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How much time do your construction workers spend moving from site to site? Travel is simply a reality of the industry. But to protect your expenses, you need to make that travel a billable expense.
Here’s everything you need to know about mileage reimbursement for construction workers.
Mileage Reimbursement for Construction Workers: Is It Required?
If you work in the construction industry, you may be wondering what your options are for mileage reimbursement. When employees travel, they need to get paid. But do they need to get paid for mileage?
If employees are using a company vehicle, they will still need to get paid for their travel time. They won’t necessarily be reimbursed for mileage because they aren’t using their own car or gas, but you’ll need to track mileage so you can bill out your mileage to the customer—you will need to get reimbursed.
If your employees are using their own vehicles, it becomes slightly more complicated. According to the IRS, the standard mileage reimbursement rate is 58.5 cents per mile driven for business in 2022. Most construction companies will reimburse their employees the standard reimbursement rate.
There’s actually no federal requirement for mileage reimbursement, but there are different requirements for travel time based on state. The exception is if the costs of mileage would bring the employee under minimum wage—then the employee needs to be brought up to minimum wage.
There are only three states that require that companies reimburse their employees for mileage: California, Massachusetts, and Illinois. Still, because it’s standard for the industry, it’s often necessary to remain competitive.
How Will Rising Gas Prices Affect These Rates?
The IRS publishes its rates yearly. The current rates will be in effect until the end of the year. The rates do rise every year, so you can expect to see a regular increase in the IRS’s posted mileage amounts.
Not all employers pay the IRS’ mileage rates. Other employees pay the true cost for the employee by reimbursing the employee’s gas. This, of course, is a direct expense that will go up as gas prices rise.
Absorbing the Cost of Employee Mileage
So, who pays for the travel time of your employees? One way or another, it’s the client—but you may bill them either directly or indirectly.
Billing Mileage Directly to the Client (Reimbursements)
When you bill mileage directly, you need to track employee mileage and costs by project. When your client gets their bill, employee mileage and travel will be an itemized section of that bill. This is the easiest and most direct method of billing mileage to the client; your reimbursements should always match up with the employee’s actual mileage.
Billing Mileage Indirectly to the Client (Overhead)
On the other hand, not all clients want to be billed directly for mileage. But ultimately, that money still comes from somewhere. Rather than directly billing clients, you can also build travel into your overhead. The downside is that your estimations may not always be as precise—and if you underestimate your travel and mileage costs, you may not be able to recover them fully.
Sometimes, companies will bill clients directly or indirectly based on how extensive the project is or how much travel is actually involved. Either way, you need a clear picture of what your mileage will cost you when you work out your bids.
Tax Breaks Associated With Employee Mileage
If you’re a construction company, there are some definite tax breaks available to you when it comes to mileage. The most significant is that you can deduct employee travel expenses (including mileage) from your taxes. But to do so, you need to keep careful track of all your travel—including where your employees went and why.
Workyard can help by providing you with a complete, comprehensive list of employee travel. Whenever your employees are traveling (and logged into the app), the app will be tracking their movements. You can then use these accurate, GPS-powered reports as the foundation of your employee mileage reporting.
How Do I Calculate Employee Mileage for Taxes?
The IRS has a standard mileage rate that you can use to deduct employee travel from your taxes. The rate changes every year, so check with your bookkeeper or accountant first.
Can My Employees Claim Mileage on Their Taxes?
Yes, your employees can claim mileage on their taxes if they traveled for work-related purposes and they were not otherwise reimbursed for them. They’ll need to keep careful track of their travel, though, so they can provide documentation if needed.
Do I Have To Reimburse My Employees for Mileage?
There’s no federal requirement to reimburse your employees for mileage, but it’s standard practice in the construction industry. Some states do require reimbursement, so check your local laws first.
Track Mileage Reimbursement for Construction Workers With Workyard
If you’re looking for an easier way to track employee mileage, look no further than Workyard. Our GPS tracking app makes it simple and easy to track employee travel—so you can get the most accurate picture of your company’s mileage costs.
Key features Workyard offers that make mileage tracking easy:
- Accurate mileage is automatically captured with every time card, including a breakdown of every trip, and driving route and the mileage for that trip. No manual data entry by workers or your office is required.
- Mileage can also be also automatically allocated to projects based on driving destination.
- Convenient reports give you a summary of driving time and mileage by employee and project.
Even better, our reporting features make it easy to generate the reports you need for tax purposes or client reimbursements. Sign up for a free trial of Workyard today to track mileage reimbursement for construction workers.