Gas Stipends: How They Work and Common Questions

Unless your employees can walk, cycle, or take public transportation to your office, many will need to drive. And the cost of gas determines whether they can do so.   

Take the story of Jason, who works as a project manager for a tech firm. Jason is a highly skilled PM who is popular with clients and his team members. He gets results. But he frequently phones in sick on a Friday—not because he’s looking for a long weekend but because gas is expensive and he’s trying to save money on his hour-plus commute into the office. 

Jason risks losing his job unless his employer can turn this situation around by offering an increasingly popular benefit: the gas stipend. 

What is a gas stipend?

A gas stipend is a fixed sum of money that covers part or all of an employee’s fuel costs. The stipend is paid upfront into an employee’s account as part of their compensation package. Typically, this happens on a regular basis, for example, monthly. However, stipends may also be offered as an annual or one-off lump sum. 

Gas stipends are best suited for in-house companies that require employees to commute to work. Another use case is for roles where driving is expected as part of the job, such as traveling salespeople or those who frequently visit clients or job sites. 

Why offer a gas stipend?

Gas stipends are just one way to support your people by offering financial assistance toward their work-related journeys. Here’s why they’re worth adding to your benefits mix: 

Supporting the cost of living 

The cost of living has soared, with 67% of Americans worried about how they’ll pay for food and rising energy bills. Fuel costs form part of the increase, with the average cost of a gallon of gas rising from $2.19 in 2020 to $3.59 in 2023. 

Employers can lend a hand here, offering gas stipends that help employees sidestep financial stress and focus on being productive at work. 

Acknowledging the daily commute 

Tying into the cost of gas is the length of commute that your employees must make to attend the workplace. Based on Census Bureau data, the national average commute is 25.6 minutes for employees who do not work from home and are aged 16+ years. Assuming a round trip of two journeys per day, this equals 51.2 minutes in the car, which significantly eats into an employee’s work-life balance and bears a financial cost; the longer the journey, the more they’ll pay for gas. 

Looking at specific locations, New York City has the longest commute, with an average of 34.7 minutes each way, or 69.4 minutes for a round trip. 

Tempting workers back to the office 

According to Buffer, 98% of workers would like to work remotely, at least some of the time, for the rest of their careers. It’s no wonder then that organizations may find it challenging to persuade employees to attend the physical office, especially when working from home typically accrues fewer costs. 

Functional training manager Ross Eisenberg recently supported someone contemplating two job offers—one remote and one in-office. Although the in-person job paid more than the remote job, Ross broke down the finances of the commute to reveal the minimal difference in pay between the two:

“Driving 30 minutes to work likely means the distance is around 20 miles each way, given urban/suburban driving conditions. That’s 40 miles per day. Assuming a 5-day workweek, that’s 200 miles per week or approximately 800 miles per month. If the car averages about 25 miles per gallon, it would need around 32 gallons of gas per month (800 miles/25 miles per gallon). At $3.20 per gallon, the monthly cost for fuel alone would be about $102.40 (32 gallons * $3.20).”

Marketing and Communications Officer Hannah Anariba explains how designated gas stipends can be a solution here: 

“I have seen some employers offer to pay employees for their commute, which is such a great compromise for requiring employees to work in-office 5 days a week. Employers should offer a stipend for all employees who have to work in-office or allow employees to work from home more often to offset the rising costs of the commute.” 

Types of gas reimbursement

Gas benefits typically fall into two buckets: those paid upfront and those requiring employees to go through an admin-intensive reimbursement process. Here are some options to consider: 

Gas stipends 

The gas stipend model removes the administrative burden on employees and benefits departments. There’s no need to track gas costs or submit evidence to use their funds. Instead, employees receive a monthly gas stipend to afford fuel for their personal vehicle. Alternatively, they might receive it less regularly, for example, quarterly or annually, as a gesture toward the expense of running a vehicle for commuting. 

Gas cards 

Gas cards are convenient and quick to distribute without adding too much administrative burden for all parties. However, this option might require employees to fill up at certain gas stations and limit their choices. 

Fixed and variable rate reimbursements

Fixed and variable rate reimbursements, also known as FAVR or a fixed and variable rate allowance, are a popular non-taxable alternative to straight cash reimbursement for anyone who uses their personal vehicle for work. 

The FAVR combines a fixed monthly stipend with variable mileage reimbursements: 

• The fixed costs are based on the time the employee spends driving. 
• The variable costs are based on the number of business miles driven in that month. Employers will pay mileage reimbursement according to local gas prices. 

Cents per mile (CPM) programs 

A mileage reimbursement program may use a cents-per-mile rate to offer a fixed cost for every mile that an employee travels for work. The IRS mileage rate is currently set as follows: 

• 65.5 cents per mile for business use
• 22 cents per mile for medical or moving purposes for qualified active-duty members of the Armed Forces
• 14 cents per mile in service of charitable organizations

Taking the standard business use mileage as an example, if an employee drove 100 miles to a work conference, the employer would owe them 100 x $0.65 = $65.00. 

Employers who offer this approach require employees to track their business miles and submit a claim regularly to receive reimbursement. This method is relatively straightforward for employees, as there’s no requirement to calculate actual vehicle expenses. However, the cost can add up quickly for companies if employees drive long distances frequently. 

Curious about the other types of stipends you can offer to employees? We put together a guide to employee stipends to provide an overview of this popular employee benefit and offer inspiration as you design your stipend program. Download the guide to learn about the types of stipends available and how to design a successful program.

Are gas stipends taxable?

Gas stipends, vehicle stipends, and car allowances all fall under the category of compensation in the eyes of the IRS, meaning they are taxable income for employees. The only exception is if employers pay the stipend or reimbursements as part of a non-taxable accountable plan. 

This scenario requires additional documentation to support the stipend payment, including clear evidence that the employee uses it to pay for gas. If accounts are not managed accurately, employers and employees could face a penalty for underpayment or record-keeping errors. 

What to consider before you offer gas reimbursements

Whether you opt for gas stipends or reimbursements, there are some crucial points to consider before you roll out your benefits plan, such as: 

Inclusivity 

When crafting your benefits policy, determine who you’re offering it to and whether you’re taking an equitable approach. Ideally, you’ll offer your gas stipend to all employees who use their personal vehicles to attend the workplace. However, if this isn’t within budget, determine whether you’ll offer gas or car allowances based on your employees’: 

• Contract type: Full-time, part-time, or contractors
• Seniority: Managers or employees with a particular level of specialism or experience at the company
• Role: Essential roles that require frequent travel, for example, sales personnel or senior executives
• Tenure: Employees who have completed a minimum length of service before qualifying for the stipend
• Personal circumstances: Employees who live X miles away from the office 

Be transparent about the reasons for your approach so your employees understand why they’re eligible, or not, to receive this benefit. 

Communication and education 

If you plan to offer gas benefits, ensure that your policy includes the details of how it’s distributed and the steps your employee must take to receive the payment. This may include providing training in record-keeping or mileage-tracking tools. It’s also wise to outline the terms and conditions of your policy in an employee handbook so everyone is aware of what they can expect. For example, communicate details about its: 

• Frequency: Every pay period, monthly, quarterly, or annually 
• Conditions: Per miles driven for business purposes during work hours; based on a fixed number of miles per month; in conjunction with car insurance coverage and maintenance
• Amount: Based on local gas prices, a fixed amount per month to all employees, or a variable rate depending on distance from home to workplace

Challenges 

Gas stipends can attract and retain employees, but that doesn’t mean they’re the right fit for every organization. Some typical problems associated with this type of support include: 

• Directing employees to track their fuel usage costs: Unless an employer pays an upfront stipend, there’s admin involved for both employees and benefits administration teams in tracking and submitting expense reimbursement requests. 
• Differentiating between business and personal use: Employees may run personal errands during their commute, and it’s trickly to determine whether the mileage reimbursement rate should apply to these journeys.
• Determining whether to offer a more inclusive commuter stipend: Instead of a dedicated gas stipend, you might provide an all-encompassing commuter benefits program to cover other vehicle expenses, maintenance costs, and parking fees.  

State laws 

If you’re rolling out any type of benefits related to gas costs, be aware that your program must comply with certain state laws when reimbursing employees. Check out how the following states approach this: 

• Illinois: Employers are required to reimburse employees for all necessary expenditures incurred by the employee during their employment that are directly related to services performed for the employer. 
• ‍Massachusetts: Employees must be compensated for the travel time and all transportation expenses when required or directed to travel from one place to another after the beginning or before the workday’s close. ‍
• California: Employers must compensate their employees for necessary expenditures or losses incurred by the employee for completing their work duties.  

Only some states have specific laws, but it’s always worth consulting legal professionals before rolling out your stipend to ensure it complies with the regulations in your vicinity. 

How to provide a gas stipend using Benepass

At Benepass, we’ve built a benefits platform that simplifies the process of offering stipends like gas allowances. A lifestyle spending account (LSA) is a flexible solution that can support employees with their gas costs and other vehicle-related expenses. Employers fund the account with a set amount each month, and employees choose how to spend the money; some will put their allowance toward gas payments, while others may prefer to channel the funds toward another eligible category that better suits their lifestyle and circumstances. 

If you’re curious about how companies are formulating their LSAs, the 2023 Benepass Benefits Benchmarking Guide outlines the types of spending categories companies are including within their LSA programs, along with average stipend contributions by company size and industry. It also explores other types of benefits accounts such as WFH, professional enrichment, food, and phone/internet. Download the full guide to start benchmarking your benefits and assessing their competitiveness. 

Here’s how to set up your account in four easy steps: 

1. You’ll choose the eligible categories in your program; for example, you might add gas, parking, or vehicle maintenance.
2. We’ll code your unique policy into the Benepass platform and Visa Benecard. 
3. We’ll connect your payroll to Benepass to automate enrollment.
4. You’ll communicate your gas stipend policy to your employees and invite them to join our platform. 

Ready to level up your company benefits? Support your people with the cost of their commute by booking a Benepass demo today. If you have any queries, feel free to contact sales@getbenepass.com. Interested in exploring other types of stipends? Check out our comprehensive guides below: 

• Travel Stipends Guide: What You Need To Know
• Meal Allowance: What Employers and Employees NEED To Know
• A Guide to Work From Home Stipends (Work Stipends in 2023)
• A Wellness Stipend Guide For Employee-First Companies
• Cell Phone Stipend: A Win-Win Solution for Employers and Employees
• Offering Fertility Benefits to Your Employees: Everything You Need to Know
• How to Offer Tuition Reimbursement Benefits: Advantages, Complications, and 7 Steps to Success
• A Guide to Professional Development Stipends: 6 Reasons to Offer L&D Benefits
• 6 Types of Family Forming Benefits to Boost Workplace Inclusivity
• Technology Stipends: What, Why, and How