The hidden cost of home to work mileage

I speak with many organisations who tell me that the deduction of home to work mileage is part of their expenses policy but is not managed with their current manual processes. Some employees will be good corporate citizens and do this automatically, some will have never have read the expenses policy (even though they tick the box stating they have read it, when all the really checked is if they can fly business class and what the allowable hotel rate was…….), and some know that it is something that is not monitored and will claim for it anyway.

There is a lot of confusion when it comes to establishing what trips are eligible for the deduction, i.e. if you go the office first and then go to a meeting, or if you go straight to the meeting venue but pass the office, or if the meeting venue is nowhere near the office, this again is another reason why organisations put it into their policy but struggle to enforce it.

The deduction of home to work mileage actually represents a significant saving for many of the organisations I speak to. There are a few different studies that show the average commute varies from 14-19 miles, but the general consensus seems to suggest it is roughly 17 miles in the UK.

- If we take an organisation that processes 1500 expense claims per month and we assume that 500 of those claims contain eligible home to work deductible mileage claims

- and assume there are 2 line items of mileage on those 500 claims

- this means 1,000 line items eligible for home to work deductions per month

- 1,000 line items @ 17 miles = 17,000 miles per month or 204,000 miles per year

- if we assume the re-imbursement rate is ￡0.40

- it could mean a potential saving of ￡6,800 per month or ￡81,600 per year

This is using rudimentary figures for explanation purposes. Your teams average commute may be shorter than 17 miles, you may have significantly less line items of mileage per month, it may be more, what is clear is that if you do not have an effective mechanism for managing the automatic deduction of home to work mileage then you are almost certainly leaving money on the table. Our teams can quiet easily do an assessment by doing a sample survey of commute distances and coupling this with a sample audit of expense claims to identify the number of mileage line items. This should give us a reasonable estimate of on the saving potential.

We would suggest taking some time to think about how you articulate this process change to your teams to ensure that it does not cause friction. Some members of your team may see this as a way of reducing the amount they are reimbursed and taking cash out of their pocket, so effective communication and change management is important when considering how to enforce change.

Get in touch with a member of our team to start a review to identify how much this change might save you and explore the best methods for handling the change management required.