The purpose of mileage reimbursement is to cover the costs that an employee incurs while using their personal vehicle for business purposes, such as fuel, maintenance, and depreciation. It also encourages employees to use their personal vehicles for business trips and helps reduce the company's expenses associated with providing company-owned vehicles.
Here's how mileage reimbursement for a company-owned vehicle might work:
1. Employee Usage: An employee uses their personal vehicle for business-related travel, such as visiting clients or attending conferences.
2. Expense Reporting: The employee keeps a record of the miles traveled for business purposes and reports it to the company. This might involve submitting a mileage reimbursement form or using a mobile app to track mileage.
3. Reimbursement Rate: The company sets a mileage reimbursement rate, which could be the IRS standard mileage rate or a custom rate determined by the organization.
4. Calculation of Reimbursement: The company multiplies the reported miles by the reimbursement rate to determine the total reimbursement amount.
5. Payment to Employee: The company reimburses the employee for the calculated amount through their regular paycheck or a separate reimbursement process.
This way, the employee is compensated for the expenses incurred while using their personal vehicle for business purposes without the company having to provide and maintain a company-owned vehicle.
