For many household, executive/personal assistance or child/family-care employees, driving may be an integral part of your role. If you do have a vehicle, and are asked by your employer to drive your own car on the job, mileage reimbursement is a topic you’ll soon want to become familiar with and address with your direct report. For inexperienced staff, formalizing something like this may seem awkward or unnecessary, especially if you have a great relationship with your future or current employer, but any experienced nanny, assistant, house manager, etc. will tell you that this is an important employment factor to address as early in your employment relationship as possible.
The federal mileage reimbursement rates are set and defined by the Internal Revenue Service (IRS) each December for the following year, and these standardized rates are used to calculate the cost or reimbursement amount for individuals who operate their own vehicle for business, charitable, medical or moving purposes. For 2023, the IRS reimbursement rate is 65.5 cents/mile.
Staff who are required to use their personal vehicle to accomplish their work duties are entitled to ask for reimbursement for every mile they drive while on the job (not including your commute to and from work). This includes any of the following: transporting children to and from school, running errands or shopping for an employer, picking up your employer or someone they have asked you to drive, etc.
How Does The IRS Determine These Rates?
The IRS mileage reimbursement rate for business-use is based on an internal study of the fixed and variable costs of operating a vehicle. The IRS uses that information to set a standard per-mile rate that covers all costs incurred when driving one’s personal car for work use, including gas, oil, tires, maintenance, and repairs, and the fixed costs are the cost of insurance, registration, depreciation, and lease payments.
So, not only does the IRS rate cover far more than just your gas, but it is also intended to compensate you for the wear and tear of transporting goods or people in your car, more frequent oil changes and tire rotations, and general upkeep as needed to keep your car running in top condition. Just as importantly, the IRS rate is intended to help cover the costs of your annual vehicle registration and your auto insurance, including covering the cost of a business rider if your state requires it (this varies by state, so if you don’t know if you legally need to have a business rider to be insured when driving for business use, call your insurance agent and ask!)
It’s important to point out that federal law does not currently require employers to reimburse employees directly for mileage, and only a small handful of states legally require employers to use the IRS reimbursement rate. That said, it is still best practice in our industry for employers to offer their staff the IRS mileage reimbursement if they require them to use their personal vehicle for work-related duties.
It is absolutely within your rights to ask your employers to honor the IRS rate, emphasizing to them that mileage reimbursement is fundamentally intended to cover more than just gas. If they’re not willing to budge and insist that they’re only willing to reimburse at a lower rate, only you can decide if you feel comfortable moving forward. Since paying the IRS rate can be optional from a legal standpoint, your employers can offer a lower reimbursement rate or other means of reimbursing, but this agreement should feel fair, appropriate, and sustainable long term.
Other Options
Another popular option for reimbursement that doesn’t follow the straight “miles × rate = cash” formula is to agree on a higher hourly rate, which includes compensation for the staff member’s mileage. The downside of this is that both parties are on the hook for increased taxable income, as the higher hourly rate is treated the same as the employee’s income otherwise. Some families will instead have their staff fill their gas tank with a family-provided credit card once or twice a week, or will load funds on a gas station gift card for their staff to use. A downside here is that the employee is not being reimbursed for other costs, such as wear-and-tear on their vehicle, insurance, etc. Another common option is paying staff a weekly mileage stipend, which is a flat rate per week based on an average of miles driven (e.g., an extra $100 per week to cover an average of 150 miles driven weekly). Or, to avoid the need for mileage reimbursement altogether, an employer always has the choice to provide a vehicle for their to use while on duty. The key is, again, that the agreement you reach feels like appropriate compensation for using your personal vehicle at work.
When you address mileage reimbursement with your employers, be prepared and remain professional. If you were placed by a professional agency, vehicle use and mileage reimbursement should have already been addressed, but if your work duties have changed, and you feel uncomfortable having this conversation directly, you may politely refer your employer back to the agency you were placed with for advice on best practices on this topic.
If you do feel comfortable having this conversation yourself, provide information about the IRS rate and what it’s intended to cover, and let your employer know how you would prefer to have mileage reimbursement handled going forward. Whether you accept the rate they offer, negotiate for a higher rate, or compromise on a different means of reimbursement that feels fair, make sure you have this agreement added to work your work agreement. Include all of the terms for reimbursement, including how you will track miles (a physical calendar, a shared Google doc, in an app, etc.), how often you’ll turn them in for reimbursement, and how the reimbursement will be paid. If you find you’re not able to meet a fair compromise with your employers, you may have to decide whether it’s best for you to stay committed to the employer, or if it’s best to find a new position that follows industry-standard practices.
Whatever the outcome, be proud of yourself for doing your research, seeking advice, and having hard conversations with your employers. You deserve to be treated as a professional and valuable employee, and being empowered to advocate for yourself will ensure that you are treated well throughout your career.
