If you’re worried that switching from 1099 to W-2 will crush your profit, you’re not alone.
Many trucking company owners are having the same thought.
The truth is switching to W-2 does come with new costs. And yes — it feels like a big leap from how you’ve been paying your drivers. But doing it the right way doesn’t have to mean draining your bank account.
"I want to do it the legal way, but I don't want to go broke paying taxes, workers' comp, and payroll fees."
John Doe
Trucking Company Owner
At Superior Trucking Payroll Service, we get it — because this is all we do. We’re the only U.S.-based payroll service built specifically for the trucking industry, and for over 17 years, we’ve helped carriers make the switch to legal W-2 payroll without losing their shirts.
Our mission is simple: we help trucking families. That means any company — not just our clients. Whether you have one truck or a fleet, we believe you deserve the truth, the tools, and the support to do things right.
In this article, you’ll learn the hidden costs of misclassifying drivers, how to pay W-2 legally without losing money, and the tools we’ve created to help you plan and save.
Why Paying Truck Drivers 1099 Is Risky — and Could Cost You Everything
1099 seems easy — but it could cost you everything if you’re audited.
Let’s be honest — paying drivers’ 1099 feels simple. You don’t have to deal with taxes, overtime, or payroll headaches. You just cut them a check, and you’re done, right? For years, many trucking companies have used 1099s just to avoid the extra cost.
But here’s the problem: Most drivers are actually employees, not contractors. And the IRS and state governments are cracking down on truck driver misclassification. If you get caught, the back taxes, penalties, and legal fees can destroy your business.
That’s why more and more companies are making the switch to W-2. The question is: How do you do it without going broke?
Interstate vs. Intrastate Drivers: How Labor Laws Change Your Payroll Rules
One of the biggest mistakes trucking companies make is not understanding how their drivers are classified under labor law. It’s not just about whether you pay W-2 or 1099 — it’s about where and how your drivers operate.
Here’s the key difference:
- Interstate drivers cross state lines or haul freight that is part of an interstate shipment (even if they don’t personally leave the state).
- Intrastate drivers only operate within one state and are not part of a multi-state supply chain.
Why does this matter?
Because different labor laws apply:
- Interstate drivers are often exempt from federal overtime laws under the Motor Carrier Exemption.
- Intrastate drivers usually must follow state labor laws, which may require overtime pay, meal breaks, and other protections — especially in strict states like California.
If you apply the wrong rules, you risk:
- Misclassifying drivers
- Underpaying wages or overtime
- Facing fines, lawsuits, and back pay claims
Bottom line: knowing which kind of freight your drivers haul helps you apply the right payroll rules — and keeps you out of trouble.
W2 Payroll Costs for Trucking Companies: What You’ll Actually Pay
Yes, paying employees by W-2 comes with extra costs:
- Employer payroll taxes (like Social Security, Medicare, and unemployment)
- Workers’ comp insurance
- Overtime pay, depending on whether loads are interstate (US) or intrastate (one state)
- Extra paperwork for state and federal filings
But don’t let this scare you. We’ve already broken down the full cost in another article.
This article explains where every dollar goes — and where you might be able to save.
How to Save Money on W2 Payroll Without Breaking the Law
This is where it gets better. You don’t have to choose between being legal and staying profitable. Here are two smart ways to lower your costs while staying 100% compliant.
Use Per Diem
Per diem is a daily allowance for meals and incidentals. When done right, it’s tax-free for your drivers and lowers your payroll taxes. Read “How Per Diem Saves Trucking Companies Thousands.”
With per diem, a big chunk of a driver’s pay isn’t taxed. That means:
- Lower employer tax and workers’ comp liability
- More take-home pay for the driver
- No hit to your profit margin
Use Pay-As-You-Go Workers’ Comp
Traditional insurance plans make you pay upfront or in large chunks. But with pay-as-you-go policies, you only pay based on your current payroll — not some guess for the year.
This helps you:
- Improve cash flow
- Avoid overpaying
- Stay flexible as your team grows or shrinks
California Trucking Payroll Laws: What Every Carrier Must Know About AB5 and Overtime
California has some of the toughest payroll laws in the country. If you’re based there — or even just running trucks there — you need to be extra careful.
If you’re not sure what laws apply to your company, this is where it really helps to work with a payroll service that understands trucking and California law.
Free Payroll Tools for Trucking Companies
At Superior Trucking Payroll Service, we built free tools to help you see the big picture — before you make the switch to W-2.
You can try all of these tools for free. No strings. Just help. And check out our Learning Center; there are hundreds of educational articles also for free.
Avoid These Costly Payroll Mistakes Trucking Companies Make When Going W2 Alone
When trucking companies try to handle W2 payroll without specialized support, it often leads to expensive errors, frustrated drivers, and burned-out staff.
Switching to W2 payroll is a big step — and if you’re trying to figure it out on your own (or using a generic payroll service), it’s easy to get stuck in costly, stressful traps. We’ve seen it happen over and over again.
Here are the three most common mistakes trucking companies make — and what you can do instead:
Mistake #1
Mistake #2
Mistake #3
Misclassifying Driver Pay Types (Mileage, Percentage, Bonuses)
Most payroll providers aren’t built for the trucking industry. They don’t understand how to process pay by the mile, by the load, or with mixed pay types like bonuses or detention pay. That means more manual work for you — and more room for error.
- Make sure your payroll partner can accurately handle all pay types specific to trucking.
Struggling with Multi-State Taxes and Per Diem
Drivers often run in multiple states, and each one may have different tax rules. Add in per diem calculations — which can reduce your tax burden — and it gets complicated fast.
- Choose a system that calculates per diem automatically and handles multi-state tax filings for you.
Wasting Hours on Manual Data Entry
If your payroll service makes you input everything into a client portal — or worse, use spreadsheets — your team is wasting time that should be spent on operations.
- Look for a service that takes the data off your plate and does the heavy lifting for you.
You don’t need to guess, juggle, or fix mistakes every pay period. There are services built to handle all of this for you — and when trucking payroll is done right, it saves time, reduces risk, and keeps your drivers happy.
Your Next Step: See What Switching to W2 Will Really Cost — Without Guessing
Switching your drivers from 1099 to W-2 feels overwhelming, but it doesn’t have to destroy your profits. With the right knowledge and tools, you can do things the legal way and still run a strong, successful business.
You’re not the only trucking company facing this challenge. We’ve helped carriers just like yours make the switch the right way — without guessing, without drowning in taxes, and without losing control of their business.
If you’re trying to figure out what switching to W-2 will really cost, don’t guess — use our free W-2 Cost Calculator. It’s simple, it’s built for trucking, and it’ll give you real numbers you can work with.
At Superior Trucking Payroll Service, we’ve spent over 17 years helping trucking companies pay their drivers the right way. We’re not just a payroll provider — we’re a partner that understands your business. Whether you’re ready to switch now or just want to explore your options, we’re here to help you every mile of the way.
Written by Melisa Bush
With over 15 years of experience in the trucking industry, Melisa is well-versed in the complexities of trucking payroll and adept at navigating special circumstances. Before joining Superior Trucking Payroll Service, Melisa worked at a trucking company, where she managed driver miles and expenses for a fleet of 50 trucks. This hands-on experience gives her unique insight into the challenges our clients face when preparing their payroll data.
Melisa’s top priority is customer service. She strives to treat each client as an individual with genuine needs, rather than just another number in the system. Her goal is to alleviate the burdens of our clients and make their daily operations smoother.