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14 mins

Vehicle Reimbursements in Field Service & Medical Device 

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Introduction

Understanding the intersection of field service work and Vehicle Reimbursement Programs (VRPs) in the medical device industry is crucial for ensuring efficient operations and customer satisfaction. Field service work encompasses tasks such as installation, maintenance, repair, and calibration of medical equipment and devices at customer sites, ensuring compliance with regulatory standards and optimal functionality. Meanwhile, field sales representatives play a pivotal role in building relationships with healthcare professionals and recommending appropriate medical devices and solutions. 

VRPs are essential in facilitating the travel required for field service technicians and sales representatives, reimbursing them for business-related travel expenses such as mileage, fuel, and maintenance. In this guide, we detail approaches to VRPs that offer customizable solutions tailored to the unique needs of the medical device industry, simplifying mileage tracking and reimbursement processes. Overall, the seamless integration of VRPs into field team processes enhances customer satisfaction, drives revenue growth, and maintains a competitive edge in the medical device industry.

What is field service work?

Field service work refers to any installation, service or maintenance activities that are performed on-site at a customer’s location rather than at a centralized facility. This type of work often involves technicians or service personnel traveling to customer sites to install, repair, maintain, or troubleshoot equipment, machinery, or systems. Field service and sales work is common across various industries, including medical device, manufacturing, telecommunications, utilities, construction, and more.

Field service workers are responsible for repair and maintenance activities, including inspections, preventive maintenance, and troubleshooting to address any issues promptly. Another crucial aspect is performing upgrades and modifications to enhance performance or compliance with regulations. Field service work plays a crucial role in ensuring customer satisfaction, minimizing downtime, optimizing asset performance, and maximizing operational efficiency for businesses.[1]

Field service and outside sales

Besides field service technicians, field sales representatives, or outside sales representatives, experience many of the same working conditions, traveling across the country to meet prospects and demonstrate or install products.[2] 

Sales representatives often conduct product demonstrations at customer sites to showcase the features and benefits of their offerings. These on-site demonstrations allow potential customers to see the product in action, ask questions, and make informed purchase decisions. Moreover, in industries where products require installation or setup, sales representatives may coordinate and oversee the installation process at the customer’s location. 

Field sales and service extend beyond the initial sale to include post-sales support and service. Sales representatives may follow up with customers after the sale to ensure their satisfaction, address any concerns or issues, and provide ongoing support and assistance. Face-to-face interactions in the field provide sales representatives with opportunities to build rapport and relationships with customers.

Field sales and service in medical device

The medical device industry in the United States is the world’s largest with 40% of the global market share and a trade surplus exceeding $1B.[4] In the medical device industry, both field service and field sales play vital roles in ensuring customer satisfaction, driving revenue, and maintaining product performance in this impressive and technical industry. 

Field service in the medical device industry involves tasks such as installation, maintenance, repair, and calibration of medical equipment and devices at customer sites, which can include hospitals, clinics, laboratories, and other healthcare facilities. Field service technicians are responsible for ensuring that medical devices are functioning correctly, meeting regulatory standards, and providing accurate and reliable results for healthcare professionals and patients. With the increasing complexity of medical devices and the critical nature of healthcare services, field service technicians in the medical device industry often require specialized training and expertise to handle advanced equipment and address complex technical issues.

Field sales in the medical device industry involves selling medical equipment, devices, and supplies to healthcare providers, including hospitals, clinics, surgery centers, and other healthcare facilities. Field sales representatives play a key role in building relationships with healthcare professionals, understanding their needs and preferences, and recommending appropriate medical devices and solutions to meet their requirements.

The benefits of field service software

Field service software provides numerous benefits to workers across industries. Much of the software immediately useful to field service and sales workers concerns mobility optimization, and in this regard, VRP software is an essential tool for field teams. 

Through effectively deployed software, workers can provide superior customer service by resolving issues faster, delivering personalized experiences, and upselling or cross-selling products and services during field visits. Field service software also generates comprehensive reports and analytics on key performance metrics, such as technician productivity, service response times, and customer satisfaction, enabling data-driven decision-making and continuous improvement.

Overall, field service software empowers workers to deliver exceptional service, optimize operations, and drive business success across industries.[5]

Vehicle Reimbursement Programs as field service software

Vehicle Reimbursement Programs (VRPs) are initiatives implemented by organizations to reimburse employees for the use of their personal vehicles for work, such as field service and sales activities. In the context of field service and sales, VRPs play a significant role in ensuring that employees are fairly compensated for the costs associated with using their vehicles for work-related travel.

VRP software comes in a variety of forms, including the following:

  • Mileage tracking software: technicians who use their personal vehicles for work are eligible for a mileage reimbursement program, and in order to log their business related work travel in their vehicle, they use a mileage capture application.
  • Business intelligence and program management: administrators who oversee programs need access to the relevant data and reports that allow them to supervise and analyze driving and payment patterns, and add and remove users from their program. Moreover, the business intelligence aspect of cloud management software allows program admins to determine the benefit that the VRP is having on their business, and see broad trends in their program.
  • Direct reimbursement payments: direct pay software lets users get their reimbursement on time.

Let’s examine the role of VRPs in both field service and sales. 

Field service

Field service technicians often travel to customer sites to perform installations, repairs, and maintenance on equipment or machinery. These technicians rely on their personal vehicles to reach customer locations efficiently and effectively. VRPs provide reimbursement to field service technicians for expenses such as fuel, maintenance, insurance, and depreciation incurred while using their personal vehicles for work-related travel.

By offering fair and transparent vehicle reimbursement rates, organizations can attract and retain talented field service technicians, ensuring that they have the resources they need to perform their jobs effectively and deliver high-quality service to customers. VRPs also help organizations manage costs by accurately tracking and reimbursing employees for actual mileage driven for work-related purposes, rather than providing fixed allowances that may not reflect the true cost of vehicle use.

Sales

Sales representatives often travel to meet with clients, conduct product demonstrations, and attend sales meetings and events. These professionals rely on their personal vehicles to travel to various locations and engage with customers.

VRPs compensate sales representatives for expenses incurred while using their personal vehicles for business-related travel, including mileage, fuel, parking, tolls, and maintenance.

Offering a robust VRP helps organizations incentivize and motivate sales representatives, ensuring that they are adequately compensated for the time and resources invested in driving sales and building relationships with customers. 

Vehicle Reimbursement Programs (VRPs) are essential in both field service and sales environments to ensure that employees are fairly compensated for the use of their personal vehicles for business-related travel. By offering fair reimbursement rates and accurately tracking expenses, organizations can attract and retain top talent, motivate employees, and drive business success in the dynamic field service and sales industries.

Medical devices, field service, and VRPs

Vehicle Reimbursements are growing in popularity and significance in the medical device field, especially where field sales and service workers are concerned. VRPs are crucial in the medical device industry, where field service technicians and sales representatives frequently travel to customer sites to install, maintain, repair, or sell medical devices.

VRPs repay employees for the use of their personal vehicles for business-related travel, including mileage, fuel, maintenance, insurance, and depreciation. By offering fair VRPs, medical device companies can attract and retain top talent in field service and sales roles, ensuring that employees have the resources they need to perform their jobs effectively and deliver high-quality service to customers.

To understand why implementing a VRP is so critical for medical device companies, it is important to understand the alternatives, to which we’ll turn now.

Fleets vs. VRPs

Let’s differentiate between fleets of company-owned vehicles and Vehicle Reimbursement Programs (VRPs), and discuss how VRPs can be more cost-effective than fleets, especially when the vehicles required are not specialty vehicles:

Fleets

Fleets of company-owned vehicles refer to a collection of vehicles that are owned or leased by an organization for business use. These vehicles are typically managed and maintained by the company, and employees are assigned specific vehicles for work-related travel.

Companies often opt for fleets of company-owned vehicles when they require specialized equipment or vehicles tailored to specific job requirements, such as utility trucks, delivery vans, or service vehicles with specialized equipment or branding.

While fleets of company-owned vehicles provide organizations with greater control over vehicle maintenance, branding, and standardization, they also require significant upfront investment and ongoing expenses, including vehicle acquisition costs, maintenance, insurance, and administrative overhead.

VRPs

Vehicle Reimbursement Programs (VRPs) compensate employees for using their personal vehicles for business-related travel. Instead of providing company-owned vehicles, organizations reimburse employees for expenses such as mileage, fuel, maintenance, insurance, and depreciation incurred while using their personal vehicles for work.

VRPs are particularly suitable for field service and sales roles where employees regularly travel to customer sites or meet with clients. By leveraging employees’ personal vehicles, organizations can reduce upfront costs and administrative overhead associated with managing a fleet of company-owned vehicles.

VRPs offer flexibility for employees, allowing them to choose vehicles that meet their personal preferences and needs. Additionally, VRPs can be structured to reimburse employees based on actual mileage driven for work-related purposes, ensuring fair compensation and cost control for the organization.

Why VRPs can be more cost-effective than fleets

VRPs can be more cost-effective than fleets, especially when the vehicles required for field service and sales roles are not specialty vehicles. Instead of getting into the car business by owning or leasing their own vehicles, organizations can leverage VRPs to reimburse employees for using their existing personal vehicles, thereby avoiding upfront acquisition costs and ongoing maintenance expenses associated with fleets.

VRPs also offer cost savings in terms of administrative overhead, as organizations do not need to manage vehicle acquisition, maintenance, insurance, or compliance for a fleet of company-owned vehicles. Instead, they can rely on standardized reimbursement rates and mileage tracking systems to accurately reimburse employees for work-related travel expenses.

Additionally, VRPs provide flexibility for employees, allowing them to choose vehicles that suit their preferences and needs, which can lead to increased employee satisfaction and productivity.

So, while fleets of company-owned vehicles may be necessary for specialized roles that require specialty vehicles, VRPs can offer a more cost-effective and flexible solution for field service and sales roles where employees can use their personal vehicles for work-related travel. By leveraging VRPs, organizations can reduce upfront costs, administrative overhead, and maintenance expenses while providing fair compensation and flexibility for employees.

Read more about fleets vs. vehicle reimbursement programs: Fleets of company cars vs. FAVR reimbursement programs

Taxable allowance vs. VRPs

Let’s next discuss the pitfalls of taxable car allowances and how they differ from tax-free Vehicle Reimbursement Programs (VRPs).

A taxable car allowance is a fixed amount of money provided to employees by their employer to cover the costs associated with using their personal vehicles for business-related travel. The key pitfall of taxable car allowances is that they are considered taxable income for employees. This means that the allowance amount is subject to federal, state, and local income taxes, as well as Social Security and Medicare taxes.

Since taxable car allowances are treated as income, employees may see a reduction in their take-home pay due to increased tax withholding. Additionally, employees may be required to report the allowance amount on their tax returns and may owe additional taxes if the allowance is not accurately accounted for.

Compare these to Vehicle Reimbursement Programs (VRPs), which are structured to reimburse employees for the actual expenses incurred while using their personal vehicles for business-related travel, such as mileage, fuel, maintenance, insurance, and depreciation.

Unlike taxable car allowances, VRPs are considered non-taxable reimbursements for employees. This means that the reimbursement amount is not subject to federal income tax, state income tax (in most states), or FICA taxes (Social Security and Medicare).

By offering tax-free VRPs instead of taxable car allowances, employers can provide employees with a more favorable tax outcome while also reducing the administrative burden associated with managing tax withholding and reporting requirements.

The key pitfalls of taxable car allowances include reduced take-home pay, tax reporting complexity, and compliance risks for both employees and employers. By contrast, tax-free Vehicle Reimbursement Programs (VRPs) offer employees a more favorable compensation arrangement while also simplifying tax compliance and administration for employers.

Read more about the differences between taxable allowances and VRPs: Car Allowance vs. Mileage Reimbursement | Cardata 

Cardata’s approach to VRPs

Cardata, as a provider of Vehicle Reimbursement Programs (VRPs), follows a philosophy centered around customization, efficiency, and simplicity. Cardata’s approach to VRPs is guided by the Design, Capture, Pay philosophy, which involves tailoring the program to the specific needs and preferences of each client, efficiently capturing mileage data using a mobile app, and facilitating direct reimbursement payments. Let’s break down each aspect of Cardata’s philosophy on VRPs:

Design

Cardata understands that every organization has unique requirements and preferences when it comes to vehicle reimbursement programs. Therefore, Cardata works closely with clients to design VRPs that align with their objectives, budget constraints, and compliance requirements.

Whether clients prefer Fixed and Variable Rate (FAVR), Accountable Allowance, or Cents per Mile (CPM) reimbursement structures, Cardata offers flexible solutions tailored to meet their needs. By customizing program design, Cardata ensures that clients can optimize their vehicle reimbursement programs to attract and retain top talent, enhance employee satisfaction, and drive business success.

Capture

Cardata simplifies the process of capturing mileage data by providing clients with a user-friendly mobile app that allows field teams to easily track and report their business-related mileage.

The mobile app seamlessly integrates with clients’ cloud management dashboard, allowing employees to record mileage accurately and efficiently while on the go, and administrators to analyze their trips and organize program details on command.

Pay

Cardata facilitates direct reimbursement payments to employees, ensuring that they are promptly and accurately compensated for their business-related mileage expenses. By leveraging direct deposit methods Cardata simplifies the reimbursement process for clients and employees alike. Direct reimbursement payments eliminate the need for paper checks or manual processing, reducing administrative overhead and streamlining the reimbursement workflow.

Cardata’s philosophy on VRPs revolves around customization, efficiency, and simplicity. By following the Design, Capture, Pay approach, Cardata helps clients optimize their vehicle reimbursement programs to meet their unique needs, efficiently capture mileage data using a mobile app, and facilitate direct reimbursement payments, ultimately driving employee satisfaction and business success.


Bibliography 

[1] What is field service? | Oracle Canada | https://www.oracle.com/ca-en/cx/service/field-service-management/what-is-field-service/ 

[2] Outside Sales: What They are, How They Work | https://www.investopedia.com/terms/o/outside-sales.asp  

[3] Consultative Selling: How to build deeper, personalized relationships with prospects |https://www.pipedrive.com/en/blog/consultative-selling

[4] Medical Device Industry Facts – AdvaMed | https://www.advamed.org/medical-device-industry-facts

[5] Top 7 Industries That Can Benefit Most From Field Service Software | https://www.fieldcircle.com/articles/field-service-industries/

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 or 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.

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