Commuter Benefits: A Total Guide to Pre-Tax Transit Benefits
Business owners of every kind find themselves in need of consistent and creative innovation. Whether that creativity is used towards developing new products or marketing strategies, building teamwork in-house, or simply discovering the most sensible resources like payroll and human resource benefits solutions.
Even creative decisions, however, can be practical. In order to run a successful business, employers must strike a balance, finding benefits that affect the organization and its employees fairly and positively. One example is commuter benefits.
Of course, healthcare, retirement plans, and paid family leave are common benefits that businesses offer to their staff. However, commuter benefits represent one way in which employers are finding fresher ways to modernize their employee benefits to fit the needs of their staff and their business.
Let’s break down the ways pre-tax commuter benefits can improve employee and employer standings for the success of the organization.
What are Commuter Benefits?
Commuter benefits assist employees with costs associated with travel, or commute, to and from the workplace. Those costs could include public transit, parking, ridesharing, or other forms of travel for commuters.
Along with the variety of uses, employers can offer them in a broad range of ways to ensure it fits with their business or their employees’ preferences. Commuter benefits can be covered through transit passes, debit cards, vouchers, or many other means.
This process is commonly done using pre-tax dollars, saving employees money on taxes each year. A pre-tax commuter benefit reduces the amount of taxable income in the employee’s paycheck, keeping more money in their wallet, in addition to helping the employer’s financial situation, too.
The key to an effective benefits package is one that balances employee advantages and efficiency in employer costs.
While the concept of commuter benefits generally assists employees with an essential part of life, it can also provide employers with benefits as well.
According to Bay Area Rapid Transit, the public transit authority for the Oakland and San Francisco area, employers and employees are both incentivized to take part in commuter benefits. The BART website’s scenario says employers could save roughly 7.5 percent in payroll taxes on the amount the employee sets aside, making it less expensive for the company to offer an employee $255 in transit benefits than a $255 raise.
Attracting An Expanded Talent Pool
Professionals across the spectrum of industries consider many factors when deciding on the best workplace for their situation.
As companies across the nation — and even beyond United States borders in some instances — vie for the top talent in their trade, benefits packages have become one of the leading factors in that race to out-hire the competition. While competitive salaries and top healthcare and retirement benefits have long been among the top benefits in consideration, commuter benefits are quickly becoming another opportunity to provide utility in their lives.
By eliminating, or at least minimizing, commuting costs from the equation, business owners can often cast a broader net and attract a wider range of prospects in the hiring process.
Boost Consumer Loyalty
In addition to the cost-saving effects for both employers and employees, along with the possibility of an improved work culture, there are tangible benefits in the marketplace as well.
Studies have shown that a large majority of consumers will be “more loyal to” (88 percent) and “more likely to trust” (92 percent) a company that supports environmental issues.
Commuter benefits fit in those categories by incentivizing more environmentally-safe commuting options such as ridesharing or public transit. It’s entirely possible that the business will improve its standing with employees or prospects, and also with the general public that sustains the business’s viability.
Understanding Local Ordinances
As commuter benefits gain popularity and become more common, many cities around the country have fully embraced the idea.
Much like the Bay Area’s local ordinances discussed above, a growing number of states and cities are now requiring certain employers to offer commuter benefits. As of now, these mostly include locations that have transit systems already set in place, such as New York City, Washington DC, New Jersey, and Seattle. These sorts of requirements are often targeted towards businesses of a certain size.
With these ordinances and requirements beginning to pop up throughout the nation, it will soon be imperative for business owners to understand how those local laws may affect their operation.
In addition to that knowledge, employers deciding to offer this benefit should understand the totality of what they can provide. The designation of what qualifies for pre-tax commuter benefits depends on IRS guidelines and current tax laws, we recommend consulting with your tax advisors.
Ensuring that commuter benefits have their desired effect is one of the many reasons outsourcing payroll services for the management of these benefits may be attractive, allowing payroll professionals to guide businesses through the decision process and future implementation.
Originally published on PayrollVault.com.