Reimbursing and Paying Correctly

LindaE

[font size="1" color="#FF0000"]LAST EDITED ON 11-12-04 AT 11:01AM (CST)[/font][br][br]We have two exempt salaried employees who worked at a branch office. Management closed that branch but has retained the two employees. Employee #1 drives a company truck (we pay for the vehicle, insurance and gas), and Employee #2 commutes in her own car.
Here's the situation: because that office no longer exists, our two employees routinely come to our office, a drive of approximately three hours one way, to work here. (Sometimes they work from their homes.) Both employees are being reimbursed for motel expenses, but Employee #2 is receiving nothing for mileage. She is also not being paid for the time spent travelling.
Sorry, folks, I have NO payroll experience and am just now starting benefits training. What are we doing wrong? Should we be paying them both to travel to and from our office? What mileage reimbursement should Employee #2 be receiving? Help-help! and thanks in advance!
Linda
PS: Employee #1 is a guy, #2 is a woman. Just how much trouble might we be in?

amwkim

My first question - why does only one have a company car?

2. What exactly does "routinely" mean?
3. Is 100% telecommuting an option?

LindaE

When that office was open, Emp. #1 would visit jobs and deliver construction material. He still does that from time to time.
Routinely means that the employees come to our office to work when they are told to. There is no set pattern. If they are needed here, they come. Some projects are very complicated and require supervision, and when those projects come up, they travel. A simpler or smaller project is usually done at their home and they communicate by phone and email. (They estimate and quote construction jobs.)
Telecommuting isn't an option (I've asked).

Rockie

Linda: I assume you are providing a company vehicle for the one employee because of the job they are performing. Because you closed the other office, both of them commute to the other office which has become their "home base". The IRS will not allow you to pay mileage for commuting back and forth to your home base.

Your choice here would be to provide a company vehicle for the other individual, increase their salary to cover the additional expense or...leave it as is.

pork1

You can not just leave it like it is! The one having a company vehicle must be keeping detailed records of usage of the company vehicle daily. On those times when he is coming to the central location if that is now the base, he should be accumalating a personal use and rewarded with income generated by the company vehicle in his possession for the month. Once an employee realizes this they will opt to give up the company vehicle and provide their own transportation.

Now, additionally, you need to check for the proper location of their base. It appears to me that their base reads like it is their homes from which they are called to the company base for particular projects and work. If the base is their homes, then you are right to pay the one milage and expense. There is nothing personal except meals for the male employee with company vehicle.

We currently have two complex managers that use their personal vehicles for company business. Their base is their home and the complex is their work station on which there are 4 work sites to spend their time. We pay them milage and meal expense.

PORK

KathiHR

To take what Rockie said one step further though, employees who drive company cars must pay for their personal mileage & that includes the commute to & from the office. The IRS will not allow the company to expense off all that personal mileage the employee put on the car. So technically, Employee 1 should be paying for his commute to & from work. It may be time to examine whether Employee 1 still needs a company car. If he does, he needs to be paying for his personal miles.

marc

[font size="1" color="#FF0000"]LAST EDITED ON 11-16-04 AT 12:13PM (CST)[/font][br][br]Kathi and Rocky have hit the nail on the head. Companies that provide company cars to EEs are supposed to make an adjustment on the EEs W-2 at the end of the year to account for the personal use of a company car. That number is supposed to be based on records kept of personal mileage, but is quite often percentage based. It shows up as an adjustment in gross wages and should result in some higher payroll taxes if it is done correctly. The fact that it is coming out of the pocket of EE #2 and does not hit EE #1 until tax returns are files gives the illusion the EE #1 has a better deal which in fact is the case. If both EEs received the same paychecks, EE #1 is receiving a net higher pay because of the use of the company auto. Of course, the difference is reduced a bit by EE #1's net effective tax rate.

LindaE

Thanks, everybody. I thought that increasing pay and making sure EE #1 paid for his commuting would be good solutions, but I particularly like the one about examing whether that employee needs the vehicle. I'll bring up your suggestions and see what happens. Thanks again!
Linda

Hunter1

[font size="1" color="#FF0000"]LAST EDITED ON 11-16-04 AT 02:17PM (CST)[/font][br][br]Edit: For some reason, only the first two responses were showing when I responded. Your question has been answered.