Commuter benefits are a form of fringe benefits that employers offer to their employees to supplement the cost of commutes to and from work using pre- or post-tax dollars. Depending on where a person lives and how they travel, using these benefits could save someone hundreds or even thousands of dollars.

Employers offer commuter benefits to help employees mitigate the costs and hassles associated with traveling to their place of work. They are especially popular in places with ample drivetime traffic, rush hour congestion, and expensive parking near the worksite.

Additionally, if an employer’s office is located in a central business district with heavy traffic, the benefit serves as an incentive for employees to utilize public transportation. 

More simply, as SHRM puts it, “commuter benefits are an investment in employees.” By offering workers better incentives during their tenure, you can improve retention rates—and save on costs associated with turnover.

The Internal Revenue Service (IRS) determines the total amount per employee that employers are permitted to contribute towards tax-exempt commuter benefits. 

For 2020, that monthly limit is $270 per employee for transit passes and vanpool services, as well as qualified parking expenses. Typically, changes to these amounts are announced preceding the beginning of a new year.

Related Terms: Fringe Benefits, Employee Retention, Employee Benefits