Car allowances are forms of compensation that some employers offer to employees who use company cars. It is important to provide employees with a clear and concise car allowance letter that outlines the details of the arrangement if you are an employer who wants to offer a car allowance to your employees.
Here is a sample car allowance letter to employees:
[Date] [Employee Name]
[City, State, ZIP Code]
Dear [Employee Name],
I am pleased to inform you that as part of your employment with [Company Name], we will provide you with a car allowance to compensate you for the use of your personal vehicle for work-related purposes. The car allowance will become effective on [start date] and will be paid on a [frequency] basis.
The car allowance will be added to your regular paycheck at a fixed rate of [amount] per month. This amount is intended to cover the cost of using your personal vehicle, including fuel, maintenance, insurance, and depreciation.
In order to qualify for the automobile allowance, you must maintain a valid automobile insurance policy and provide proof of such insurance policy upon request. You are also responsible for any taxes or fees associated with receiving the car allowance.
Please be aware that the car allowance is not for personal use of your vehicle and no reimbursement will be made for personal use expenses. In addition, you are responsible for any fines, penalties or legal fees resulting from the use of your personal vehicle for work-related purposes.
Car allowance letter to employee template Download
Please do not hesitate to contact me or Human Resources if you have any questions or concerns regarding the car allowance. Thank you very much for your continued dedication and hard work at [Name of Company].
The following are important considerations when offering a car allowance to your employees:
Eligibility: Car allowance eligibility may not apply to all employees. It is important to establish eligibility criteria and communicate them clearly to employees.
Amount: The car allowance amount should be sufficient to cover the cost of using a personal vehicle for work. To determine an appropriate amount, research local costs for fuel, insurance, and maintenance.
Taxes: Automobile benefits constitute taxable income and may be subject to federal, state, and local taxes. Be sure to include this information in the car allowance letter and advise employees to consult a tax professional for advice.
Insurance: Make sure that employees are covered by valid auto insurance and provide proof if requested. It is also a good idea to include language in the car allowance letter that holds the employee responsible for any damage or liability resulting from the use of the employee’s personal vehicle for work-related purposes.
Record Keeping: Maintain a record of the car allowances that are paid to employees, including the amounts paid and the dates of payment. For tax reporting and compliance purposes, this information is important.