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Understanding the intersection of field service work and Vehicle Reimbursement Programs (VRPs) is crucial for ensuring efficient operations and customer satisfaction. Field service work encompasses tasks such as installation, maintenance, repair, and calibration of various equipment and devices at customer sites, ensuring compliance with standards and optimal functionality. Meanwhile, field sales representatives play a pivotal role in building relationships with clients and recommending appropriate solutions.[1]
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 general field service operations, 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 field service industry.
Field service in various industries
Field service touches industries like sales, construction, finance, technology, medicine, security, and more, and can include services like installation, maintenance, repair, and delivery.[2] Field service technicians, for example, are responsible for ensuring that equipment is functioning correctly, meeting regulatory standards, and providing reliable results.
Field sales is a growing industry and involves everything from selling equipment, devices, and solutions to clients, playing a key role in building relationships and understanding client needs. Based on statistics from the Bureau of Labor Statistics, outside sales jobs, including those under field service, are projected to grow by 2% from 2020 to 2030, outpacing the average for all occupations.[3]
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 workers concerns mobility optimization, and in this regard, VRP software is an essential tool for field teams.
The field services’ use of software to assist with job function is expected to boom, with early reports indicating that software adoption across industries due to increase by 15% annually. According to one study, this is being driven by the demand for enhanced customer service and operational efficiency. [4]
Through effectively deployed software, workers can provide superior customer service, resolve issues faster, and generate comprehensive reports and analytics on key performance metrics.
Vehicle Reimbursement Programs as field service software
Vehicle Reimbursement Programs are important tools for organizations, particularly in industries where field service operations are prevalent. These programs are designed to reimburse employees for using their personal vehicles for work-related travel, including field service and sales activities. VRP software encompasses various functionalities such as mileage tracking, program management, and direct reimbursement payments.
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.
The role VRPs play in field ops:
Field Service
Field service technicians are often required to travel to customer sites for installations, repairs, and maintenance tasks. VRPs ensure that technicians are fairly reimbursed for expenses like fuel, maintenance, insurance, and vehicle depreciation incurred during work-related travel using their personal vehicles.[5]
According to FieldCircle, the top seven industries that can benefit from field service software are: oil and gas enterprises, HVAC companies, IT providers, facility management companies, retail companies, healthcare institutions, and manufacturing companies.[6]
These industries all rely on field operations and need efficient management of tasks, resources, and personnel across diverse locations. Field service software solutions like Cardata’s VRPs enable them to optimize operations, streamline technician dispatch, track assets, and enhance overall efficiency. From monitoring equipment in oil fields to managing IT services remotely, these industries require effective field service management to meet customer demands and maintain competitiveness amidst complex logistical challenges.
Sales
Sales representatives frequently travel to meet clients, conduct product demonstrations, and facilitate sales transactions. VRPs provide compensation to sales professionals for expenses associated with using their personal vehicles for business-related travel, ensuring they are fairly remunerated for their efforts.
In industries where field service and sales operations are prominent, implementing an effective VRP is essential to ensure fair compensation for employees who rely on their personal vehicles for work-related travel. These programs not only streamline reimbursement processes but also contribute to employee satisfaction and operational efficiency.[7]
Understanding the significance of VRPs in various industries highlights the need for organizations to implement effective reimbursement strategies tailored to their field service and sales requirements. By embracing VRP solutions, companies can effectively manage expenses, enhance employee satisfaction, and optimize operational performance.
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 reimbursement 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 vehicles, companies 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.[8]
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 not have their full vehicle expenses covered since 30% of the allowance is lost to tax.
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 reimbursement arrangement while also simplifying tax compliance and administration for employers. [9] [10]
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.
To learn more about Cardata’s VRP solutions, visit cardata.co.
Bibliography
[1] What are Vehicle Reimbursement Programs? | Cardata | https://cardata.co/blog/vehicle-reimbursement/
[2] What is field service? | Oracle Canada | https://www.oracle.com/ca-en/cx/service/field-service-management/what-is-field-service/
[3] Projections overview and highlights, 2020–30 | US Bureau of Labour Statistics | https://www.bls.gov/opub/mlr/2021/article/projections-overview-and-highlights-2020-30.htm
[4] Field Activity Management Market by Component | MarketsAndMarkets | https://www.marketsandmarkets.com/Market-Reports/field-activity-management-market-221015299.html
[5] Top 7 Industries That Can Benefit Most From Field Service Software | https:/www.fieldcircle.com/articles/field-serviceindustries/
[6] Fixed and Variable Rate (FAVR) Glossary | Cardata | https://cardata.co/favr-glossary/
[7] Tax-Free Car Allowances Attract Sales Talent | Cardata | https://cardata.co/blog/tax-free-car-allowances-attract-sales-talent/
[8] Fleets of company cars vs. FAVR reimbursement programs | Cardata | https://cardata.co/blog/fleets-company-cars-vs-favr-reimbursementprograms/
[9] A quick guide to taxable car allowances | Cardata | https://cardata.co/blog/quick-guide-to-taxable-car-allowances/
[10] Car Allowance vs. Mileage Reimbursement | Cardata | https://cardata.co/blog/car-allowance-vs-mileage-reimbursement/
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 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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