Targeted commuting support may ease pressure on employees but can strain tight employer budgets and morale, says expert
With employees feeling the pinch at the pump and employers pushing harder on return-to-office, the question of whether to subsidize commuting is resurfacing – and the answer, says one Canadian HR scholar, is “only if the business case is clear.”
From a compensation perspective, employers should be very circumspect with a “commuting costs” initiative, says Parbudyal Singh, professor of human resource management at York University in Toronto.
To determine if such a program makes sense, each employer would have to weigh the pros and cons of doing so within their own business and operational contexts.
Weighing the business case for fuel subsidies
Singh says the starting point is a clear-eyed look at how higher fuel costs are affecting both employees and the organization’s financial health.
“Any increase in fuel expenses would not only drive up the cost of commuting for employees, but the costs of doing business for employers,” he says.
“Any additional employer subsidies would have impacts on the bottom lines and break-even points for businesses, especially those with thin profit margins.”
Because of that, he says, gas stipends or mileage top-ups should only be on the table when there is a real – and demonstrable – impact on performance.
“So, each employer would have to weigh the negative costs of commuting for employees, with an analysis of how this affects the employees’ work and productivity,” says Singh.
“If it affects the organization’s bottom line, then they should consider fuel subsidies, if they can afford it.”
Public-sector organizations should be even more cautious, he adds: “In fact, they should stay away from it.”
Designing commuting support without fuelling inequity
For employers that decide the business case does exist, Singh says the design of any commuting support will matter just as much as the decision itself. Missteps in how the support is structured, he says, can lead to perceptions of unfairness, essentially adding “another level of problems.”
He points to employers that provide gift cards for fuel for use in certain time windows as an example of support that can be easily adjusted to external factors.
“In this way, they can make changes in a nimble manner – such as when the gas prices subside,” Singh says, adding that employers should also be cautious of tying subsidies to pay level or job status.
“Gas subsidies are not performance-based incentives, and they are not tied to an employee’s impact and productivity,” he says.
“They cushion costs, and these are standard across employees’ groups, so a flat rate is advisable.”
Also, he warns employers against being seen to privilege driving commuters over those taking public transit. In an environmentally conscious society such as Canada, Singh points out, giving financial help to car-commuters could rub some employees the wrong way.
“Many employees use public transportation. This is a desirable behaviour from an environmental perspective,” he says.
“Should they now be punished because they do not drive to work?”
Low-cost options for tight budgets
For employers on tight margins, Singh recommends focusing on modest, targeted measures; rather than narrowly subsidizing fuel, he encourages HR to think more broadly about commuting support.
“For employers with limited budgets, such as those in the not-for-profit sectors where wage levels may already be low and even marginal, increases in fuel prices may have significant impacts on what employees can afford,” Singh says.
“Then, small stipends and gift cards can be considered. Subsidized parking can also be considered, where appropriate.”
Encouraging public transportation or even providing a shuttle transport where feasible can also be considered as options where employees live locally, he adds.
Looking ahead: shock-by-shock, not standard practice
Despite current pressure on commuting costs, Singh does not expect gas subsidies to become a permanent fixture of Canadian total rewards – at the end of the day, commuting costs are part of the package of employment, and introducing regular subsidies for irregular external shocks can introduce unnecessary instability.
“Commuting costs are part of the cost-of-living indices we use in compensation planning. We plan for next year with this in mind,” he says.
“Of course, there may be external shocks, such as wars, that affect supply chains, but we can work with this on a shock-by-shock, organization-by-organization basis.”
