Per Diems Put More Cash In Drivers' Pockets

      One of the fastest-growing trends in driver compensation is per diems or meal allowances, says Gordon Klemp, president of the National Transportation Institute. The allowances are generally not subject to state and federal income or withholding taxes as long as they don't exceed IRS limits. Thus a few cents per mile per diem versus a few cents more per mile in base pay usually puts more money in the driver's pocket.
      To illustrate, Klemp offers some simple examples based on 28% state and federal taxes, and 2,200 miles a week. Under those circumstances, a driver making 33 cents a mile earns $704 a week, pays $197 in taxes, and takes home $506. If he makes 25 cents a mile with an 8 cent per mile per diem, he earns $550 a weeks, pays $154 in taxes and, with the $176 per diem, takes home $572.
      Carriers may also benefit from per diem programs because they take the meal expense deduction - now 65% for truckers and scheduled to go up every other year until it reaches 80% in 2008. Moreover, per diems aren't subject to employee matching for Social Security and Medicare.
      But there are cautions. Per diems should be set up with guidance from a tax attorney or accountant in order to make sure they comply with all applicable federal and state tax rules. And in order to be successful, they require a good deal of communications and training.
      "If the company is going to benefit along with the driver, emphasize that you're sharing the advantage," he advises. If possible, it works best to offer the drivers a choice between the per diem package and higher base pay. That way they don't feel there's a hidden agenda.
      Per diems, and how they might affect take-home pay and taxes, should be carefully explained to drivers. Dispatchers, payroll personnel and anyone who works with drivers should also understand and be able to discuss the programs.
      "If drivers get a consistent message, it's easy for them to get comfortable with the idea," says Klemp. "If they get different answers, they'll soon start to doubt the value of the program."

Dealing with Drivers continued...