Travel pay computations can be complex and confusing, even for experienced payroll professionals. The FLSA and state wage and hour laws require employers to pay employees for all hours worked and include all hours worked in computing overtime compensation. An employee's total hours include all time spent doing work for the employer including time spent traveling on behalf of the employer.
Different rules apply for commuting, travel away from the employee’s tax home, and local travel between work locations. Rules also vary based on whether the employee is driving a company or personal vehicle or using public transit, and whether the employee is exempt or non-exempt. Some states have enacted travel pay rules that differ from federal guidelines.
Employers may pay different rates of pay for time spent in different types of work, reimburse expenses or provide travel allowances to employees, or provide other types of compensation for time away from home. Where employees receive reimbursement for expenses, specific documentation and reporting rules must be followed or the reimbursement may constitute additional wages to the employee.
Mistakes in computing time worked or overtime compensation may lead to wage and hour complaints and claims. Employers must know which hours must be compensated, which payments must be included in the regular rate of pay, and how to compute the correct amount of overtime compensation.
It is important for employers establish clear policies regarding employee business travel and communicate those policies to employees to assure compliance avoid problems.