Paying employees for their travel time—and dealing with subsequent reimbursements and deductions—is one of the most confusing parts of personnel administration.
Must you pay hourly employees for … a cab to the airport? … a drive to a second work site? … a flight to a conference?
Here is an analysis of these challenges, using a case study for each question:
Commuting time. Let's say Robert Lee is a nonexempt employee who occasionally travels for your company. It's clear that you don't need to pay for his commute to and from work; the Portal-to-Portal Act of 1947 covers that.
But suppose you ask Robert to pick up some company documents along the way to work. In that case, you'd pay him from the time he picks up the plans. The law says that if the travel is for the company's benefit, it is paid. If it is purely commuting, it's not.
Working at different locations. If you send Robert around to rally the troops, things are a bit different. If Robert reports to headquarters before making his rounds, the commute to headquarters is commuting time, but all travel from headquarters until his last stop is paid time. Time from the last stop to home is unpaid commuting time. (Also note that if Robert goes directly from home to a work site, that time, too, is commuting time.)
Any travel that is a regular part of the employee's job is paid time.
In our new audio recording — Travel Pay: When to Pay It, How to Pay It, and How to Tax It — employment tax expert Mindy Harada explains which workers are entitled to travel time pay and at what rate. She explains the tracking and paperwork necessary to compensate the traveling employee correctly. Get your copy here...
Day trips. Generally, travel time on work-related day trips is counted, except for meal times.
Say Robert drives to the airport and takes a 6 a.m. plane to a seminar in Chicago. He arrives at 8:30 a.m. and takes a cab to the seminar. The seminar runs from 9 to 5, with an hour lunch break. After the seminar, he chats with friends for an hour before taking a cab back to the airport. He flies back to his base city and drives home.
What counts as "compensable" time?
You don't pay Robert for his trip to the airport; that's commuting time. But you do pay from the time he arrives at the airport through his flight, cab ride and during the Chicago seminar. (He doesn't get paid for his lunch period.)
Do you pay for Robert's chatting time with friends? If there are no other flights home until later, yes. But if Robert simply opts for a later flight to swap stories with his buddies, the answer is "no."
The cab back to the Chicago airport and the flight home are paid time. The drive home from the airport is considered commuting time.
Our new audio recording Travel Pay: When to Pay It, How to Pay It, and How to Tax It explains IRS and DOL rules regarding what is considered “travel time” versus “commuting time,” plus what is an allowable expense versus taxable wages. Among the things Mindy will reveal:
- What does the IRS consider bona fide travel? (Mindy will address the rules for mileage, airfare, hotel and car rental.)
- How quickly receipts must legally be provided by an employee, and how often expense reports must be submitted.
- What’s considered a wage or a taxable commuting benefit.
- Common pay- and FLSA-related problems that arise with employee travel, such as meals during travel.
- And much more...
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