As the demand for food delivery drivers continues to increase, so do the costs associated with the fuel and maintenance of drivers’ transportation. The rise in costs for delivery drivers can result in hourly earnings that fall below minimum wage. Considering that drivers are owed any money paid out of pocket when on the job from their employer, small business owners shouldn’t assume that tips will offset their expenses.
It is recommended that drivers be compensated at the rate set by the Internal Revenue Service, which is 54 cents per mile. This compensation structure not only ensures that delivery drivers are making a fair wage but, also that small business owners are avoiding legal action by delivery drivers earning less than minimum wage. The extra funds allocated to your delivery drivers will ultimately prove to be more beneficial to business owners in the long run.
Pizza Hut learned this lesson the hard way in 2013. About 160 Texas Pizza Huts failed to reimburse adequately for personal automobile use. A driver, Steven Jackson, claimed he was paid 88 cents per delivery. After calculating all car-related expenses, his hourly wages resulted in a range of $1.48-$4.20 per hour. At this time, the Federal minimum wage rate was $7.25 per hour. If the company had reimbursed $0.45 per mile, he would have accrued a range of an additional $4.05 – $5.76 per hour and made minimum wage.
Besides meeting federal requirements, utilizing a reimbursement program for miles will increase driver retention rates. When employees feel taken care of by their employers, their satisfaction increases, decreasing your business’s turnover rate.
Understanding how to adequately compensate employees will ultimately help you avoid issues likes wage reimbursement. Small business owners deal with enough problems on a daily basis; there is no reason to worry about additional, avoidable issues.