FAVR Example: What does a fixed and variable (FAVR) reimbursement program look like?

Online shoppers know the pain of buying something, only to find out what’s delivered doesn’t meet expectations. Everyone has an experience of size being off, the wrong thing arriving, the “gotcha” in the fine print. The same concerns can apply to a company’s vehicle program. With such a big business decision comes a desire to “try before you buy.” In this blog we’ll present a FAVR example: how a company sets up their program, how they would roll it out to driving employees and what the reimbursement process looks like.

What does a FAVR program look like?

You know what a fixed and variable rate program is (or, if you don’t, you can learn all about it). You’re aware of its benefits and its requirements. You get the differences between fixed vs variable costs. Now you’re ready to see what one looks like in action! For this example of the Fixed and Variable Rate (FAVR) reimbursement program, we’re going to look at a large pharmaceutical company.

Gray Matter Pharmaceuticals is looking to reduce the liability of their fleet program while enabling their sales team to perform at their best. For this reason, they’ve chosen to use a FAVR vehicle program. They’ve selected the vendor they’ll be using, now they need to iron out the details of their FAVR program.

Setting Up the Program

There are a number of steps Gray Matter Pharmaceuticals will cover before rolling out the new program. A FAVR program is built around a base vehicle. Companies share information about the needs of the business and its driving employees. Vendors will use this information to provide customers with a base vehicle and a reimbursement rate that fits within their goal. In this FAVR example, the vendor suggests the best base vehicle and rate for Gray Matter Pharmaceuticals would be a mid-sized sedan and a fixed rate of $500.

With the foundation of the program decided, the vendor will guide the business through the policy creation process. This includes factors like insurance requirements, penalties for being found out of compliance and more. In an ideal scenario, they’ll use industry benchmark data to ensure best practices are met and build the FAVR program to achieve business goals. The vendor should additionally help with a launch timeline and post-launch best practices.

Rolling Out the Program

This is where those best practices come into play. With the vendor’s help, Gray Matter Pharma sticks to the launch timeline, informing employees of the vehicle program change, hosting town-halls and informational sessions about the program before launch day.

With sufficient training employees do two important things. First, they submit their vehicle and insurance information and set up a direct deposit. Second, they download the mileage capture app and begin to record business trips in their personal vehicles. Using the right vendor, this process is a cinch and launch day goes well! Program administrators have access to dashboards sharing the rate of adoption, information the company can use to take next steps in the roll out.

Reimbursement

It’s been a month and 15 days since Gray Matter Pharmaceuticals rolled out their FAVR program! Since the beginning of the program, a fair number of driving employees were skeptical of the new approach. That number has dropped off considerably as they’ve had an easy time using the vendor app to capture their miles and submit their trips.

Today, the 15^th of the month, employees who submitted their mileage logs on time now receive their first set of fixed and variable reimbursements. Unlike other reimbursements, these are specific to the individual and where they operate. That translates to the driving employees being satisfied with the reimbursements they’ve received.

FAVR Example: Sound far-fetched?

There’s just one example of what the implementation, roll out and use of a FAVR vehicle program looks like at a company. Does it sound a little too good to be true? We understand that not every company has such a sterling experience when they adopt a FAVR program. A lot of difficulty can stem simply from the vendor. Here are a number of problems we’ve heard from customers who recently left other providers.

• Vendor kept old FAVR rates, not benchmarking them within the industry or updating them to be current. These inaccurate rates result in unfair and inaccurate reimbursements.
• Vendor did little to no proactive account management, provided no automation integrations and offered no flexibility.
• Customers locked into vendor’s pre-determined rates that did not provide employees with enough reimbursement.
• Lack of experience resulted in overpromising and under-delivering, and a general lack of knowledge. This proved challenging around sensitive areas like taxation and rate calculation.
• Driving employees may compare rates and be confused when they find the payment they receive is different than a coworkers. Reminding them of the difference between fixed costs vs variable costs and how costs vary by the area they operate in goes a long way towards helping them understand.

FAVR with Motus

When it comes to vehicle programs, choosing the right vendor makes all the difference. It can mean the difference between smooth operation and serious issues. Leveraging 40 years of industry leadership, Motus shares the guidance to maximize program performance. That experience shows in the 4.5-star app rating and 99% successful trip capture with GPS-enabled technology. It also show in the over 400 implementations we do annually. Motus additionally provides the most secure solution, as evidenced by our SOCII Type 2 certification with continuous audits and no gaps in compliance for over 4 years. Interested in learning more about what partnering with Motus looks like? Check out our guide, The Road to Becoming a Customer.

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