Mileage vs energy: what is the fairest way to reimburse EV charging?

Short answer: energy based reimbursement is generally the fairest approach, because it reflects the true cost of charging, while mileage rates prioritise simplicity over accuracy.

Most fleets start with mileage. Many move to energy as complexity and expectations increase.

Why this question matters

EV reimbursement sits at the intersection of:

• Cost control
• Compliance
• Driver experience

The method you choose determines:

• Whether drivers are out of pocket
• Whether costs are predictable
• Whether the process scales

At its core, this is a trade off between simplicity and fairness.

What is mileage based reimbursement?

Mileage based reimbursement uses a flat rate per mile, typically aligned to the HMRC Advisory Electric Rate.

How it works

• Drivers record business miles
• A fixed rate is applied
• The business pays the resulting amount

Advantages of mileage based reimbursement

• Simple to understand
• Easy to administer
• Low data requirements
• HMRC aligned

This is why it is often the starting point.

Limitations of mileage based reimbursement

• Does not reflect actual electricity cost
• Ignores tariff differences
• Ignores charging behaviour
• May under or over compensate

It is a useful approximation, not a precise calculation.

What is energy based reimbursement?

Energy based reimbursement pays drivers for the actual electricity used to charge the vehicle for business miles.

How it works

• Measure energy used (kWh)
• Apply the driver’s electricity tariff
• Separate business and private miles
• Reimburse the calculated cost

Advantages of energy based reimbursement

• Reflects real energy cost
• Accounts for tariff variation
• More accurate across different drivers
• Aligns with actual expense principles

Limitations of energy based reimbursement

• Requires more data
• More complex to implement
• Difficult to manage manually

Without the right systems, it can create admin burden.

Where fairness differences appear

Different tariffs

Drivers may pay:

• Low overnight rates
• Standard tariffs
• Higher peak rates

Mileage reimbursement treats all drivers the same.
Energy reimbursement reflects these differences.

Charging behaviour

Drivers who:

• Charge overnight pay less
• Charge during peak hours pay more

Mileage rates ignore this.
Energy based methods capture it.

Charging location

Drivers who:

• Charge at home benefit from lower costs
• Rely on public charging often pay more

A single mileage rate struggles to represent both fairly.

Business vs private miles

Both approaches require separation of:

• Business miles
• Private miles

However:

• Mileage methods estimate energy indirectly
• Energy methods measure it more directly

Compliance vs fairness

Mileage based approaches:

• Are simple and compliant
• Do not guarantee fairness

Energy based approaches:

• Can be compliant when structured correctly
• Improve fairness by reflecting real cost

The key insight:

Compliance answers “is this allowed?”
Fairness answers “does this feel right?”

When mileage is good enough

Mileage based reimbursement works well when:

• Fleets are small
• Driver behaviour is similar
• Tariff variation is limited
• Simplicity is the priority

It is a practical starting point.

When energy becomes the better option

Energy based reimbursement becomes more appropriate when:

• Fleets scale
• Tariffs vary significantly
• Drivers question fairness
• Finance teams want accuracy

At this point, mileage starts to show its limitations.

Can fleets combine both?

Some fleets use a hybrid approach:

• Mileage for simplicity in some cases
• Energy based for more complex scenarios

This can work, but only if:

• The rules are clear
• The logic is consistent
• Different driver groups are treated appropriately

Blending approaches without structure creates confusion.

What drivers actually care about

From a driver perspective, the question is simple:

“Am I being paid fairly for the energy I use for work?”

They do not think in terms of:

• Mileage vs energy
• Policy design

They think in terms of:

• Their energy bill
• Their reimbursement
• The gap between the two

How Paua Reimburse supports fair outcomes

Paua Reimburse is designed to support energy based reimbursement at scale.

It helps fleets:

• Calculate true energy costs
• Reflect individual tariffs
• Separate business and private miles
• Apply consistent logic across drivers

This enables fleets to move beyond approximation towards accuracy.

The takeaway

Mileage and energy based reimbursement both have a role.

• Mileage is simple and easy to implement
• Energy is more accurate and fair

As fleets grow, the need for fairness and accuracy increases.

Fleets that move towards energy based approaches are better able to:

• Reflect real costs
• Support drivers consistently
• Scale without friction

About Paua

‍Paua is a UK EV charging payment platform for fleets. We help businesses pay for electric vehicle charging across public networks, home charging and shared depots, giving fleet managers control over time, cost and data as they electrify.‍

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Read more about Paua Reimburse

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