The expenses covered by companies in relation to mileage are intended to compensate for any type of wear and tear or consumption that the vehicle has had during a work-related trip.
A distinction should be drawn here between mileage expenses and ‘transport supplements’. The former case covers expenses that arise in the course of the employee’s work duties, while the latter compensates the expenses generated by the employee travelling from home to work and back again. The amount by which employees are remunerated in this respect is normally negotiated as part of the company’s Collective Bargaining Agreement.
Such payments are designed to cover expenses incurred by employees in the performance of their professional duties.
Without a doubt, the main aspect associated to mileage expenses is fuel. It certainly represents a significant line item in travel expense accounting, but it is one of many. Some studies conclude that fuel accounts for around 60% of mileage expenses.
A second area that encompasses various elements involves expenses related to the wear and tear incurred by the vehicle, as well as breakdowns. Tyres becoming worn down, oil getting dirty, mechanical parts that deteriorate through use and have to be replaced. In short, any mechanical component of the car that is gradually consumed due to driving and which has to be changed.
Another area of mileage expenses involves all of the aspects related to taxes: registration, road tax, etc.
Moreover, another source of vehicle-related expense that mileage allowances are designed to cover is insurance. This is a particularly important aspect due to the legal implications it may have for the company. As such, part of the amount assigned for mileage allowances is intended to cover this aspect.