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Human Resources/Per diem, mileage, and hourly compensation

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Question
Hello -

I work at an oil and gas maintenance company in Texas and my questions are concerning what's fair vs. legal regarding per diem and mileage compensation and what are the tax ramifications if we've been paying incorrectly.  Okay so here it goes:

1.) What are the specific IRS standards/guidelines regarding per diem pay?
2.) How many miles does an employee have to travel before they can receive per diem compensation?
3.) Do we have to pay an employee their hourly rate for the time they travel to the work site in their personal vehicle? Or mileage? Or both?
4.) Do we have to pay the employee his hourly rate if they travel to the work site in a company truck? And if they are traveling to the site in a work truck that they got at the main office do we pay the hourly rate?
5.) Can you please give me references to employee law that could help me understand any of this better?
6.) And finally, do we need to pay per diem/mileage at all or is it a "perk" or benefit of their employment?

If this is too many questions to answer I would really appreciate if you could just point me in the right direction to dig for more answers.  I want to be fair to the employees but have to be able to control costs and make sure I'm compliant with the applicable compensation and employee laws.

Thank you in advance for taking the time to read and answer my questions. I have so many more but these are the ones that continue to come up unanswered and I have bad feeling I've been paying the employees too much. :(  Again, thank you for your time.

Answer
Hello Jennie,
Thanks for your question.   Let’s see if I can help.

1.) What are the specific IRS standards/guidelines regarding per diem pay?

I doubt that I could type all the per Diem related info associated with this question so here are two web sites that should take care of this one.

http://www.irs.gov/pub/irs-regs/perdiemfaq&a.prn.pdf

http://www.journalofaccountancy.com/News/20126533.htm

2.) How many miles does an employee have to travel before they can receive per diem compensation?

It is not a matter of miles Jennie, it is what is your/the company’s preference.  Do you want to pay actual expenses or a flat per diem rate?  Per Diem rates are used when travel is frequent and  found more in the sales and service industries.  It is up to the company whether they chose actual expense reimbursement or per diem.  PD takes a little more research to make sure it is fair to both employee and company.

3.) Do we have to pay an employee their hourly rate for the time they travel to the work site in their personal vehicle? Or mileage? Or both?

That depends.   If it is daily back and forth from home to work, and their work day (e.g. 8 am to 5 pm) starts upon arrival at the worksite at 8 am, there is no requirement to pay them their hourly rate until they start to work and no requirement to pay mileage reimbursement.  In the case where sales, customer, and service calls are made by an employee traveling directly from home to the sales or customer location, mileage should be reimbursed.  In this same case, if he/she leaves home at the start of the typical work day to call on a customer or make a service call, then the hourly wage should be paid from the time he/she leaves home.

However, if an employee reports to work at his work location and then is required to leave the office to travel on company business, the company should be paying his/her hour rate and mileage reimbursement (if an employee-owned car is used).  

4.) Do we have to pay the employee his hourly rate if they travel to the work site in a company truck? And if they are traveling to the site in a work truck that they got at the main office do we pay the hourly rate?

Yes, assuming they are traveling during their regular work hours, e.g. 8 am to 5 pm.

5.) Can you please give me references to employee law that could help me understand any of this better?

Most of this stuff is cover by federal wage and hour laws, for the most part.  Here is the website.
http://www.dol.gov/dol/topic/wages/#.ULa_RaxTySo      You might also take a look at:
http://www.dol.gov/whd/flsa/#.ULa_h6xTySo   and other similar web sites.

6.) And finally, do we need to pay per diem/mileage at all or is it a "perk" or benefit of their employment?
 
Again Per Diem pay is an alternative to paying actual expenses.  It is associated with expenses – usually meals and hotels.  Mileage is usually separate.  So, either your company has to pay the actual expenses associated with work related travel or a flat rate per diem.

I hope this helps Jennie.  This stuff is a quagmire of labor and wage laws.  The other thing you could do is to find a company in your area who has a similar business and compare practices.  That might help!

Best of luck!  If you have a minute I would appreciate your evaluation of this answer through the multiple choice survey on the AllExperts.com website.

Regards,
Mark

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Mark Eichinger

Expertise

Any type of question related to domestic and international Human Resources work. My H.R. passions include Compensation design and systems in competitive markets, Health and Safety in Industrial Environments, Performance Management, Talent Management (Hiring, Selection, Employee Development, Compensation, Creating Space, etc.), Communications, Coaching, Counseling, Leadership, and Management. Questions I cannot answer: I am sure there are questions within these categories that I may not be able to answer but my experience below would suggest those would be few.

Experience

I own International Human Resources Coaching and Consulting, LLC. www.IHRCConline.com. Previously, I successfully held corporate executive and management leadership positions from 1979 to 2007 in two $9B+ multi-national corporations. Positions included: Vice President, Human Resources for the Asia Pacific Region, Eaton Corporation; I was based in Shanghai, China. Prior to that assignment, Vice President, Human Resources International and Operations, Eaton World Headquarters, Cleveland, Ohio with global responsibility for Eaton’s Human Resources practices, international assignee management, and Regional Human Resources Directors in Asia Pacific, Europe, and Central and South America. Specifically, my experience spans work at domestic and international locations at the operating plant, division, business unit, and corporate levels and most business scenarios to include startups, closedowns, restructurings, integrations, and ongoing operations. I am an Eaton Business Excellence Assessment Examiner (Malcolm Baldrige based system). I introduced processes and process mapping into the Human Resources environment. I have extensive experience with and working in domestic and international organization matrix structures. In the Asia Pacific region, my responsibilities included, leading the regions H.R. team and processes, managing the H.R. relationship with the corporation, creating and leading the professional and general manager development programs, China’s university relations program and managing the Asia Pacific key leader’s process. I have coached managers and leaders. I am a professional listener, my style open, direct, and focused on leader accountability and employee engagement. In Summary, my career responsibility included more than 60,000 employees, 60 union and union free operations, and 45 countries. I also lived in Korea for two years while in service with the USA’s armed forces.

Organizations
SCORE – Counselors to Americas Small Business; at various locations I have also belonged to Rotary, Lions, Kiwanis and the Chamber of Commerce. I have served on Boards of medical, community and institutional organizations.

Education/Credentials
Bachelor of Science in Business Administration, Youngstown State University. MBA work Youngstown State University, and University of Bridgeport. University of Tennessee, Lean Manufacturing Certified. Thunderbird School of Global Management, Management Certified.

Awards and Honors
Corporate level awards for compensation systems, communications campaigns.

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