Variable Reimbursement

Variable reimbursement is the per-mile portion of a Fixed and Variable Rate (FAVR) program that compensates drivers for costs that increase with mileage.

FAVR reimburses employees for the real, business-required cost of owning and operating a personal vehicle for work. The variable portion is designed to cover expenses that change based on how much a driver uses their vehicle, such as fuel, maintenance, and general wear and tear.

Variable reimbursement is calculated by multiplying a per-mile rate by the number of business miles driven during a given period.

In a FAVR program, this per-mile payment works alongside a fixed monthly reimbursement, which covers costs like insurance and depreciation. Together, these two components provide a more complete and accurate picture of total driving costs than mileage-only or flat allowance approaches.

Variable rates are typically based on standardized vehicle profiles and regional cost data, including factors like fuel prices and vehicle efficiency.

By aligning mileage reimbursement more closely with actual driving activity, variable reimbursement helps keep payments fair, consistent, and reflective of real-world expenses.