Mileage Reimbursement FAQ

By Kathryn O'Connor, PHR, SHRM-CP, CCP, GRP, Director, Compensation Services
Published February 7, 2023

Q: What is employee mileage reimbursement?
Employee mileage reimbursement is the practice of paying employees for expenses associated with driving their personal vehicles for business purposes. 

Q: Do I need to reimburse my employees for mileage?
Yes. Illinois enacted an Expense Reimbursement Act on January 1, 2019 that requires employers to reimburse employees for “all necessary expenses that are incurred by the employee within the employee’s scope of employment and that are directly related to services performed for the employer.” 820 ILCS 115/9.5(a). This includes mileage incurred for business reasons (excluding the employee’s regular commute).

Q: Can you provide some examples of when employee mileage reimbursement would be required?
Nearly all travel performed during the workday is subject to mileage reimbursement. For example, field service technicians using their personal vehicles to visit multiple client sites within the course of the workday need to be reimbursed for all miles driven beyond their typical commute. 
Employee mileage reimbursement is also required when employees run errands on behalf of the organization – whether going to the bank, the post office, or the store.
Finally, mileage reimbursement applies when employees drive their personal vehicles to out-of-town conferences or business meetings, where the distance traveled is longer than their daily commute to the office. 

Q; How do we track milage incurred?
Although sophisticated GPS tracking systems are available, most employers use reimbursement spreadsheets and/or their payroll system’s expense reimbursement portal to track mileage expenses. Employees typically submit their miles driven and may be required to submit supporting evidence such as odometer readings.

Q; At what rate do we reimburse mileage?
Employee mileage reimbursement is calculated at a per mile rate. The IRS tracks the price of gas, vehicle repair and maintenance costs, vehicle registration fees, insurance rates, and other factors related to vehicle ownership. The IRS publishes a standard mileage reimbursement rate that is designed to cover all these costs. Most organizations choose to use the standard IRS mileage rate. As of the 1st of January 2023, the IRS standard mileage reimbursement rate is 65.5 cents per mile.

Q; Does my organization need to use the IRS standard mileage reimbursement rate?
Although it is advised to use the standard IRS rate, it is not required. Some employers require employees to keep track of actual travel-related expenses, but this is administratively burdensome. Alternatively, some employers choose to reimburse at less than the IRS rate. In this scenario, the employee may be eligible to claim additional business mileage on their personal tax return filing.

Q; Can you share a few sample scenarios with calculations?
John lives in Downers Grove, Illinois, and commutes to Lisle, Illinois (7 miles away). John is required to go to a business conference in Rosemont. How much mileage reimbursement is owed?

Scenario 1:
Multiple employees have been asked to attend the conference, so arrangements are made to meet at the office in Lisle so employees can carpool together. John drives to Lisle (like any other day) to meet with his carpool group. He does not drive to the conference; he is a passenger in another vehicle. No mileage reimbursement is owed.

Scenario 2:
John meets his carpool group and he drives himself and colleagues to the conference in his personal vehicle. John tracks his mileage from their office in Lisle to the convention center in Rosemont. 21 miles are logged. Using the IRS mileage reimbursement rate, John is owed 21 miles @ 65.5 cents per mile (the current IRS mileage reimbursement rate) = $13.76 for the trip to the conference. Assuming he also drove the group back to the office in Lisle, the same amount would be owed for the reverse trip.

Scenario 3:
John is given permission to drive himself to the conference. To save time and gas, John leaves directly from his home instead of going to the office first. Mileage from John’s home in Downers Grove to the conference in Rosemont is 16 miles, but he must subtract the 7 miles of his typical daily commute. So, 16 – 7 = 9 reimbursable miles. Using the IRS mileage reimbursement rate, John is owed 9 miles at 65.5 cents per mile, a total of $5.90 for the trip to the conference. Assuming he also drove from the conference directly back to his home, the same amount would be owed for the reverse trip.

We hope this helps clarify employee mileage reimbursement requirements and practices. As always, HR Source members with questions should contact us through the HR Hotline online or at 800-448-4584.