A according to a recent Automotive Fleet survey, 91 percent of responding fleets allow personal use of a company-provided vehicle, a figure up from recent years. A common lament among many fleet managers, however, is the effort expended to boost driver compliance with vehicle use and reporting policies. How to motivate, cajole, or admonish drivers to submit, in particular, mileage information, data important to so many fleet management cost factors?
A review of successful personal use compliance programs reveals common practices:
● Well-defined, clearly stated policies.
● Targeted and repeated communications.
● Consistently applied consequences.
At UGL Unicco, a Boston area-based facilities maintenance services provider, fleet manager Pete Belloli employs several tactics to maintain reporting compliance.
The company deploys a 625-vehicle fleet for service, sales, and operations management functions. The fleet includes primarily cargo vans and pickups, with sedans, box trucks, dump trucks, and shuttle buses.
Belloli relies on his leasing company's reporting program for mileage data files. All applicable drivers must enter their data monthly. Salaried sedan drivers' incomes are inputted quarterly on W-2 forms, although that process may change. "We are discussing charging drivers via payroll deduction, a certain amount per week," said Belloli.
Currently, he sends a reminder e-mail each quarter, alerting drivers they need to report their mileage. In addition, the leasing company e-mails drivers whose data is missing for the previous quarter.
Drivers who miss reporting personal use data are charged a penalty; 100 percent of mileage in the missing month(s) is inputted as personal use. This practice "has a significant motivating effect on timely data submission by the drivers," Belloli noted.
"To keep drivers honest," Belloli reviews the percentages of reported personal mileage. "Those drivers reporting low percentages are asked to confirm the numbers and to document why personal usage is so low," he said.
Incorporate in Fleet Policy
"You need to ensure drivers fully understand the importance of mileage reporting," suggests Kevin O'Loughlin, fleet services manager for pharmaceutical company Sepracor, headquartered in Marlborough, Mass. Ranking among the top 300 commercial fleets in Automotive Fleet magazine's Fleet 500 list, Sepracor's sales fleet comprises 1,500 vehicles.
O'Loughlin has incorporated mileage reporting compliance into Sepracor's fleet policy to clearly communicate to fleet drivers the importance of consequences for noncompliance. "With compliance in policy, it can lead to disciplinary action by driver's management during employment reviews," he said.
Drivers are charged a monthly personal use fee. Totals are reconciled at year's end, and "more is added to their W-2 if the computed value is higher than what we have deducted," O'Loughlin explained.
Drivers are penalized for not reporting. Like Belloli and other fleet managers, O'Loughlin also considers mileage in unreported months as 100-percent personal use at the year-end reconciliation.
O'Loughlin takes other steps to ensure driver awareness of personal use policies, including:
● Requiring drivers to confirm annually that they understand the data reported will be reported to the IRS as taxable compensation.
● Requiring drivers also to confirm annually their understanding that if they are audited, they are responsible to provide support for the personal use data they have reported.
● Sending quarterly e-mail reminders to noncompliant drivers reinforcing the personal use policy.
William Forsythe, fleet administrator for ADP, utilizes a series of communications to help maintain driver compliance with personal use policies.
The Roseland, N.J.-based company provides outsourced business management services, including human resources, payroll, tax/benefit administration, and computing. The company fleet of more than 2,500 vehicles includes cars, light-duty trucks, and SUVs.
Drivers are charged a monthly fee, deducted from their paychecks.
Forsythe reminds drivers to report mileage through:
● A monthly, personalized Microsoft Outlook "out of office assistant" notice.
● Quarterly newsletters.
● E-mail blasts to all drivers.
● Personal e-mail reminders to drivers who have not reported in more than 90 days.
● A dedicated end-of-year reminder newsletter to inform drivers of the tax consequences for nonreporting.
Employ Multiple Methods
"At Orkin, we use a multidimensional approach to ensure vehicle-use compliance," reported Mike Reynolds, fleet director for Rollins, parent company for a number of pest control and protection subsidiaries, including the well-known Orkin.
Headquartered in Atlanta, the nearly 7,000-unit Rollins fleet comprises primarily light-duty trucks and several hundred cars.
Orkin currently charges for personal use in two use categories - Private and Restricted, according to Reynolds.
Private use permits a driver personal use of the company vehicle during nonworking hours. For an additional fee, the driver's spouse can also operate the vehicle, Reynolds explained. "Restricted use allows a team member to drive the vehicle back and forth to work only. In most cases, both categories have an associated charge depending on job classification," he added.
Reynolds partners with several internal departments to ensure compliance to policies.
Orkin's risk department uses telematics/GPS to identify after-hours driving, runs annual MVR reports on drivers and spouses, and maintains a point system for infractions by driver.
The company's auditing department confirms drivers have completed the appropriate forms and are charged correctly for personal use. The payroll department sends a report listing Private or Restricted driver personal use mileage to senior management to review for errors and omissions. Finally, Orkin's field administration support group ensures drivers re-sign the appropriate documentation annually.
"Using multiple methods and departments to enforce compliance, Orkin is more likely to catch infractions and ensure conformity across the company," said Reynolds.
'A Responsibility, Not an Option'
As national procurement manager for Univar USA, a leading chemical distribution company headquartered in Redmond, Wash., Robin Robinson is no longer active in day-to-day fleet activities. However, he draws from past fleet experience to recommend best practices in promoting personal use compliance.
The IRS stipulations are clear-cut; any unsubstantiated miles must be considered personal and thus subject to the rules accounting for such use as an employee benefit, with the value of the use taxable to the employee, Robinson explained. "And the IRS is pretty specific on what is considered business, versus commuting, versus personal use."
He advised publishing for driver distribution a copy of company policy outlining IRS regulations, commute rules, and IRS rules governing personal use calculations. Emphasizing that company policy is driven by IRS policy and procedures forestalls the impression the company was simply being miserly, "taking away a benefit," Robinson pointed out. This awareness "pretty much eliminates pushback or arguments. Company drivers will complain to the IRS, not the company."
Another tactic promoting personal use compliance Robinson has used is sending drivers monthly reminders and statements of their individual reporting status, "thus providing ample notice to make a correction to a past statement or be subject to additional taxes." These reminders were sent through the company's fleet management provider.
"Unfortunately for the few employees who failed to report properly, due to the reporting year of November to October," Robinson recalled, "the additional taxes were taken out of the employee's December paycheck, an unwelcome Christmas present." In these cases, he noted, most employees quickly completed their reporting, and the company removed the tax assessment. An emergency check was issued, "but only after their senior management was made aware of the failure to comply. Needless to say, compliance significantly increased to virtually 100 percent after a few years of reporting," said Robinson.
He summarized the critical components of personal use compliance programs:
● Establish policy consistent with IRS rules, regulations, and procedures.
● Use IRS guidelines to facilitate support from HR and other critical departments (make the IRS the "bad guys").
● Be reasonable, fair, consistent, and firm in implementing the policy.
● Communicate, communicate, communicate. "People do forget and get side-tracked. A reminder is nice."
● Outsource to a fleet management service provider. "It will more than pay for itself."
"A company's greatest asset is its reputation gained partially through value, integrity, and ethics," noted Robinson. "Compliance is a responsibility, not an option."