Inside the Average Monthly Vehicle Allowance for Construction Workers

The Real Story Behind Construction Travel Pay

Did you know the typical construction worker in North America now receives a total of around $975 a month for travel? On the surface, that looks like a simple number, but it encompasses a mix of reimbursement and cost types. 

Construction companies are feeling cost pressures from all directions. They have to keep experienced employees happy in a skill-based competitive market, but at the same time they’re stuck with tight project budgets. Even a small change, say $50 in a monthly car allowance per driver, can tip the balance. It might decide if an employee sticks around or if a project bid comes in high or low. That’s why leaders are paying more attention to travel pay, looking for options that are fair, tax compliant, and strong enough to help them win and keep talent.

Breaking Down the $975 Benchmark

Of the total, around $680 goes to fixed ownership costs such as insurance, depreciation, license and registration fees, and taxes. The other $295 accounts for variable expenses like fuel, tires, and maintenance, of course, ranging based on mileage and geographical location.Together these pieces add up to an average reimbursement of $975 per employee each month for a typical construction company.

Since fixed and variable costs behave in unique ways, a lot of construction companies are turning to reimbursement programs that split them apart. This approach not only keeps reimbursements fair, it also satisfies IRS rules and gives employees confidence that the money they receive is truly theirs, and tax-free, as long as the right records are kept.

How Location Shapes Reimbursement

A national benchmark of $600 per month might seem like a fair starting point, but it falls apart once you look at real job sites. In places like Pennsylvania and Illinois, higher operating costs quickly push reimbursements above that mark (https://cardata.co/blog/pennsylvania-mileage-reimbursement/, https://cardata.co/blog/illinois-mileage-reimbursements/). In Florida and Texas, the opposite happens. A lower cost of living keeps most average fixed payments under $600 (https://cardata.co/blog/florida-mileage-reimbursement/, https://cardata.co/blog/texas-mileage-reimbursement-rate-rules/). 

In California, the picture looks different again. State law requires employers to cover business mileage, so compliance is not optional. Add in some of the highest gas prices and insurance premiums in the country, and reimbursements rise well above the national average. For companies with drivers in California, programs like FAVR provide a way to keep payments tied to actual costs while staying compliant and tax-free (https://cardata.co/blog/california-mileage-reimbursement/).

What Really Drives Costs

Several factors make costs vary from month to month. The first is fuel. Even a small change at the pump adds up quickly, and that alone can shift monthly costs (https://cardata.co/blog/tips-improve-fleet-management/). Insurance is another factor. You’re likely paying for 100% of the insurance of your company-managed fleet, and it’s probably the most expensive insurance plan in the market(https://cardata.co/blog/fleet-vehicles-real-cost/). Depreciation also plays a role. Heavy-duty construction trucks lose a big chunk of their value as soon as they leave the lot, which explains why the fixed portion of allowances is larger than in other less specialized industries (https://cardata.co/blog/wear-and-tear-car-allowance/). 

Turning Flat Allowances into Smarter Reimbursements

FAVR works better than a flat car allowance because it pays for both the fixed costs of owning a car and the variable costs of driving it. That means payments match real expenses instead of being just a “good guess”. Companies that switch to FAVR often save around 30% (https://cardata.co/blog/the-employers-guide-to-favr-car-allowances/). On top of that, using mileage tracking apps saves each driver about 42 hours of paperwork a year, which is basically an extra work week freed up for more important project work (https://cardata.co/blog/drivers-benefit-mileage-reimbursements/).

Making Reimbursement Work for You

Travel allowances are no longer just a “nice-to-have” benefit. Done right, they protect company margins and help keep employees happy. Using the $975 average as a reference point is a good start, but it’s only part of the story.

Real costs shift depending on region and project type, which is why more construction organizations are moving to FAVR programs that the IRS already recognizes. With FAVR, reimbursements feel fair to employees and still save companies money.

If you want to see what this looks like for you, connect with Cardata. Our reimbursement specialists can walk you through the numbers and show you how to turn travel costs into a real advantage for your team. 

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants nor agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.