Delivery Mileage Comp??

[harley8936]

Hi I have question how do you pay your delivery drivers comp? I just went though a labor board audit and they are telling me I need to pay my drivers mileage of .54 per mile. I have been paying my drivers 2.00 per run and their hourly plus tips which works out to anywhere between 15 to 18 per hour. I have quite a large area to cover and if I need to do this I will be leasing a fleet of cars because this will be way too expensive and insight would be appreciated thanks

 

[PizzaDad]

what state are you in? I used to have a fleet of 4 cars and it was great for the first 10yrs b/c they were fully wrapped and it was pretty much our entire marketing budget. I was paying approx $250/mo for EACH car for commercial auto insurance and approx $2k/mo just for gas and minor repairs. Then the drivers would beat the bejesus out of them and there was the MAJOR repairs and tires and brakes. We ended up giving them the cars recently and reimburse them $1 for each delivery and charge $2…the other $1 we keep to cover insurance and pay them the regular min wage (not tipped since we can not in our state) plus tips. These guys normally make upwards of $20/hr so we have no complaints since they just do runs and rarely pizza boxes and wiping down pans. The last driver empties the garbage in the dining room and bathroom and that is it.
good luck but if I had to do that I would have to add increased & teired delivery charges based on location

 

[brad_randall]

He’s in Michigan.

There is no requirement that I know of which forces you to pay per mile, so maybe they’re saying that the driver’s hourly wage + $2/run is netting employees less than minimum wage when the standard mileage rate deduction is factored in?

Are you tracking the driver’s mileage so that you can prove $2/run is in excess of or averages out to $.54/mile? Are you reporting delivery driver tips on your payroll so you can prove that income for those drivers?

However, from a business owner’s tax perspective, reimbursing per mile is the only way to be certain the IRS won’t come after you for payroll taxes when you list that driver’s delivery reimbursement as non-taxable expense. I know paying per run and/or as a percentage of sales are “industry standards”, but IRS agents I’ve spoken with in the past have said that there’s no guarantee that would pass the sniff test if you’re ever audited.

 

[system]

I charge 2.99 or delivery

we pay 1.00 per run to the driver, they use there own cars

 

[durbancic]

He’s in Michigan.

There is no requirement that I know of which forces you to pay per mile, so maybe they’re saying that the driver’s hourly wage + $2/run is netting employees less than minimum wage when the standard mileage rate deduction is factored in?

Are you tracking the driver’s mileage so that you can prove $2/run is in excess of or averages out to $.54/mile? Are you reporting delivery driver tips on your payroll so you can prove that income for those drivers?

However, from a business owner’s tax perspective, reimbursing per mile is the only way to be certain the IRS won’t come after you for payroll taxes when you list that driver’s delivery reimbursement as non-taxable expense. I know paying per run and/or as a percentage of sales are “industry standards”, but IRS agents I’ve spoken with in the past have said that there’s no guarantee that would pass the sniff test if you’re ever audited.

After years of doing this we now pay drivers min wage in the store, $4.10 on the road, plus the federal mileage rate which this year is 54 cents.
When we ran the numbers before we made the switch, in theory the drivers make more money per check (about $10) due to paying less in taxes - the mileage isn’t taxable. We also save a little bit in taxes as well. Plus, it will pass the “sniff test” if we ever get audited. Just have to keep an eye on the drivers mileage logs. We setup a log book to track this, which we compare every payroll with the POS. This way we notice any discrepancies. Before we started we tracked the drivers miles for about a month to figure out what the store average was. Once we switched we had an idea of how many miles, on average, a driver should be getting per delivery they take. It has added a lot of work to payroll, but isn’t that what the government does!

 

[d9phoenix]

@durbancic How do you handle the drivers log books ? Do they log their mileage at the start of the shift and then the end of the shift in the store or do you let them keep a book themselves ?

What POS do you use ?

 

[durbancic]

We use Revention which allows the split wage in an out of store. I have attached what our log looks like. The driver/manager fill it out each day. When the office checks it they verify that there are not mileage averages that are out of the norm. Notice, we did not put the average on here or share it w/ anyone. This way the drivers cannot “make” their miles equal close to the average. This log book has also helped when drivers type it wrong in the POS, we can double check what their mileage was to correct the mistake.

 

[bodegahwy]

No way I would pay drivers actual mileage… “Be careful what you ask for!” When you pay by the mile you are incentivizing the drivers to take the long way every time.

Mostly they drive our cars but when they drive personal cars they get 6% of the deliveries. There is no requirement to pay the federal .54 rate but anything you pay that ends up being more than that could be considered taxable income.

You really have to include tips. Wage plus tips should exceed the full minimum wage. The amount paid for the vehicle use is not income unless it exceeds the 54 cent rate. In our store drivers get $6 per hour wage and we declare the tips. The CC tips are actually collected and paid on the paycheck.

 

[Rick_G]

I am not a tax professional or a legal expert, but isn’t the 54 cents a maximum allowable number and that number is based upon average operating cost and depreciation of a new vehicle?

 

[durbancic]

No way I would pay drivers actual mileage… “Be careful what you ask for!” When you pay by the mile you are incentivizing the drivers to take the long way every time.

The drivers are also making the tipped min while they are on the road ($4.10/hr). So that incentives them to get back into the shop to make min wage (or above) when they are in the store.
We do also claim CC tips on their checks as well, however they take them home nightly.

 

[durbancic]

I am not a tax professional or a legal expert, but isn’t the 54 cents a maximum allowable number and that number is based upon average operating cost and depreciation of a new vehicle?

Like bedegahwy said, I believe anything above that amount becomes taxable. The number last year was 57.5 cents per mile, but came down this year.

 

[harley8936]

I appreciate all the responses but let me clarify that my drivers make way over minimum wage and we do include tips as wage and report it on their paychecks. This was a federal labor board audit and we had no problems with any paychecks or minimum wage issues at all but the labor board has instructed us to pay the drivers the mileage of 54 cents. This is ludicrous as this would cost me out of the business. I have been in the business for 25 years and I have always took care of my drivers and always make sure they are making at least 12 an hour and that would be a horrible day. So what do I do? Just doesn’t make sense I called about 8 different places and they pay the 1.00 comp as well as I do and the other 1.00 I collect as a delivery fee goes to offset the insurance costs.

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[d9phoenix]

imo time to speak with an attorney. Sounds like you have a auditor who is not following the actual law, but what he thinks it is.

 

[harley8936]

imo time to speak with an attorney. Sounds like you have a auditor who is not following the actual law, but what he thinks it is.

Thank you everyone for all your help. I am already in process of hiring an attorney and I really think he is over stepping his authority I will let you all know what happens and thanks again

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[Registered_Guest]

The only concern of the labor board is “are you paying your employees at least minimum wage”.

You don’t “have” to pay any compensation at all for your drivers use of their cars as long as their cost to operate their vehicle on your behalf does not take them below minimum wage.

Paying the 54 cents per mile rate is not always the solution anyway. You have a driver that delivers in an F350 4WD truck, or a driver that delivers in his Ferrari - his cost to use those vehicles on your behalf will be a lot more than 54 cents per mile, and will quickly put them below min wage depending on their rate.

 

[bodegahwy]

his cost to use those vehicles on your behalf will be a lot more than 54 cents per mile, and will quickly put them below min wage depending on their rate.

I am pretty sure that is not your problem. If you pay the federal rate it does not matter what the employees actual costs are. No reporting is required of the employee or the employer beyond the documentation of the miles and business purpose. The employee does not have to declare any surplus as income and the cannot deduct actual costs from income.

Many of us pay on some basis other than the federal rate such as a set amount per delivery or a % of delivered orders. The employee should be tracking their own miles or tracking actual costs and depreciation. At tax time they can report the actual miles driven or the costs and depreciation and deduct additional amounts beyond the reimbursement up to the actual costs or the federal max rate. Similarly, if the reimbursement is greater than the actual costs and the federal rate they should declare it as income. The burden of this record keeping and reporting is on the employee.

 

[noreason]

This post got me reading a few things and I came across this on the department of labor website. I never knew about this… Does anyone do it?

“Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA. However, this charge on the tip may not reduce the employee’s wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.”

 

[Registered_Guest]

I am pretty sure that is not your problem. If you pay the federal rate it does not matter what the employees actual costs are. No reporting is required of the employee or the employer beyond the documentation of the miles and business purpose. The employee does not have to declare any surplus as income and the cannot deduct actual costs from income.

Many of us pay on some basis other than the federal rate such as a set amount per delivery or a % of delivered orders. The employee should be tracking their own miles or tracking actual costs and depreciation. At tax time they can report the actual miles driven or the costs and depreciation and deduct additional amounts beyond the reimbursement up to the actual costs or the federal max rate. Similarly, if the reimbursement is greater than the actual costs and the federal rate they should declare it as income. The burden of this record keeping and reporting is on the employee.

The IRS rate really has nothing to do with the labor board. You won’t find it mentioned in any of the labor regulations. Everything you mention in your post is about taxes, taxable income and deductions. The labor board isn’t concerned about that.

It really is simple. If an employee uses their own vehicle, their cost of using that vehicle cannot cause them to go below minimum wage. Period.

I believe that this will continue to become a bigger and bigger issue as time goes on. I know for a fact the the federal labor board is looking very closely at this and their have been more than a few audits of top 5 chain franchisees. Sort of a shot over the bow.

 

[Registered_Guest]

This post got me reading a few things and I came across this on the department of labor website. I never knew about this… Does anyone do it?

“Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA. However, this charge on the tip may not reduce the employee’s wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.”

I knew you could do that.

But in the scheme of things it appears petty and you’ll surely lose drivers or at least make them mad. My daughter once worked somewhere that did that.