Making it Easy for Small Businesses to Offer Transit Benefits

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[By Paul Goddin for Mobility Lab]

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It has been well documented that large companies offering transit benefits to their employees gain payroll tax savings, lower health-benefit costs, increased employee productivity, and better retention levels.

But we seem to hear less about the advantages to small companies.

Turns out, offering transit benefits is just as beneficial for small firms as it is for large ones. [Editor: Not to mention, Congress may soon restore an equivalent tax break for transit commuters that would match the current parking subsidy.]

“The biggest misconception small businesses have about providing transit benefits is that it will cost the company money,” said Wendy Duren, director of Arlington Transportation Partners (ATP).

Yet since the same Internal Revenue Service tax rules apply regardless of the number of employees of a business, the reality is that providing employees with transit benefits will often save a firm money, no matter whether it’s large or small.

Since small businesses can deduct the transit-benefit amount from their payroll taxes, this benefit can have a positive impact on a company’s bottom line. Current IRS rules permit employers to save 7.65 percent on every dollar set aside by employees pre-tax for commuting expenses.

Employees benefit financially as well. Since money for transit is deducted from employee paychecks tax-free, this translates into real money back in their pockets: up to a 40 percent reduction in commuting costs, based on the individual’s tax bracket.

Aside from the financial advantages, transit benefits can improve employee satisfaction levels. The benefit can be an effective way for a company to differentiate itself from competitors in a tight labor market.

Time is another factor discouraging small businesses from participating in transit-benefit programs. Small businesses and sole proprietors lack the economies of scale available to larger companies with seasoned human-resources departments.

Duren said, “This is one more task for a small business owner to engage in, when starting and operating a company is daunting enough already.”

When it comes to both time and cost, Duren describes how ATP’s business-to-business consulting services add value.

ATP, a division of Arlington County Commuter Services, helps companies regardless of size, and at no cost to them. Like many transportation demand management agencies, ATP’s fees are paid from sources like the U.S. Department of Transportation’s Congestion Mitigation and Air Quality grants.

Beyond simply setting companies up with transit benefits, ATP offers many other TDM services, such as customized Quick Glance flyers (see right and as a PDF) that educate employees about the specific transportation benefits their employer provides, as well as all of their nearby transportation options in an easy-to-read, eye-catching format.

ATP has also instituted a successful Champions program, used to recognize and reward companies that place an emphasis on sustainable transportation options – those that promote transit, carpooling, vanpooling, biking, and walking.

A bronze-level Champion ranking is available without any substantial financial investment, and is therefore relatively easy for small businesses in Arlington County to attain. (Another exciting example of an employer-rewards program is Knoxville (Tennessee) Smart Trips.)

Allowing firms such as ATP to help them administer transit benefits is a good way for small businesses to operate as if they had the economies of scale otherwise reserved for larger companies. Duren says that the majority of ATP’s clients are small businesses.

In fact, small businesses, often with narrower profit margins, may receive a disproportionate benefit from providing transit benefits to their employees. Transit benefits aren’t just a good way to improve employee quality-of-life, but can increase small-business competitiveness as well.

On a related note, this Saturday, November 29, is Small Business Day in Arlington and throughout the country. Once this major shopping day is past, what better way is there for small-business owners to give thanks to their employees than investigating how to get them transit benefits?

Photo by M.V. Jantzen.

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