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

Going on a work trip can be an exciting endeavor for employees. However, as an employer, you need to ensure you handle compensation correctly when hourly staff travels for their jobs. Develop clear travel policies, understand wage laws, reimburse expenses properly, and utilize tools to reduce administrative hassles. This 2600+ word guide covers everything employers require for paying non-exempt staff during business travel.

Importance of Travel Policies

The first step is developing written travel compensation policies so all parties understand expectations. Your handbook should cover:

• Payment rates for travel time versus working hours
• Mileage reimbursement rates
• Approved expenses like hotels, meals, airfare
• Reimbursement processes and forms

Explicit travel policies reduce confusion on allowances and procedures. They also ensure consistent and fair treatment of all your hourly personnel. Review the policies with new hires too.

Pay Rates for Travel Time

You must pay non-exempt staff for travel as work hours under federal wage laws. Compensation depends on whether the travel cuts across normal work hours.

Regular Commute Travel: You don’t need to pay employees for regular commute time to and from work. But if they commute to an alternate workplace for a business trip during regular times, you must pay for that time.

Travel During Work Hours: All travel for business within regular paid work hours qualifies for their normal hourly wages. For example, if regular shift is 9 am to 5 pm and they travel for work from 10 am to 2 pm, pay standard hourly rates.

Travel Outside Work Hours: You can pay a lower rate for travel falling outside regular work shifts but it must equal minimum wages at least. Paying full hourly rates allows you to avoid overtime wage calculations.

Travel Time Pay – State Variations

Hourly wage compliance varies slightly across states with different overtime threshold rules. This table summarizes the nuances:

Managing Travel Expenses

Besides hourly pay, develop clear policies around reimbursing travel expenditures like:

Transportation: Pay for costs of flights, mileage for personal cars, train or bus tickets, parking fees, toll charges, and taxis/rideshares. Set per-mile reimbursement rates for personal car use.

Accommodation: Cover hotel stays along with taxes and fees. Define guidelines for allowances – single occupancy, budget hotels near event venues etc.

Meals: Reimburse meals eaten during business travel. Set upper limits per meal to control costs. Exclude alcohol from reimbursements.

Incidentals: Pay for work-related costs like Wi-Fi, luggage fees, supplies etc. Exclude entertainment or personal expenses.

Historical Mileage Reimbursement Rate Data

As per IRS publications, below are the standard business mileage reimbursement rates over the past 5 years. Employers can set custom rates but many align with these published ones.

Breakdown of Travel Expenses

Based on workforce expense reporting trends, here is the split of various travel costs as a percentage of total expenditure. Lodging accounts for almost half at 45% while airfare and meals are the next major categories.

Data Source: Certify Global Travel Report

IRS Accountable Plans

Structure your travel expense compensation as per IRS accountable plan rules to minimize payroll tax burdens. Requirements include:

• Pay only allowed expenses with documented proof like receipts
• Get employees to adequately account for all expenses
• Require excess reimbursement refunds to employer

Also have employees submit expense reports and original receipts soon after trips end.

“By following the IRS accountable plan rules, employers can provide travel reimbursements without tax headaches. It leads to simplified administration and record-keeping too" says Patrick Campbell, principal wage-hour consultant at PayLab Workforce Solutions.

Automating Tracking

Automated systems help accurately capture and process travel time and expenses.

Time Tracking : Apps allow remote clock-in/out plus geotracking. Employees can timestamp attendance, break periods, travel durations with location stamps.

Mileage Tracking: Apps use GPS to log miles driven so reimbursement calculations are automated.

Expense Reporting: Apps centralize expense reporting with automated approvals, policy compliance checks, integrated reimbursements etc.

HRIS integrations also push trip data directly into payroll systems for efficient compensation.

“Workforce management systems have evolved tremendously in handling employee travel workflows. The efficiencies and transparency provided by automation are invaluable for employers as well as staff,” elaborates Lauren Langley, Technology Advisor at HR futurists Inc.

Alternate Commuting Options

Explore ways for employees from the same regions to carpool together for outstation trips. This saves mileage reimbursements.

Also negotiate special corporate rates with frequently used hotels near your go-to client venues. Discounted group rates for accommodations can achieve significant savings over time.

Onboarding Staff

Cover your formal travel policies during new hire orientation sessions. Ensure they understand:

• How travel hours get compensated
• Expense claim processes
• Tools and apps to track time, mileage, expenses
• Commuting options like carpools
• Importance of receipts for reimbursements

Refreshers before big company conferences or client projects also help.

Handling Exempt Employees

The above policies apply to non-exempt or hourly employees covered by federal overtime pay rules. Exempt salaried staff don’t qualify for OT wages so may have different travel compensation policies like:

• Paying a flat daily stipend versus hourly rates
• Higher rates for weekend or overnight travel
• Mileage reimbursements only without regular pay

Review wage compliance for any differential travel pay policies.

“Its prudent for employers to still define clear travel compensation guidelines for exempt workforce and not just leave itopen-ended. Setting expectations upfront is always wise,“ notes Alan Thompson, Payroll Law specialist.

Pros and Cons of Hourly Pay Versus Per Diems

Paying hourly rates for travel time seems the obvious route, especially with fluctuating wage regulations. However per diem travel allowances have benefits too.

Hourly Wage Pros

• Guaranteed fair pay for all travel hours
• Complies with federal and state wage rules
• No reimbursement documentation needed
• Simpler payroll administration

Hourly Wage Cons

• Manual validation of reported travel time
• Higher wage costs with overtime
• Annual pay rate changes complex to manage

Per Diems Pros

• Predictable travel compensation amounts
• Low/no overtime costs
• Annual policy updates not needed

Per Diems Cons

• Potential underpayment if outside long hours
• Higher administrative workload for claims

Ultimately hourly rates provide the best staff experience. Per diems trade convenience for wage compliance risks. Hybrid policies also work with hourly base + fixed stipends.

Managing Validation of Travel Timesheets

To prevent wage fraud or timesheet errors, implement checks before approving travel hour claims like:

Geotracking: Cross-verify timestamps on timesheets with geodata for travel duration accuracy

Buddy Checks: Trip partners sign-off on peer travel hours for verification

Daily Approvals: Get local supervisors at trip location to validate times daily

Productive Hours: Check timesheets against work deliverables completed to assess if excessive

Historical Baselines: Compare travel hours claimed versus past averages for similar trips

Automations make continuous timesheet validation efficient by flagging outliers or discrepancies for manager review.

Sample Overtime Scenarios

Consider these hypothetical overtime calculations if hourly employees work beyond regular schedules during travels:

Regular hours: 9 AM – 6 PM, Monday to Friday
Hourly rate: $20
OT rate: $30 per hour

Scenario 1)

• Mon – Fri: 8 AM – 7 PM travel and work hours
• Total hours: 55 hours
• 10 OT hours
• Regular pay = 40 hours x $20 = $800
• OT pay = 10 hours x $30 = $300
• Total pay = $1100

Scenario 2)

• Mon – Sat: 8 AM – 9 PM travel and work
• Total hours: 78 hours
• 28 OT hours
• Regular pay = 40 hours x $20 = $800
• OT pay = 28 hours x $30 = $840
• Total pay = $1640

OT costs add up fast. But Hourly pay allows you to control labor costs better if you cap travel durations.

Predictive Modeling for Travel Spend

Advanced quantitative analysis helps improve travel budgeting and policies through predictive modeling techniques like:

• Statistical forecasting algorithms to estimate future travel patterns
• Simulation models that quantify policy change impacts
• Data mining using neural networks for new insights
• Prescriptive analytics to optimize compensation rules

“Predictive modeling delivers tangible benefits in managing variable workforce expenditures like travel costs or hours. The analytics provide data-driven policy insights not possible manually.” explains Diego Ross, Analytics consultant at Deloitte.

Emerging Considerations

With remote and virtual working models, travel compensation is evolving further with additional compliance considerations like:

• Defining commute to official work locations for remote staff
• Tracking hours effectively for virtual business trips
• Reimbursing home office expenses during extended trips
• Paying travelers providing hybrid services virtually

Employers need ongoing policy reviews adapting to changing workforce and technology landscapes. Staying updated on wage laws and accounting practices is equally critical.

Key Takeaways

Paying hourly employees for out-of-town business trips requires you get a number of things right – from wage compliance to expenses reimbursement and reporting automations. Key lessons include:

• Develop clear written travel pay and allowance policies
• Understand nuances in wage laws around travel time and variable state regulations
• Cover all permissible expenses via IRS accountable plans only
• Implement efficient validation of reported travel hours and expenses
• Consider predictive analytics for data-driven travel spend management
• Continuously revisit policies as remote working models evolve

While automations handle most processing needs, the foundation of travel wage compliance starts with well-defined compensation policies and employee awareness.