California Mileage Reimbursement in 2024: A Complete Guide
Emily Maina
Last update on:
May 21, 2024 10:20 AM
Published on:
It is important for businesses, particularly those with employees who travel frequently, to understand how to reimburse for mileage. Whether you employee salespeople that drive to meet customers, delivery drivers making rounds, or construction workers working at different job sites, miles can add up quickly.
This guide will cover everything you need to know about California mileage reimbursement, including the current rates, how to calculate reimbursement, and important legal requirements as per the California Labor Code 2802.
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California Labor Code 2802 On Mileage Reimbursement
California is one of three states that require mileage reimbursement. Employers are mandated by law to pay back their workers for any business expenses they may have incurred while driving their personal vehicles.
According to the California Labor Code section 2802, employers should compensate employees for "all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”
The strict labor regulations in this state are designed to protect California workers from having to foot the bill for work-related expenses. The expenditures of using a personal vehicle for business travel are also included in the reimbursement expense.
For instance, if you send your staff to pick up supplies, you are in charge of paying them back for both the items they bought and the mileage they traveled to complete this assignment.
Here are examples of additional travel expenses related to work that are also eligible for reimbursement:
Driving to meet with clients
Making deliveries to customers
Traveling from one work site to the next
Providing services at homes, such as home healthcare
Making trips to financial institutions for work-related tasks
Other than travel expenses, this California law requires employers to pay employees for other work-related expenses such as:
Work uniform costs
Training costs
Fees for participating in conferences
Cell phone bills for making work calls
Toll costs incurred during work-related travel
Employers will encounter legal consequences if they do not adhere to California reimbursement regulations. The law defines "necessary expenditures or losses" as "all reasonable costs." It states that these costs may include legal fees an employee incurs when enforcing their rights.
Is Mileage Reimbursement Taxable in California?
Employee mileage reimbursement is tax-free for employers in California. However, this applies as long as what you’re paying your employees for travel is not more than the standard mileage rate.
If your reimbursement rate is less than or equal to the IRS mileage rate, it is a fully deductible expense. As of 2024, the IRS mileage rate is 67 cents per mile for business use.
In order for the vehicle reimbursement to be valid and tax-free, you must provide proof that the mileage incurred was for business use. By keeping a current log of every business trip's date, destination, and mileage, your business remains compliant with IRS standards.
Mileage logs used to be kept on paper or in Excel spreadsheets. Today, more individuals are using the best mileage-tracking apps to automate mileage tracking. If you’re still using manual logs, check out our free mileage log template to help you meet documentation requirements.
Calculating Mileage Reimbursement in California
If your company is located within the state of California, there are four methods you can use to determine reimbursement totals. Per the Gattuso v. Harte-Hanks Shoppers case, the California Supreme Court determined that these methods are compliant with Labor Code 2802.
These methods include:
Business Mileage Reimbursement
Actual Expense Method
Lump-Sum Method
The FAVR method
Let’s take a closer look at each of these.
Business Mileage Reimbursement
The Business Mileage Reimbursement method requires employees to log all work-related mileage to be compensated at the company’s mileage rate. Typically, businesses use the standard mileage rate to calculate vehicle expenses. This is a very popular reimbursement method as it protects both the employer and the employee.
Remember, in most cases, your company violates section 2802 by paying less than the current IRS rate. To legally pay less than the Internal Revenue Service suggests, you’ll have to prove that the employee’s vehicle costs are less than the established IRS rate, which is a strenuous task.
On the other hand, if an employee feels that their expenses are higher than the rate issued by the IRS, they also need to prove that vehicle operating costs exceed it.
To make sure everyone is on the same page, it is best to create a policy that outlines your company's reimbursement process. You can use our free mileage reimbursement policy template to get started.
As its name suggests, this calculation method is based on employers reimbursing their workers for actual business-related expenses. It requires employees to record the exact expenses they’ve paid or losses they’ve incurred while using their personal vehicles for work-related purposes. These costs include purchasing fuel, vehicle depreciation, and costs of maintenance.
This method is the most accurate, but it’s also the most cumbersome. Recordkeeping requirements are time-consuming for employees. Additionally, disputes may arise over the California Labor Code 2802 statement that expenditures need to be reasonable and necessary.
For example, the grade of gasoline employees use can be challenged. The same goes for the mechanic where they take their vehicle for maintenance. Although it is the most precise method, the actual expense method can cause headaches to both parties involved.
Lump Sum Method
This calculation is also known as a “gas stipend.” Employers will pay their employees a fixed monthly amount to cover their costs for using personal cars for business purposes. With this method, employees don’t have to log miles driven. For employers using the lump-sum method, providing employees with the compensation they’re entitled to requires less effort.
This method is frequently chosen because it is relatively simple for both parties. It only requires employers and employees to agree on the set price. Once arrangements are in place, employees receive a car allowance, gas allowance, or per diem payment.
Still, California employers need to be careful about the reimbursement amount issued. They must fully compensate the employee for the actual costs of operating the vehicle. Otherwise, the employer may find themselves in violation of state labor laws.
Another thing you need to be aware of is that fluctuating gas prices can affect the lump sum’s value and make it inadequate. According to the California law, workers have the right to question the amount they are being given and demand that it be aligned with the gas market’s prices.
The FAVR Method: Fixed and Variable Rate Reimbursement
The FAVR reimbursement method is a hybrid model that splits the costs of using a personal vehicle for business-related purposes into fixed and variable expenses. Fixed costs include insurance rates, while variable costs encompass gas prices.
This calculation's advantage lies in its accuracy, as it reflects the actual and current prices. In addition, instead of using the state or national averages, gas prices are compensated according to local prices.
When properly implemented, the FAVR model can avoid issuing over- or underpayment to workers. It’s also important to note that reimbursement under this method is non-taxable, just like the IRS mileage reimbursement rate.
How Can Timeero Help Me Stay Compliant With the California Mileage Reimbursement Law?
Using Spreadsheets and paper mileage logs as mileage tracking tools presents a host of problems. They are often redundant, labor-intensive, and prone to errors. Additionally, they take up a lot of time that your staff could be spending on other productive duties.
Timeero offers a reliable mileage tracker that can precisely track mileage for work and provide IRS-compliant mileage logs. Taking advantage of Timeero’s robust features is the best way to remain in compliance with California's mileage reimbursement requirements.
Let’s examine the app’s capabilities to see how Timeero makes it easier for you to remain compliant.
Real-Time GPS and Mileage Tracking
Keeping an eye on your employees and holding them responsible for the mileage they report can be a hassle, but Timeero makes this task easy. You can enable mileage tracking for workers who are on the go, and once they clock in, the app begins to record their miles.
Mileage tracking on Timeero.
Timeero starts tracking mileage when the speed of movement goes above 4.47 miles an hour. This ensures that time spent in traffic or walking is not counted toward mileage. If you prefer to use a different speed threshold, you can customize this in your account settings. The software picks up GPS location and records time stamps at every 150 feet.
Personalize tracking settings on Timeero.
Timeero's offline GPS mileage tracker continues recording mileage even in locations with sporadic network access. This feature ensures that every work travel trip is documented, no matter where an employee is.
The tracker only records data pertaining to an employee's work hours. This means that it stops tracking when they clock out, safeguarding their privacy. Explaining this to your employees would be a great idea, especially when introducing the app to prevent employee pushback.
The Who's Working dashboard allows you to see where each employee is during work hours. This comes in handy when you want to verify that an employee is headed where they should be, as you can view their movement in real time.
Timeero’s Who’s Working dashboard.
Segmented Tracking
Timeero's Segmented Tracking tool allows you to observe how your team members spend their working hours. It summarizes business travel information, including time spent on particular tasks, location, and the length of each journey.
Using this feature is easy, as your staff only needs to sign in at the start of their shifts. The app will handle tracking and documents all required driving information for you.
Segmented Tracking on Timeero.
Commuter Mileage
Apart from its extensive mileage tracking features, Timeero provides a special and useful feature called "Commuter Mileage." This function simplifies mileage classification for businesses. We cover this more in detail in our article on commuting mileage reimbursement.
Timeero takes into account your employees' commuting distances when you assign job destinations to them. When an employee reaches the commute threshold, the software starts recording business mileage automatically. This guarantees that the mileage reported is solely associated with travel for work-related purposes.
Mileage Charging
When calculating mileage reimbursement, accuracy is important. Timeero lets you set up a per-mile rate in your settings to compute mileage costs.
Once you’ve configured the rate, the software automatically gives you the total cost amount, eliminating the need for any manual input. This not only saves time but also ensures that your figures are accurate. You can even choose your preferred currency on the software, so you don’t have to worry about working with exchange rates if you don’t use USD.
Customizing cost per mile on Timeero.
Additional Expenses
Timeero allows businesses to track extra charges independently, enabling them to control every aspect of mileage reimbursement. Employees can attach a note or a photo of a receipt to their timesheet, making sure that all the specifics of their toll expenditures are recorded.
An admin or manager can examine the note that an employee adds to their timesheet if, for example, they are required to pay a parking fee. If it checks out, the employee will then be reimbursed for that expense.
Employees can add notes and attach photos to time cards.
Route Replay
In addition to providing you with real-time insights into your team members' locations, Timeero lets you see the routes they took during work hours by displaying a virtual trail. This breadcrumb trail promotes accountability for your business.
Each crumb is like a location marker, and when you hover over it, you’ll see the speed and timestamp recorded at that particular point. You will be able to tell whether someone drives excessively fast or takes longer routes. This enables you to promptly resolve any concerning issues and prevent unwanted behavior.
Timeero’s Breadcrumb feature.
Signatures
Timeero encourages you to hold your staff accountable with its Signatures feature. Employee timesheets include information about how long an employee spent at a job site, as well as the distance they drove during their shift.
These timesheets can be digitally signed by the relevant employee for verification purposes. To confirm that your employee finished tasks at the worksite, you can have multiple clients sign the timesheet.
Adding a mobile signature (Employee view).
Suggested Route
The Suggested Routes tool in Timeero increases efficiency and accountability even more. Workers can compare the recommended route with the one they actually traveled.
Using the suggested route promotes adherence to best practices among staff members by encouraging careful driving and time management skills.
Timeero’s Suggested Route feature.
Historical Records
Disputes sometimes arise when compensating employees for mileage. For example, an employee might claim that they covered a certain number of miles and were paid less than what they were supposed to. The best way to address such claims and prevent a lawsuit is to have a record of all trips and mileage details.
With Timeero, you have access to all necessary records. As we mentioned above, every timesheet has clock in and clock out details, as well as the number of business miles covered during that shift. It also has information on any breaks taken or overtime hours worked.
An employee timesheet on Timeero.
You can also generate specific reports, such as mileage reports, which come in handy when proving that you are compliant with California Labor Code 2802. This information is securely stored for four years in the event you need to access reports and documents.
Mileage reports on Timeero.
Integrations
Timeero integrates with several software options. These include Zapier, Vieventium, Gusto, Rippling, Paychex, Xero, Paylocity, and ADP. With multiple options to choose from, you can select the software that best suits your existing business needs.
By enabling integrations, the mileage data you track in Timeero can automatically flow into your payroll software. By automating the transfer of mileage data from Timeero to payroll, you eliminate the risk of typos or mistakes. This ensures your employees receive accurate reimbursements based on the correct mileage.
Timeero integrations.
Simplify California Mileage Reimbursement With Timeero
Now that you understand California Labor Code 2802 and its mileage reimbursement requirements, the next step is to fulfill your obligations while remaining compliant.
Because of its automated tracking feature, Timeero is a very useful tool. Using Timeero's mileage-tracking features is the most ideal way for employers to reimburse their California employees while also guaranteeing legal compliance.
FAQs
What Is the California Mileage Reimbursement Rate in 2024?
Employers have the flexibility to choose a reimbursement rate, but most choose to adhere to the standard mileage rates established by the IRS for business-driven miles. This rate is adjusted annually to reflect fluctuations in fuel costs and other operational expenses.
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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