Employee pay strategies

Status
Not open for further replies.
Chamuit

Chamuit

Grumpy Old Man
Location
Texas
Occupation
Electrician
I haven't had any employees for years but I was asked to come up with a pay/commission strategy for another department I work with.

In my previous life, I just paid my guys for the hours they worked, including lunch time sometimes.

I would appreciate any advice or strategies that you are willing to share to help jump start my brain.

Benefits are already predetermined by the HR beast. (PTO, Med, dental, etc.)
Service work.
Need to keep the time pressure on so they don't dog the jobs to make hours.
Need to reward producers.
They get a take home vehicle.
No on-call, at the moment.


Thank you.
 
Chamuit said:
I haven't had any employees for years but I was asked to come up with a pay/commission strategy for another department I work with.

In my previous life, I just paid my guys for the hours they worked, including lunch time sometimes.

I would appreciate any advice or strategies that you are willing to share to help jump start my brain.

Benefits are already predetermined by the HR beast. (PTO, Med, dental, etc.)
Service work.
Need to keep the time pressure on so they don't dog the jobs to make hours.
Need to reward producers.
They get a take home vehicle.
No on-call, at the moment.


Thank you.
Click to expand...
I think it is a bad idea to pay them for lunch. It is a nice gesture but if you do it sometimes, you probably should do it all the time.

If they get a take home vehicle and leave from home to the job, I think they should be paid from the moment they get in the company owned vehicle.

If they are not on call, how do you justify a take home vehicle without having to make them pay the income tax that they owe for having a company vehicle? You are supposed to be issuing them a 1099 or similar form for this benefit so they can pay the taxes due. The IRS has a special rule you can use of $3/day as the value of a company vehicle supplied to an employee that is used to commute back and forth to work. That is dirt cheap for the employee.

I don't think there is any practical way to separate the dogs from the producers except with effective supervision.
 
petersonra said:
If they get a take home vehicle and leave from home to the job, I think they should be paid from the moment they get in the company owned vehicle.
Click to expand...

For most people a take home vehicle is a perk. They don't have to pay for gas to commute to work. They don't have to commute to the shop before heading out to work. You don't also need to pay them just because they are driving a company vehicle to their first stop. That's commuting and it's on them.

petersonra said:
If they are not on call, how do you justify a take home vehicle without having to make them pay the income tax that they owe for having a company vehicle? You are supposed to be issuing them a 1099 or similar form for this benefit so they can pay the taxes due. The IRS has a special rule you can use of $3/day as the value of a company vehicle supplied to an employee that is used to commute back and forth to work. That is dirt cheap for the employee.
Click to expand...

Even though employees generally like taking home a vehicle, the reason you send employees home with vehicles is it saves the company money. You don't need a big lot to park in. They are usually safer from break-ins. You don't have to pay employees to drive from the shop to their first service call or from their last service call back to the shop (that's commuting). You can also send them to jobs based on where they live so you can get more billable hours per day (less windshield time). Since the primary reason for sending the vehicles home with the employees is for the company's benefit, IMHO the employees are not getting something of value they should have to pay taxes on (but I'm not an expert on IRS law in this area).

petersonra said:
I don't think there is any practical way to separate the dogs from the producers except with effective supervision.
Click to expand...

Agreed, a field supervisor should be randomly dropping in on the jobs both to make sure people are working efficiently and to check the quality of their work.

P.S. Watch out for employees using their take home vehicles for off hours side work. Even if they are not using company materials, they are probably using power tools and expendables. The additional driving increases vehicle expenses and risks additional accidents.
 
Last edited:
For most people a take home vehicle is a perk. They don't have to pay for gas to commute to work. They don't have to commute to the shop before heading out to work. You don't also need to pay them just because they are driving a company vehicle to their first stop. That's commuting and it's on them.

I don't believe that's true, in CA if you drive a company vehicle, you are on the clock. I work for a city and I am on a 24 hour call list, I must report to the office first and get my city vehicle other wise I'm not covered by the city if anything happens.
 
cowboyjwc said:
For most people a take home vehicle is a perk. They don't have to pay for gas to commute to work. They don't have to commute to the shop before heading out to work. You don't also need to pay them just because they are driving a company vehicle to their first stop. That's commuting and it's on them.

I don't believe that's true, in CA if you drive a company vehicle, you are on the clock. I work for a city and I am on a 24 hour call list, I must report to the office first and get my city vehicle other wise I'm not covered by the city if anything happens.
Click to expand...

If you are not on the clock you are commuting. So if you are in a company vehicle you are either being paid by the company for the time you are driving and the company is paying for the cost of the vehicle or the company is not paying you for the drive time so you are commuting in which case the employee is responsible to pay tax on the $3 a day the IRS says that commuting in a company owned vehicle is worth. You can't get around this. At least not legally. It is something that has roundly ignored in some circles but eventually somebody is going to get caught. At least know what the actual law is
 
Coppersmith said:
For most people a take home vehicle is a perk. They don't have to pay for gas to commute to work. They don't have to commute to the shop before heading out to work. You don't also need to pay them just because they are driving a company vehicle to their first stop. That's commuting and it's on them.
....
Click to expand...

Sometimes not. Once upon a time when I was a wire monkey the boss kept bugging me to take the van home at night. I had a shotgun driveway so this meant constantly juggling my personal vehicle and company vehicle onto a fairly busy secondary road. That would have been even worse after I got married. So I asked him what were the parameters for use of the vehicle

Can I use it for short trips to the supermarket, Home Depot?
No.

Can I use it to pick up something from Home Depot on my way back home?
No.

Any personal use at all?
No.

Guess what my answer to his request was.
 
gadfly56 said:
Sometimes not.
Click to expand...

I agree which is why I said "for most people". Probably the biggest reason people don't want to take a vehicle home is HOA rules that forbid commercial vehicles in driveways. My subdivision has very weak rules (something I looked for when house hunting) which is why I have three service trucks in my driveway. My neighbor one block over has an A/C company and has three vans parked on the cul-de-sac circle in front of his house.
 
cowboyjwc said:
http://svelf.com/travel-time-compensation-california/
Click to expand...

The only thing I see in there that might require the employer to pay an employee with a take home truck is this:

Employer Control of Travel: An employer is required to compensate an employee for time spent riding in or driving a company vehicle from his home or a central stop to the work site if the employer requires employees to reach their worksite on company provided transportation.

However, since take home trucks are voluntary, I don't think it applies. The employee has the option to pick up and return the truck at the shop. If this is the case, commuting starts/ends at the shop.
 
Coppersmith said:
However, since take home trucks are voluntary, I don't think it applies. The employee has the option to pick up and return the truck at the shop. If this is the case, commuting starts/ends at the shop.
Click to expand...

You may not have to pay them for the time they spend commuting but you may well have to issue a 1099 for the value of the company vehicle for commuting purposes as it is a taxable benefit to the employee.
 
petersonra said:
You may not have to pay them for the time they spend commuting but you may well have to issue a 1099 for the value of the company vehicle for commuting purposes as it is a taxable benefit to the employee.
Click to expand...

Please note that in this particular instance, he's talking about picking the truck up from the shop and dropping it back at the end of the work day.
 
What about people like my State Electrical inspectors? They drive a vehicle owned by their employer, they park it at home every night. some of them are 2-300 miles from "the office" and would be pointless to have to physically report to the office on a daily basis, as they would about have to turn around as soon as they get there to go home, if they wanted to have a life after working hours.

Our State troopers are another example with similar situation - though they have more then one office within the state, many are still more then 30 miles from one of said offices, and may be called to duty at times while at home - not so good in an emergency to need to go get the cruiser when it could be right in your driveway.

I know neither one of those I mentioned is ever driving their work vehicles for personal use. They may take personal "break" while otherwise on duty and stop at a convenience store or something like that, but only to a place that is pretty much on the path they were otherwise going to be traveling.

Another example - my father was a truck driver, an employee not an owner operator. When he was OTR he was only home on occasions, quite often just for a night or two with his personal vehicle still parked at his employer's parking lot 100 miles away. Was that personal use to park at home on those occasions even if he had to veer off the otherwise intended path to the next destination?

Later on he drove for another more local place and was home nearly every night - but still parked his truck (not at but very near) his home every night. This was a tractor-trailer rig and not something you are going to just ride around in and take to the movies, grocery store, and run your other personal errands in except in pretty rare occasions.
 
Here is the IRS publication that talks about this subject:

https://www.irs.gov/publications/p15b#en_US_2017_publink1000193762

Specific sections that apply are:

Working Condition Benefits.
This exclusion applies to property and services you provide to an employee so that the employee can perform his or her job. It applies to the extent the employee could deduct the cost of the property or services as a business expense or depreciation expense if he or she had paid for it. The employee must meet any substantiation requirements that apply to the deduction. Examples of working condition benefits include an employee's use of a company car for business, an employer-provided cell phone provided primarily for noncompensatory business purposes, and job-related education provided to an employee.

Qualified nonpersonal use vehicles.
All of an employee's use of a qualified nonpersonal use vehicle is a working condition benefit. A qualified nonpersonal use vehicle is any vehicle the employee isn't likely to use more than minimally for personal purposes because of its design. Qualified nonpersonal use vehicles generally include all of the following vehicles.

Vans.
A van with a loaded gross vehicle weight of 14,000 pounds or less is a qualified nonpersonal use vehicle if it has been specially modified so it isn't likely to be used more than minimally for personal purposes. For example, a van qualifies if it is clearly marked with permanently affixed decals, special painting, or other advertising associated with your trade, business, or function and has a seat for the driver only (or the driver and one other person) and either of the following items.

  • Permanent shelving that fills most of the cargo area.
  • An open cargo area and the van always carries merchandise, material, or equipment used in your trade, business, or function.

The above talks about an exclusion (from taxing the employee) but I'm not sure I understand it.
 
kwired said:
What about people like my State Electrical inspectors? They drive a vehicle owned by their employer, they park it at home every night. some of them are 2-300 miles from "the office" and would be pointless to have to physically report to the office on a daily basis, as they would about have to turn around as soon as they get there to go home, if they wanted to have a life after working hours.

Our State troopers are another example with similar situation - though they have more then one office within the state, many are still more then 30 miles from one of said offices, and may be called to duty at times while at home - not so good in an emergency to need to go get the cruiser when it could be right in your driveway.

I know neither one of those I mentioned is ever driving their work vehicles for personal use. They may take personal "break" while otherwise on duty and stop at a convenience store or something like that, but only to a place that is pretty much on the path they were otherwise going to be traveling.

Another example - my father was a truck driver, an employee not an owner operator. When he was OTR he was only home on occasions, quite often just for a night or two with his personal vehicle still parked at his employer's parking lot 100 miles away. Was that personal use to park at home on those occasions even if he had to veer off the otherwise intended path to the next destination?

Later on he drove for another more local place and was home nearly every night - but still parked his truck (not at but very near) his home every night. This was a tractor-trailer rig and not something you are going to just ride around in and take to the movies, grocery store, and run your other personal errands in except in pretty rare occasions.
Click to expand...

there are a few vehicles that are specifically exempted by the IRS. I seem to recall cop cars are one of them. i can't find a citation for this just yet.

https://www.irs.gov/pub/irs-pdf/p15b.pdf

take a look at pages 24-29.
 
Will admit I don't know all the rules, but an observation- if you drive any vehicle belonging to your employer and are not "on duty" you are still parading around any advertising that may be on that vehicle - a benefit to the employer.

The down side for the employer is if you do anything "stupid" while driving that vehicle it is their name that is seen, but that goes for whether you are on the clock or not.
 
When I was a Service tech many years ago, our pay scale was something like this ......

$15/hr base pay.
First $4k in sales goes to the company to cover O&P.

Commissions started after $4k;
Next $1k you got 10%
Next $1k you got 15%
Anything over that you got 25%.

So if you sold $7k in a week, your pay would be $950.

The only thing I can remember this not applying to was generators, because your markup on the generator is so low. You’d lose money even paying 10% on the cost of it. We did get commission on the material and labor for install though.

If you had a helper, you had to pay the company back an hourly rate for using them. We would share a helper between Service techs as needed. The rate was like $25/hr, so it encouraged you to work alone. Some jobs just absolutely require a helper though, but if you’re in need of a helper you should be hitting some pretty high sales goals.

I usually didn’t need a helper until I was up around $12k in sales for a week.

I will say my boss was very fair about billing for a helper. If I only needed him for one job that day, and didn’t have time to bring him back to the shop because of how tight the schedule was, they wouldn’t charge me for him.

Sometimes they would just give us a helper so they’d make their hours for the week, which was always nice.

We also had a company vehicle and fuel. Everyone’s health benefits were the same but PTO was based on years of service. At minimum you got 48 PTO hours, 2 sick days, and a personal day.




Sent from my iPhone using Tapatalk
 
brantmacga said:
When I was a Service tech many years ago, our pay scale was something like this ......

$15/hr base pay.
First $4k in sales goes to the company to cover O&P.

Commissions started after $4k;
Next $1k you got 10%
Next $1k you got 15%
Anything over that you got 25%.

So if......
Click to expand...

Thanks for the reply. :thumbsup: That gives me something to ponder and build off of.

Interesting how everyone was so interested in take-home vehicles..... :blink:
 
Chamuit said:
Interesting how everyone was so interested in take-home vehicles..... :blink:
Click to expand...

I think it is because so many employers do it not realizing that in most cases it is a taxable benefit. Employees think they are getting something for nothing, which they are, if they pay no income tax on the benefit.

The ironic thing is that by telling employees they are "on call" if they take the vehicles home, they avoid the tax issue entirely, even if people are rarely called. they can also avoid the tax issue by dispatching people from their homes, although this is a little tricky as in most states they would have to pay for the drive time. however, if they came back to the shop and left from there the drive time would be paid. So that is probably a wash.
 
Status
Not open for further replies.
Top