What is a Memorandum of Employee Automobile Expense Allowance?
When hiring a new employee, whether for an executive, sales-related or other position requiring extensive travel ...
the Memorandum of Employee Automobile Expense Allowance may be used to define the details in which an employee shall be reimbursed for use of their personal vehicle during company-related travel. More specifically, the Memorandum of Employee Automobile Expense Allowance form is a written agreement stating the terms and conditions of both the employee and company related to the automobile allowance.
This document may be used for any level of employee who shall receive an automobile allowance.
A Memorandum of Employee Automobile Expense Allowance document will typically specify the following:
1. Company name
2. Employee name
3. The employee requirement to furnish his or her own personal automobile. The employee also must maintain the automobile in good repair and driving condition at all times.
4. Effective dates of Memorandum of Employee Automobile Expense Allowance (beginning date may usually be the first date of employment with the company; an ending date is not required to be specified, however, some companies may wish to maintain the Memorandum effective for twelve (12) calendar months with a review and any necessary revisions at the end of the twelve month period. Should the employee resign or be terminated prior to the Memorandum ending date, the Memorandum may be canceled as a result of resignation or termination.)
5. Insurance requirements, as defined by the company, in which the employee must comply, including minimum requirements in the areas of comprehensive coverage, collision coverage and related deductibles; bodily Injury; each person insured; each occurrence; each accident; and property damage and liability.
Some companies also may require the company name be listed as an "interested party" on the employee's insurance policy.
6. Terms of allowance, i.e. weekly, monthly, quarterly or annually
7. Amount of allowance (per terms)
8. Signature of company
9. Signature of employee
The Memorandum of Employee Automobile Expense Account document language states the company will pay the employee per the terms of the Memorandum and be charged to the employee as an automobile allowance.
Dependant upon the company policy, the automobile allowance amount may or may not be subject to federal, state and / or local withholding tax.
Each employee should carefully consult with his or her tax advisor.
The Memorandum of Employee Automobile Expense Account document also states such automobile allowance account payments do not obligate the company as the owner or lessee of the employee's automobile, nor is the company responsible for any damage to the automobile.
The company may wish to require the employee to provide an insurance Declaration as proof of the insurance requirement compliance prior to executing the Memorandum of Employee Automobile Expense Account.
This document may be used in addition to an agreement of mileage reimbursement.
Many companies who provide an Employee Automobile Expense Allowance offer mileage reimbursement at a reduced rate, or no mileage reimbursement.