How do I pay my OTR drivers and owner-operators?
Truck drivers are rarely at the office on payday, so paying over-the-road (OTR) drivers and owner-operators takes some planning. How do you pay them accurately and on time?
Start with accurate records
The first challenge is calculating the pay itself, which depends on how you pay: by the mile, by the hour, a percentage of the load or a flat amount per load. Set up record keeping that matches your pay method and is easy to use. Many general accounting programs are not built for trucking, so look for one that works from trips.
Trip Sheet Central is built for this. Driver pay is calculated from the trips, so you can answer questions like these without a spreadsheet:
- How much is this driver's pay for the pay period?
- What are the total miles for a pay period?
- Can I print a pay statement for a driver, or the last few?
- What was the activity for a given driver or truck?
Driver pay statements are on the Premium plan.
Electronic payments
The simplest way to pay drivers who are on the road is an electronic payment: direct deposit to the driver's bank account, or a payroll card for drivers without one. Payroll cards are offered by banks and by transportation payment companies.
When you choose a payroll card or payment provider, compare the fees for both you and the driver. Avoid providers that charge you to load the card and then charge the driver to use it. Prefer one with clear pricing that also supports what you need on the road, such as fuel and supply purchases. Providers that specialize in transportation include Comdata and T-Chek.
W-2 or 1099?
Whether a driver is an employee or an independent contractor decides which taxes you owe, so it is critical to get right. Generally, you must withhold income tax, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay those taxes on payments to an independent contractor.
The IRS looks at the whole relationship, not the label you use. It considers behavioral control (who directs how the work is done), financial control (who provides and pays for the equipment, and who can make a profit or loss) and the relationship of the parties (contracts, benefits and how permanent it is). No single factor decides it. If you are unsure, read the IRS page on independent contractors and employees, ask an accountant, or ask the IRS for a determination on Form SS-8. State rules can differ from the IRS rules.