent on their payroll taxes.

Creative companies can also offer other commuter benefits, including:

  • Free or reduced-cost transit passes. Offering fully paid or subsidized passes for local transit networks is an excellent way to incentivize the use of public transportation. Commuters who use them can save big on vehicle maintenance, insurance and fuel costs, all while helping reduce pollution and traffic congestion.
  • Game-ify commuting. Create friendly company-wide competitions and track the number of journeys made using alternative modes of transportation, and/or the number of miles logged. Keep track of the top individuals or teams using leaderboards and offer prizes or other incentives to the victors.
  • Incentive programs for commuters who use alternative modes of transportation. Businesses can also use more loosely structured incentive programs that simply reward commuters for choosing smarter ways of traveling between work and home. For example, a company might offer a free gift card to a popular local business or restaurant to every employee that logs a minimum number of public transit commutes during a given month, quarter, or year.
  • Employee-sponsored carpools and vanpools. This is an increasingly popular strategy for businesses that aren’t easily accessible via public transportation. Employer-run carpool programs that link like-minded commuters can lead to major cost savings. Company-sponsored vanpools are a convenient, cost-effective way to link company facilities with local transit hubs and encourage commuters to leave their cars behind.

An endless number of permutations and variations are possible, and some of these programs can also help companies and employees qualify for additional tax benefits beyond those specifically designed for commuter management. Businesses are free to create any type of commuter benefits program they like. These examples are just some of the most common.

Why Are Commuter Benefits Important?

Commuter benefits programs are a major way that forward-thinking businesses can move towards the kind of positive, community-oriented company culture that really connects with employees, especially younger ones. As mentioned, culture is just as important as the perks and fringe benefits that come with a job, and these factors can make all the difference during the hiring process.

These types of programs are also major drivers of behavior change, which can otherwise be tricky to implement in cases where commuters are firmly entrenched in their single-occupancy vehicle habits. They get people thinking actively about alternatives while creating financial, social, and professional incentives to use other modes of transportation. Increasing amounts of research are also showing that commuter benefits programs are linked to higher levels of both job satisfaction and overall life satisfactions.

Commuters who use public transit, carpools, vanpools, or bike or walk to work, are also more likely to report lower levels of stress and higher levels of workplace productivity. Thus, businesses that adopt commuter benefits programs are making a major investment in the quality of their workforce, all while reducing payroll tax obligations and helping employees take home more pay each month.

Not only do commuter benefit programs increase employee satisfaction and productivity, the behavior change such programs can create also has a positive impact on employers’ concerns such as limited parking availability and increasing parking costs.

Commuter Benefits Are Equitable

Another advantage of well-designed commuter benefits programs is that they are equitable and non-discriminatory. It’s important to note that while some employees will own and prefer to use single-passenger vehicles to get to work, others choose not to. In some cases, this is because a person can’t afford to purchase, insure, and maintain their own car.

However, this may also be a matter of preference. For example, consumer research shows that fewer and fewer millennials are opting to buy their own cars. This is partially because they have grown up with the sharing economy all around them, and have been quick to adopt ridesharing services like Uber and Lyft or carsharing programs like Zipcar. It’s also partly due to their heightened awareness of the toll cars take on the environment.

Commuter benefits are a great unifying tool because they offer incentives to employees regardless of what mode of transportation they opt to use. This, in turn, ensures that everyone has equal access to the tax breaks available through the IRS, and to whatever other benefits the company decides to offer.

How to Make Commuter Benefits Part of Your Company’s Program

Businesses that are looking to start a commuter benefits program should begin by researching current employee travel habits. Look at what alternatives are practical, given the company’s location. Consider, for example, the proximity to local or regional transit hubs, and whether or not it would be well-served by a vanpool or employee carpooling program. Then, add to this information-gathering process by performing surveys that query commuters about their habits and their theoretical willingness to consider alternate modes of travel.

Then, expand the scope of the program beyond IRS-mandated tax benefits, and customize the plan to include other incentives that are a good match for the company’s culture. Consider factors like eligibility requirements, proper and improper usage guidelines, dollar limits, and cut-off dates, with an eye to creating as fair, accessible, and equitable a program as possible.

Remember: incentives get people excited, particularly when they’re money-oriented. They also give commuters that all-important nudge they so often need when trying out a different way of getting to and from work.

Enhanced Support for Commuter Benefits Initiatives

Your efforts at providing benefits and changing behavior can be made much easier with commuter management tools like Gohio Commute. Replete with highly useful and customizable features, businesses can use the Gohio Commute platform to create and administer employee carpool networks, track benefits, manage incentive programs, distribute surveys, monitor program progress, and much more.

Interested in setting up a network for your business or company?

Email us at gohiocommute@eastgatecog.org to get started