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25 Mar 21

How to reimburse EV business miles

The transition to electric vehicles is forcing employers to review their fleet policies for reimbursing drivers for business mileage. Former calculations based on the cost of petrol or diesel and kilometres driven no longer apply, given the blend of home, workplace and public charging opportunities available to EV drivers.

But if fleets are to reap the benefits of lower energy costs from operating battery-powered vehicles, then mileage reimbursement rates need to reflect the actual cost of electricity.

At the same time, the massive range in cost per kWh between home charging and fast public chargers, which can range from €0.15 per kWh to €0.30 per kWh at domestic addresses to more than €0.79 per kWh at ultra-fast chargers on motorways, means a flat-rate mileage reimbursement model is in danger of leaving either the driver or the employer significantly out of pocket.

Paul Hollick, managing director of fuel management consultancy TMC, which has just opened a new European office in Amsterdam, said: “Reimbursing drivers using the actual cost of electricity is the fairest way to reimburse employees driving electric company vehicles. To do this, businesses need to take into account the different costs of charging at home, office, kerb side and public charge points on route.”

1. Energy consumed per km

The first step, said Hollick, is to work out how much energy a vehicle consumes per kilometre. This gives you the kWh/km, although it’s important to note that the figure will vary more than litres per km for an internal combustion engine car, due to the energy used in air conditioning or heating.

2. Cost per km for home charging

The cost per km for home charging can be worked out by multiplying the employee’s cost per kWh from their domestic energy supplier (some electricity companies are now launching EV-specific tariffs) by the number of kWh it takes to power the vehicle per KM (kWh/KM figure). Employees can provide a copy of their electricity bill to confirm the cost per kWh.

3. Cost per km public charge points

If employees use public charge points, the cost per KM can be worked out in the same way using the vehicle’s kWh/KM.

4. Mixed charging reimbursement

“The rate used to reimburse electric vehicle drivers can be a blended rate of home and public charging, taking any charging using company charge points into account,” said Hollick. “Or if an employee uses public charging for all/the majority of their business trips, the calculation can use the cost per km for public charging first and then apply the home rate for any additional business kms, again taking off any charging that has already been paid for by the company if they have used company-owned charge points.”

He added that fleets could consider charge cards, similar to fuel cards, for employees who rely heavily on public charging.

5. Driver-by-driver approach

TMC advises fleets that are in the process of transitioning to EVs that it does take time to calculate precise EV mileage reimbursement rates, because each rate is unique to each individual. As a guide for fleets, TMC holds data on the range and the kWh for each electric vehicle in the market.

6. Vans are different

In the UK, the Government has issued an Approved Electric Rate of 4pence per mile [about 2.8c per km] but Hollick said this is less than the cost per mile for larger EVs and vans, which would mean drivers of electric vans would be reimbursed less than their costs.

“We have APIs set up with providers like EO and Pointpod to take in office and home charging data, along with feeds from charge card providers,” said Hollick.

If drivers don’t have smart meters for their home electricity supply, TMC can still work out the cost per mile or km for charging their vehicles at home, based on their domestic energy tariff, and use basic expense claims for any public charging costs.

“Employees can claim their mileage using our system, or via our app, and we work out their reimbursement rate and provide a payroll file to the employer. Our aim to make electric vehicle reimbursement simple and fair for both the business and EV drivers.”

7. Reimbursement vital part of EV strategy

Having a clear and easy process for drivers to reclaim their electricity costs is essential for a successful electrification programme, said Steve Winter, head of fleet at Centrica, which has committed to electrify its 12,000-strong operational commercial vehicle fleet by 2025.

Where possible, the company is installing charge points at the homes of its engineers, who drive their vans home in the evening and simply need to plug in the vehicles, with no need to calculate energy usage or measure mileages to reclaim their energy costs.

“We have spent a lot of time and effort in our business developing software solutions that allow us to ‘talk’ to the charge point and the vehicle, understand exactly how many kilowatts have been put into that vehicle, and provide a direct reimbursement straight into the driver’s payroll,” said Winter.

Authored by: Jonathan Manning