Commuter Benefits: Why Offer Them?
When you’re busy hiring, running payroll, and getting shifts covered, it can be hard to prioritize things that seem like extras. Getting commuter benefits for your employees, for example, might be something you’d love to check off your to-do list but might not seem mission critical. That is, unless you’re in the state of New Jersey.
New Jersey is the first state to pass a commuter benefit ordinance. This means that employers with 20 or more employees must provide those employees with commuter benefits. Providing commuter benefits means that your employees have the option to allocate part of their paychecks, pre-tax, to their transit spending. Unlike 401(k) or health benefits, this benefit is funded by employees’ earnings, there should be no cost to employers to provide this benefit.
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Because this benefit is funded by employees’ earnings, there should be no cost to employers to provide this benefit. In fact, employers can actually save on payroll taxes when they give employees commuter benefits.
New Jersey employers aren’t the only ones that need to worry about commuter benefits ordinances. Many local jurisdictions already have commuter benefits mandates in place, including Seattle, New York City, Washington D.C., and the San Francisco Bay Area.
Even if you’re not required to provide commuter benefits, you should still seriously consider doing so. Forty-eight percent of adults weigh benefits and perks when considering whether to apply for a job, according to a survey by Glassdoor. With unemployment at an all-time low, benefits and perks can be a powerful recruiting tool to attract quality candidates (and keep them).
Because commuter benefits don’t accrue out-of-pocket costs for employers, this is a great way to start giving your employees work perks. But how do you implement a commuter benefits program?
Unfortunately, it’s not as simple as giving cash reimbursements to employees for their transit expenses. This is actually illegal under IRS rules. The easiest and surest way to ensure you’re compliant with commuter benefits mandates and/or IRS rules is to choose a third-party provider, just as you would with 401(k) benefits and health benefits.
There are a lot of choices out there when it comes to finding a third-party provider for commuter benefits, but it’s best to use one that doesn’t require too much manual time on your part, and is easy for your employees to take advantage of.
Alice is a pre-tax benefit provider that syncs with payroll systems like Square Payroll. Alice seamlessly deducts the amount of money spent on eligible purchases (commuting) from your employees’ paychecks before taxes are deducted. This means you can run payroll as you usually would without any added steps or hassle. As for employees, setup is easy. Employees can set it up via mobile and ask questions of the Alice team via text.
Whichever provider you choose for giving employees commuter benefits, make sure they sync with your payroll so you can do all deductions in one place each time you run payroll. Especially if this is your first time providing benefits, keeping things simple helps you take your first steps to provide benefits for your team and then get back to growing your business.
Note: Square does not provide legal or tax advice. If you have specific questions, consult a legal or tax professional.
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