IRS Raises Mileage Reimbursement to 55.5 Cents Per Mile
Posted July 11, 2011

With the surge in gas prices in the first half of 2011, the IRS has raised the mileage reimbursement rate, effective July 1, 2011, to 55.5 cents per mile, up from 50.5 cents. Note that a few years ago the state of California formally adopted the IRS rate as its “reasonable” rate. If a California employer deviates from this standard, it would have to show that the lower rate is “reasonable” under the circumstances. Failure to meet that burden of proof could subject the employer to additional actual expenses associated with employees driving their own vehicles on company business, such as having to reimburse for auto insurance. Reimbursing employee mileage by simply increasing pay or higher commission rates, without separately designating the amount intended for mileage reimbursement, increases your exposure.

Employers should also review their mileage reimbursement and travel time policies to ensure that employees who travel on company business, even if locally on a daily basis, are properly reimbursing for travel time other than regular commute time. This can be problematic in industries such as construction, in which crews may travel beyond their normal work radius on a particular day. Both mileage (for personal vehicles) and travel hours are likely to be compensable. Watch out also for crew members who voluntarily “hitch a ride” to a job site but who have performed even minimal services while at a yard or staging area. You may be required to pay them from the yard to the work site, and back. Note that travel time can be paid at minimum wage, but that should be clarified in writing up front. If overtime is worked on a day when both travel time and regular work is conducted, and the rates are different, the “blended rate” method for calculating overtime is California’s chosen method.