Out of store rate?

I know that some (all?) of the big 3 have out of store pay rates for their drivers. I know that papa johns does it here and they pay minimum wage for in store and a lower rate while out of store on delivery. My point of sales system supports this, so it’s had me thinking for quite a while…

Question number 1, Who here does this, and if you do, what is your opinion on it?

Question 2, did you always do this or did you one day decide to make the change? If so, was it a terrible transition? It seems like it would be tough.

Question 3, why have both rates? Couldn’t a driver just be considered a tipped employee and have a set wage of, lets say for example, 5.25 an hour both in and out of store? Are the secondary rates to help insure that during a slow week he or she is pretty much guaranteed to make at least minimum wage (mostly all drivers here make well into the 15-18 dollar an hour range) or are there other legalities that I am missing?

I like the idea of saving the money, especially in todays world where profit margins seem to get slimmer and slimmer, but I also don’t see that transition going well at all. It’s never easy to just wake up the next day and say, “Well guys and gals, I’ve decided to cut your rates. Merry Christmas!”. But, like I said, times are getting harder and harder and we could use any labor dollars we can get, so any advice and feedback is appreciated.

I would check to see what the laws in your state allow…as of next week my drivers are making $10.10/hr because my state considers only servers & bartenders as tipped employees, not drivers even though these guys often pull in $20+/hr. The year before I changed my delivery charge from a tiered charge based on distance of $1.50 to $4.00. Drivers got a flat $1.50 for each delivery but we changed the delivery charge to a flat $2.00 to simplify things and lowered the reimbursement to $1.00 for each delivery. We did get a little pullback at first but we explained that this was to expand our market and it seems to have worked.

If I could pay drivers as tipped employees I would do it in a heartbeat! They do not perform any other duties except making boxes and wiping pans in the rare times they are not doing deliveries which is not very often.

Our employees clock in by what job they are doing… so, if they clock in as a driver they are making a tipped wage of $6.00. If they clock in as kitchen help they make whatever their rate is for that. (Usually $11.00)

If they driving but it is slow and the manager gives them kitchen work to do they clock out and clock back in as kitchen help. If they are just grabbing the phone between runs or something they do not.

There is a legality to consider. Being on the road is considered the tipped occupation. While off the road, they are performing duties that do not result in tips and you’re not allowed to use the tip credit to make up wages for those hours (within reason).

From the Dept. of Labor:

Dual Jobs: When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a maintenance person and a waitperson, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing. However, where a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

A quick summary of tipped-employee rules can be found here: https://www.dol.gov/whd/regs/compliance/whdfs15.htm

Edit: One reason to track on-road vs. in-store hours even if you don’t pay different rates is for insurance purposes. Your workers comp rate ought to be much lower for your in-store help than for your delivery drivers.

We switched over a year ago. The reason was to avoid lawsuits like some of the big 3 have had (although being small, the chances of that were thin). We do min (or more depending) when they are in the store. $4.10 on the road. Pay mileage at the federal mileage rate - they clock in with their mileage and clock out with it. Before we started this we used about 1 months of data to track miles / delivery, etc. We were paying Min + $1 per delivery. We even went so far as to spreadsheet out every driver and show them what the difference was. In the end, both us AND the employee (theoretically) benefit from it. Mileage compensation is not taxable income. So we turned a lot of payroll taxable expenses into non taxable. So we are paying less in taxes, so is the driver. Ended up a driver would make about $10 more per check the new way compared to the old. I think we save about the same as well.
We did put some checks into place to make sure that drivers aren’t milking it. We have a log book the driver and manager fill out each shift. If a driver consistently drives more miles than the average we look back at the log to see if there are valid reasons for them driving more miles than most other drivers.

I was with Domino’s for 32 years. The big guys have a bullseye on their backs, for sure.
We never did a split but made sure the minimum was at least minimum wage for the drivers- believe we paid $5 for drivers and $10+ inside.
I know that a few times here or there we had to kick in for tips to bring the driver to minimum.
We paid $1.50/delivery… or address… so if a driver left with a triple it was $4.50 in mileage.
Our POS did split road/in-store times for insurance (WC).
My DC was $2.50.