A Comprehensive Guide to Paying Hourly Employees for Out of Town Travel

As a small business owner, you will likely encounter situations where your hourly employees need to travel for work. When this happens, you must have a clear plan in place for compensating employees for their time and expenses. Mishandling travel pay can lead to wage violations, damaged morale, and unnecessary costs. By following some key guidelines, you can seamlessly handle travel compensation while staying legally compliant.

As a business consultant who has helped dozens of startups and small companies navigate travel pay issues, I’ve seen the benefits of getting travel compensation right. Here’s my comprehensive guide to paying hourly staff for out of town business travel.

Lay the Ground Rules Upfront

Before any work-related travel occurs, communicate expectations clearly to employees in writing. Specify:

  • If they will receive regular hourly pay or separate travel pay rate
  • Per diem rates for meals, lodging, airfare, and other common expenses
  • Required documentation for reimbursable expenses

Providing these details in advance avoids confusion and disputes down the road. For travel pay rates, the federal employer laws require compensation for all work hours except bona fide meal periods and lodging sleep time.

According to a survey by Paychex, 37% of small business owners don’t understand legal regulations for travel time pay. Make sure you understand the laws to avoid costly wage violation claims.

Consider a Distinct Travel Pay Rate

To offset costs, you may want to establish a separate hourly travel rate that is lower than the regular work rate. However, this travel pay rate must still meet federal, state, and local minimum wage requirements. I recommend setting the rate at least 20% below regular pay.

Having a distinct travel pay rate defined in writing can significantly reduce compensation costs, especially for long trips. Just ensure employees agree to the rate structure so there are no surprises down the line.

For example, Company A sets a travel pay rate of $9/hour rather than the regular $12/hour wage. For an employee traveling 22 hours roundtrip for an offsite training event, this would save $88 in travel pay.

Track Mileage for Reimbursement

Employees using personal vehicles for business travel must be reimbursed for mileage. Have them track miles driven each day and submit monthly for reimbursement at the current IRS mileage rate (58.5 cents per mile in 2024).

This mileage reimbursement is on top of their hourly travel time pay. Maintaining detailed mileage logs protects you in case of any wage disputes. Apps like Everlance, MileIQ, and Triplog make tracking easy.

For a 100-mile roundtrip, reimbursing at the 2022 IRS rate would be $59 plus applicable hourly travel pay. Without mileage reimbursement, you risk Department of Labor violations.

Set Per Diem Rates

To streamline expense reporting, set per diem rates for meals, lodging, airfare, and other common travel costs. You can choose to reimburse either per diems or actual expenses.

Referencing federal per diem guidelines for the travel destination ensures fair, reasonable rates. Per diems simplify your accounting and make travel reimbursement costs predictable.

For example, the 2022 per diem rate for meals and lodging in Los Angeles is $276. That breaks down to $74 for meals and $202 for lodging.

Leverage Time Tracking Technology

Modern time tracking tools like TSheets, Homebase, and WhenIWork make it seamless for employees to log travel time and submit hours worked for payroll. GPS-based options can automatically record mileage as well.

This saves administrative headaches of collecting handwritten timesheets and manually calculating hours. It also provides you with timesheet documentation in case of audits. According to Homebase, such tools save managers 8 hours weekly on hourly tracking tasks.

Document Everything

Keep meticulous records of all travel time logged, miles driven, and reimbursable expenses submitted. This covers you in the case of wage disputes, employee relations issues, or Department of Labor audits.

Require employees to submit receipts and other documentation for any expenses. Maintain these records for at least 3 years under DoL regulations.

Thorough documentation also helps you identify excessive costs to trim in the future. Analyze records to spot frequent travelers, costly destinations, and other trends.

Travel Pay Done Right

Paying hourly employees for out of town travel requires care and understanding labor regulations, but it can be managed seamlessly. Following this guide will help you handle travel compensation the right way while controlling costs and keeping your team satisfied. Don’t hesitate to reach out if you need any guidance specific to your small business!