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Associate Member Viewpoint: How Often Should You Reimburse Employees for Mileage?
When driving from place to place is a big part of your employees’ work day, those mileage reimbursements can really add up. When and how often should you pay them out? You have no shortage of option to choose from:
- Monthly reimbursements, on a set day of the month, like the 1st
- Semi-monthly reimbursements, on two set days of the month, like the 1st and the 15th
- Bi-weekly reimbursements (every two weeks), on a set day of the week, like Fridays
- Weekly reimbursements, on a set day of the week, like Wednesdays
- Less than weekly reimbursements, e.g., every four days or even every day
- On demand reimbursements, whenever employees submit a report to get reimbursed
Ultimately, you need to balance operational efficiency and employee satisfaction when choosing the right schedule for each of your teams. To help you do so, we’ll walk through the pros and cons of more frequent (weekly, less than weekly and on demand) versus less frequent (bi-weekly, semi-monthly, monthly) reimbursements.
More Frequent Reimbursements
Reimbursing on at least a weekly cadence is a pro-employee move, giving them access to the reimbursements they’ve earned on a more regular basis. It’s an important benefit to employees, but unless you have the proper tools in place, frequent reimbursements could easily become an administrative time suck.
Advantages of More Frequent Reimbursements
Reduced financial stress
With 62% of consumers living paycheck to paycheck, it’s quite likely at least some of your employees face this situation. They may really need that reimbursement to fill up their gas tank, pay their insurance bill on time, buy groceries and more.
Reimbursing at least weekly ensures employees have a steady flow of funds to meet their financial obligations, helping them avoid the financial strain that can come with waiting for longer pay periods. A study by the Journal of Consumer Research showed that receiving pay more often allows employees to better plan for expenses and avoid financial stress.
It’s no wonder that earned wage access providers, who provide access to earned pay before the scheduled payday, have been growing in popularity.
Improved employee morale and retention
Living paycheck-to-paycheck cuts across many income levels, but even for employees who have sufficient savings, more frequent reimbursements are appreciated. 78% of consumers feel more satisfied when they receive instant payouts. Along the same lines, instant reimbursements can significantly boost employee satisfaction.
You can send a clear message to your employees that you care about them with how frequently you pay and reimburse, at a relatively low cost to you. In turn, employees are happier and less likely to leave.
Increased productivity
Both reduced financial stress and improved employee morale also contribute to worker productivity.According to PwC, financially stressed employees are nearly five times more likely to be distracted at work. Relieving this stress enables them to better focus on their work, which can lead to greater productivity.And the University of Warwick has shown happier employees are 12% more productive!5Xmore likely to be distracted at work if financial stressed
Challenges of More Frequent Reimbursements
Higher administrative burden
Each time you process a reimbursement, there’s typically some admin work involved – from reviewing the report and approving it, to issuing payment to an employee, to recording the payment in your accounting journal. So naturally the more often you reimburse employees, the more time and resources you will have to devote to it.
Without tools to streamline the work, more frequent reimbursements can put a strain on everyone involved, especially if you have a lot of employees on the road.
Cash flow impact
More frequent reimbursements means more frequent cash outflows from your business, which can be a challenge if revenue is inconsistent. You need to keep a close eye on your funds and ensure sufficient cash is available each time to meet your obligations.
Plus, depending on current interest rates and the total dollar amount of reimbursements, you could see a noticeable impact on your earned interest.
Less Frequent Reimbursements
Only reimbursing employees bi-weekly, semi-monthly or monthly creates less admin work, but the tradeoff could be your employees’ financial wellbeing.
Advantages of Less Frequent Reimbursements
Lower administrative burden
If you’re reimbursing bi-weekly, that’s only 26 reimbursement cycles per year. 24 per year if you’re reimbursing semi-monthly and of course, only 12 per year for monthly. The less frequent your schedule, the less admin time you have to spend on it – pretty straightforward.
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How much time that actually adds up to, though, depends on your process (do you carefully review and approve every report, or just the ones that are flagged?), your systems (do you outsource reimbursement payments or handle them in house?) and your team size.
More time for adjustments
Say there’s an issue with a prior reimbursement. If it won’t be at least another two weeks until the next reimbursement cycle, you’ve got additional time to correct the error in time for it to be reflected in the following reimbursement.
Or say an employee has fallen out of compliance. They have more time to upload their documentation showing they’re compliant before it impacts their next reimbursement.
Challenges of Less Frequent Reimbursements
Employee stress
Employees may find it more difficult to effectively manage their finances when they have to stretch their reimbursement over two weeks or more. Budgeting becomes critical, but may be a struggle.
60% of full time employees are stressed about their finances, which leads to a whole host of negative effects, including on their sleep and mental health, that can in turn hurt work productivity.
Turnover
Financially stressed employees are less engaged at work according to many measures, like how much they feel they belong at your company. And that translates to them being less likely to feel like they have a future there and more likely to be looking for another job.In fact, financially stressed employees are twice as likely to be job hunting compared to their non-financially stressed counterparts. What’s attractive to them? An employer that cares more about their financial wellbeing than what they currently feel they get.2Xmore likely to be job hunting if financially stressed
More off-cycle payments
Sometimes, an employee has a hard time waiting until the next reimbursement to get paid. They forgot to submit a report during the last cycle and are close to running out of money for gas, for example.
The longer the stretch until that next reimbursement, the more inclined you may feel to grant an exception and pay them “off cycle” ahead of the next scheduled payment timeframe. The problem is these off cycle payments create extra admin work. And because they’re an exception, you could easily forget some mileage has already been paid and accidentally double reimburse employees for the same trips during the next reimbursement cycle.
So, what is the best reimbursement frequency?
The short answer is, it depends. The best reimbursement frequency depends on the specific needs of your business and employees. Are employees financially stressed? Or are managers already over-burdened with too many admin tasks?
In addition to taking into account the advantages and disadvantages discussed above, another consideration is your payroll frequency. You may want to align the two, so if you pay employees weekly, you also reimburse them weekly. Or if you pay biweekly, reimburse them biweekly, and so forth.
Having the two on the same schedule can make it easier for everyone to remember. Employees can submit their time cards and reimbursement reports at the same time, and managers can also review them at the same time, ensuring the two line up.
According to the U.S. Bureau of Labor Statistics, biweekly payments are the most common, with 43% of U.S. businesses using this schedule. Meanwhile, 27% of businesses offer weekly pay, which many employees prefer because it offers quicker access to their earnings.
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But what if there is a way to give employees the financial flexibility of more frequent reimbursements without adding to your admin burden? This best-of-both-worlds scenario is where Everlance can help.
Everlance accelerates mileage reimbursement
While more frequent reimbursements still require some level of management, Everlance significantly streamlines the process with workflow automations. You can set up company-specific rules to quickly flag, approve or reject reports that meet your reimbursement policies, cutting the time it takes by up to 90%.
Then, Everlance can take care of reimbursement payments on your behalf, so you don’t add to the admin burden of your accounting/payroll team. And you can choose any schedule you like; it doesn’t have to align to your current payroll schedule if you want something different.
Our latest innovations even allow for on demand reimbursements, and make the funds available to your employees in just four seconds, instead of the standard four business day wait.
You can achieve all the benefits of more frequent reimbursements – reduced financial stress, improved employee morale and retention and increased productivity – with few downsides.