What are the advantages of paying truck drivers W-2 instead of 1099?
There is a lot of talk about 1099 versus W-2 when it comes to paying truck drivers. Many trucking companies tend to pay 1099 when W-2 is clearly the legal way to pay the driver. Many companies do this despite knowing full well what it could cost them big time if they are caught. To some, that is not enough to convince them to make the change. So then what are the other advantages to paying your truck driver’s W-2 instead of 1099?
In this article, we will discuss some of the things you may not have thought about like, Driver retention. The mindset of a driver that asks to be 1099. No fear of IRS penalties.
Driver retention
We’ve been doing payroll for a while, over 10 years. We can tell you, with certainty, truck drivers paid 1099 do not stay with a trucking company as long as W-2 drivers. While there are many reasons why this could be true a fair amount of them have to do with the trucking company. Now maybe that’s not you because you treat the drivers well. Providing good equipment, good routes with plenty of miles, and home time. There are companies out there that don’t care. It stands to reason a company that doesn’t care what the driver wants or needs out of their job may not care if they are paying the driver the legal way.
While we are at it let’s talk about the cost of driver turnover. The average cost to a trucking company is anywhere from $2,000 to $10,000 per driver. It’s a lot of wasted money. Especially if you know they are a bad fit for your company going into it. That brings me to my next point.
Beware the drivers that ask for 1099
What if you have a driver that asks or requires that you pay him or her via 1099? Don’t walk away from that driver, RUN AWAY FROM THEM! Think about it. Why would a truck driver want to paid by 1099 when they should be W2? Often, they are trying to avoid a legal obligation. It could be child support or garnishment for a debt they were sued over. Sometimes, it is tax obligations or even an unwillingness to pay taxes. In each of these situations, the driver is trying to get out of paying what they are supposed to pay. To put it more bluntly, they are stealing. If they bought a car and didn’t make the payments and got sued, and still never pay it, it is theft. If they won’t pay taxes, they are stealing from all of us that do pay them.
So now that we’ve established that theft is ok with them, what stops the truck driver from stealing from you. It would be so easy to put 20 gallons of diesel into someone else’s truck on your fuel card while grabbing a $20 bill from that driver? If they think the trucking company they work for owes them (Never happens, right?) they are past any other barrier stopping them. It’s not if but when it happens to you.
No fear of getting caught paying illegally
Don’t lose sleep at night over the fear of getting caught. It’s not worth the stress to try and save a few bucks. In Michigan, the penalty for not paying Workers Compensation when you should have been is $1,000 per employee, per day. (Do some quick math and let that number sink in) Then you have all the IRS fees.
With the right payroll procedures, we can help you mitigate the cost differences. Ask us for a no-cost consultation where we will discuss your situation with you. Also, check out our other articles about how you will get caught and the repercussions.
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Written by Mike Ritzema
With over 20 years of experience in entrepreneurship, management, business planning, financial analysis, software engineering, operations, and decision analysis, Mike has the breadth and depth of experience needed to quickly understand entrepreneurs’ businesses and craft the most suitable solutions.
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