We all recognize how much benefits impact our efforts to recruit, hire and retain top talent. Here's one benefit you may not have considered: helping employees with commuting costs.
Commuter benefits allow employees to deduct money
for commuting and parking needs from their paycheck before taxes and place funds in a specified account. Eligible expenses include public transportation such as ferries, trains, subways and buses, and parking meters, lots and garages. Contribution rules allow them to lower their taxable income by electing funds to be set aside for this purpose, paying less tax on salary.
A company should consider their workforce before offering this type of benefit. Employees located in the middle of metropolitan areas with many train and bus stops would benefit from this more than suburban or rural employees. Here are some basics pros and cons.
There are several options for employees to access commuter accounts.
If you are considering offering this benefit, follow these tips.
An employer can either work through their current broker or find a new TPA (third-party administrator) to implement commuter benefits. It never hurts to sign up for one year to see the response of your employees. Don’t just create the plan and let it idly operate throughout the year; make it a part of your onboarding
presentation and tell your current employees how it can help them.
When employees elect to set aside money before taxes are paid, employers also save money. When an employee lowers taxable income, employers pay a lower amount of tax too. For example, having to pay 7.65% on a paycheck of $800 is less than on a paycheck of $1,000. Savings across many employees could be substantial.
Benefits to offering this plan are not strictly monetary. Having employees use public transport lowers the company’s carbon footprint and adds to sustainability efforts. While some employees are not open to driving 45 minutes from their house to work, they may be more open to riding a train for a similar amount of time, leading to attracting and retaining more talent.