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August 11, 2008
Company's Gas Reimbursement Benefit Fuels Loyalty
When STS Telecom workers arrived home from work one Friday afternoon in June, they were pleasantly surprised to receive a $25 gas card from their employer in their mailboxes. The accompanying letter explained that the company planned to do even more to ease their pain at the pump: STS announced that it would reimburse each of its 75 employees $2 per gallon for the miles they drive to and from work.

With the cost of regular gasoline topping $4 per gallon, the announcement was obviously well-received. CEO Mark Amarant says he got about 45 emails and phone calls that weekend. "Everyone was thankful for it."

"During these hard times, this news felt like it was Christmas in June!" says Provisioning Manager Ron Curry, who was spending about $40 per week commuting between his home and Cooper City, Florida, where STS (www.ststelcom.com) is located.

A 6-year employee of this long distance provider, Curry says the new benefit made him even more loyal to the company. "At so many places, the boss does not care. These guys treat everyone like family, and this just reinforces my commitment to the company. I'm here to stay."

What Got Wheels Turning

While reviewing some company bills on a recent spring weekend, Amarant noticed that the company's costs to fuel its six vans had more than doubled. As he began to think about his own family paying more at the pump, he realized that all of STS's employees must be feeling the pinch.

With no public transportation near the office, all employees rely on motor vehicles to get to work, he says. Although no one had left the company due to high gas prices, Amarant feared that some employees might feel compelled to look for work closer to their homes.

"We just couldn't let it keep going the way it was going. These are the same people that helped us build the company up," he says, noting that STS has grown from a $3 million business to a $22 million business in 5 years.

After doing some research and learning that gas prices averaged $2.67 per gallon 2years ago, Amarant decided to reimburse employees $2 per gallon for their commute based on an average of 20 miles per gallon in gas consumption.

Any full-time employee who commutes daily and has worked for STS for at least 90 days is entitled to this benefit, which is included in employees' biweekly paychecks. In an effort to be fair to all employees, the company based the reimbursement on the actual number of miles that each employee drives to and from work--up to 150 miles per day, according to Amarant.

HR calculated each employee's daily commute through MapQuest® and included a printout with the gas card and the letter informing employees of the new benefit.

HR figured the exact amount each employee would receive per paycheck, using the following formula: Multiply an employee's actual mileage to and from work by 21 business days per month. Divide that amount by 20 miles per gallon. Multiply that figure by $2 per gallon. Add 25 percent to cover the employee's portion of taxes (since this benefit is treated as income for tax purposes). Multiply that amount by 12 months. Divide by 26 pay periods.

For example, an employee who lives 30 miles from the office would receive $157.50 per month, or about $72.70 per pay period, from this benefit: 60 mile round trip x 21 business days ÷ 20 miles per gallon x $2 per gallon = $126 + $31.50 (25 percent of $126) = $157.50 x 12 months ÷ 26 pay periods.

STS also introduced a new $250 incentive for employees who want to buy or lease a new model hybrid car.

Steering Down Road to Success Here are a few tips to keep in mind when setting up programs to help employees deal with rising gas prices:

  • Look at the big picture. When you consider how much you've invested in employees and the cost of replacing them, it makes sense to offset their commuting costs, Amarant says.
  • Determine what you can afford. If reimbursing employees for gas is not a realistic option for your company, look at more affordable alternatives such as telecommuting and condensed workweeks.
  • Consider tax ramifications.If you're adding money to employees' paychecks, remember that the money will be treated as taxable income.
  • Make it fair. You do not want complaints that certain employees benefit from a perk more than others.

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