Mileage: Overview, definition, and example
What is mileage?
Mileage refers to the distance traveled by a vehicle, often used as a metric for calculating reimbursement for work-related travel, determining vehicle usage costs, or monitoring wear and tear. In contracts or policies, mileage is typically associated with expense reimbursements for employees or contractors who use their personal vehicles for business purposes. Employers often set reimbursement rates per mile, aligned with regulatory standards or internal policies.
For example, an employee traveling 100 miles for a business meeting may be reimbursed at a standard rate of $0.65 per mile.
Why is mileage important?
Mileage is important because it provides a clear and measurable standard for reimbursing employees or contractors for vehicle-related expenses incurred during business travel. It ensures fairness, transparency, and compliance with tax or regulatory guidelines.
For employers, properly tracking and reimbursing mileage helps maintain accurate records for tax deductions and compliance. For employees, it ensures they are fairly compensated for out-of-pocket expenses related to business travel.
Understanding mileage through an example
Imagine a sales representative uses their personal vehicle to visit clients across a region. The company’s policy reimburses employees at the IRS standard mileage rate (e.g., $0.65 per mile). After driving 500 miles in a month, the employee submits a mileage reimbursement claim for $325 (500 miles × $0.65/mile).
In another example, a company leases vehicles to employees for work use. The lease agreement includes a clause limiting annual mileage to 15,000 miles. If the employee exceeds this limit, they are charged an additional fee per mile over the limit.
An example of a mileage clause
Here’s how a mileage clause might appear in a policy or agreement:
“Employees who use their personal vehicles for approved business purposes shall be reimbursed for mileage at the rate of [rate] per mile. Reimbursement claims must be submitted monthly and include detailed records of dates, destinations, and distances traveled. The reimbursement rate shall be adjusted periodically to reflect changes in applicable regulations or Company policy.”
Conclusion
Mileage is a crucial metric for calculating travel reimbursements and managing vehicle use in business contexts. For employers, clear mileage policies ensure compliance with tax regulations and maintain employee satisfaction. For employees, such policies provide fair compensation for travel-related expenses. Including well-defined mileage provisions in agreements or policies promotes transparency, accuracy, and accountability in managing travel-related costs.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.