Should Contractors Charge for Travel Time? (w/Examples) + FAQs

Yes, contractors can and often should charge for travel time, though the rules differ based on whether you are an employee or an independent contractor. The Fair Labor Standards Act requires employers to compensate employees for certain types of work-related travel time, creating obligations that many contractors face when they hire workers. For independent contractors running their own businesses, travel time represents a real cost that must be factored into pricing to maintain profitability.

The core problem stems from the Portal-to-Portal Act of 1947, which created specific exemptions to compensable work time that many contractors misunderstand. This federal law establishes that ordinary commuting from home to a regular workplace is not compensable, but it includes important exceptions that create confusion and potential wage violations. When contractors fail to properly compensate employees for required travel time, they risk penalties including back wages, liquidated damages, and attorney fees under 29 U.S.C. § 216(b).

According to research on construction industry billing practices, 48% of subcontractors account for working capital costs (including travel) in their bids, and these contractors report profit margins nearly 2 percentage points higher than those who do not. This statistic demonstrates that properly charging for travel time directly impacts business profitability and long-term success.

What you will learn from this article:

📍 Federal and state laws that determine when travel time must be paid and how the Portal-to-Portal Act creates specific exemptions that affect your business

⚖️ The critical difference between independent contractors and W-2 employees, including IRS classification tests that determine whether you must pay travel time to workers

💰 Four proven methods for billing travel time (hourly rates, mileage fees, flat rates, and hybrid models) with specific examples from plumbing, electrical, and HVAC contractors

🚫 Common mistakes that trigger wage claims and IRS audits, including misclassifying workers and failing to document travel time properly

✅ Best practices and do’s/don’ts for establishing travel time policies that protect your business while maintaining competitive pricing in your market

Understanding the Legal Framework: When Federal Law Requires Travel Time Payment

The Fair Labor Standards Act establishes the foundation for all travel time compensation rules in the United States. This federal law requires employers to pay non-exempt employees at least the federal minimum wage of $7.25 per hour and overtime pay at time-and-a-half for hours worked over 40 in a workweek. Travel time that qualifies as “hours worked” under the FLSA must be counted toward both minimum wage and overtime calculations.

The Portal-to-Portal Act, passed in 1947 as an amendment to the FLSA, created important limitations on what counts as compensable work time. The Act’s primary purpose was to relieve employers from paying for preliminary and postliminary activities that occurred before or after the principal work activities. However, the Act includes critical exceptions that many contractors overlook.

Under 29 C.F.R. § 785.38, travel time counts as work time when it is “part of the employee’s principal activity”. This regulation creates a bright-line rule: once an employee begins their first principal work activity of the day, all subsequent travel until the last principal activity ends must be paid. The consequence of violating this rule is liability for unpaid wages dating back two years (or three years for willful violations), plus an equal amount in liquidated damages.

The Department of Labor’s regulations establish five distinct categories of travel time, each with different payment requirements. Home-to-work travel is generally not compensable under the ordinary commute exception. However, if an employee is required to report to a meeting place to receive instructions, perform work, or pick up tools before traveling to the worksite, all of that time becomes compensable.

Travel from job site to job site during the workday always qualifies as compensable time under the “all in the day’s work” rule found in 29 C.F.R. § 785.38. This regulation means that once an employee reports to the first location, travel to subsequent worksites must be paid at the regular hourly rate. The rule applies regardless of distance traveled or whether the employee uses a personal vehicle or company transportation.

Special one-day assignments to another city trigger different payment rules under 29 C.F.R. § 785.37. When an employee travels to a different city for a one-day work assignment, all travel time to and from the destination must be paid, minus the employee’s normal commute time. For example, if an employee normally commutes 30 minutes each way and takes a special assignment requiring 2 hours of travel each way, the employer must pay for 3 hours of travel time (the extra 1.5 hours each way beyond the normal commute).

Overnight travel creates the most complex payment obligations. When travel requires an overnight stay, the FLSA regulations at 29 C.F.R. § 785.39 establish that travel time during normal working hours must be paid, regardless of the day of the week. If an employee normally works 9:00 AM to 5:00 PM Monday through Friday, and they travel on Sunday from 2:00 PM to 7:00 PM, the employer must pay for the hours between 2:00 PM and 5:00 PM. The travel time that falls outside normal working hours (5:00 PM to 7:00 PM) is not compensable unless the employee performs actual work during that time.

The Seventh Circuit Court of Appeals reinforced these rules in Walters v. Professional Logistics Group (2024). The court held that employees working away from home overnight are entitled to compensation for travel time that occurs during their regular working hours, and this travel time must be counted toward overtime calculations. The court rejected the employer’s argument that the travel was merely commuting, holding that when employees do not both leave and return home on the same day during remote assignments, the travel cuts across their workday and becomes compensable.

California’s Strict Standards: The Morillion Decision and Compulsory Travel Time

California law imposes significantly stricter requirements on travel time compensation than federal law. The California Supreme Court’s decision in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575 established that time employees spend on compulsory employer-provided transportation must be compensated as “hours worked” under Industrial Welfare Commission wage orders.

In Morillion, the employer required agricultural workers to meet at designated parking lots at specific times and ride employer-provided buses to the fields. The employer prohibited workers from using their own transportation to reach the fields, threatening verbal warnings and lost wages for violations. The workers spent time assembling at departure points, riding the bus to fields, waiting for return buses, and riding back to the departure points.

The California Supreme Court held that this compulsory travel time was compensable because the employees were “subject to the control of an employer” as defined in IWC Wage Order No. 14-80, subdivision 2(G). The Court emphasized that the employer directed and commanded the employees to travel between designated points on its buses, exercising control over when, where, and how the employees traveled. This level of control distinguished the situation from voluntary employer-provided transportation, which would not be compensable.

The Morillion decision established three critical factors that determine whether California employers must pay for travel time. First, did the employer require the employees to use the transportation, or was it merely provided as an option? If employees are free to use their own vehicles without penalty, the travel time is likely not compensable. Second, did the employer control when, where, and how the employees traveled? Control over departure times, routes, and conduct during travel indicates compensable time. Third, could employees use the travel time effectively for their own purposes? If employer restrictions prevent employees from reading, sleeping, or engaging in personal activities, the time is more likely compensable.

The Court specifically rejected the employer’s argument that travel time should not be paid because employees would have had to commute anyway. The Court noted that employees who commute on their own decide when to leave, which route to take, and whether to make personal stops. The employer’s control over these decisions transformed the travel from a personal commute into compensable work time.

California employers must also comply with Labor Code § 2802, which requires reimbursement for all necessary expenses incurred in connection with employer-required travel. This statute creates a separate obligation beyond paying for travel time itself. Employees must be reimbursed for mileage, fuel, vehicle wear and tear, and other travel-related costs when travel is required for work.

In 2024, the California Supreme Court further clarified travel time rules in Huerta v. CSI Electrical Contractors (2024). The Court held that time construction workers spend waiting for vehicle inspections at security gates before entering a worksite is compensable as “hours worked” because the workers are subject to employer control during the inspection. However, the subsequent drive from the security gate to employee parking lots was not compensable as “hours worked” (though it might qualify as “employer-mandated travel” under wage orders for the construction industry).

The Huerta decision established that employers can impose safety rules on access roads (speed limits, no smoking, no passing) without converting drive time into compensable “hours worked”. The Court reasoned that common-sense safety restrictions do not create the level of control necessary to transform commuting into work time. However, if the security gate or meeting point is the first location where an employee’s presence is required for an employment-related reason, all subsequent travel to the actual worksite becomes compensable.

State-by-State Variations: How Travel Time Rules Differ Across the United States

While federal law establishes minimum standards, many states impose additional requirements that contractors must follow. Understanding these variations is critical because state law violations can result in penalties even when federal law does not require payment.

New York

New York follows the FLSA regulations for travel time compensation, with no additional state-specific requirements beyond federal law. However, New York employers must ensure that travel time pay meets the state minimum wage of $16.50 per hour in New York City and $16.00 per hour in the rest of the state (as of January 1, 2026). The state also requires that employers establish a predetermined compensation rate for travel time before employees travel.

New York’s overtime law requires payment at time-and-a-half for hours over 40 in a workweek, which means compensable travel time must be included in overtime calculations. Employers may pay a different rate for travel time than for regular work, but the travel rate must be established in advance and must meet minimum wage requirements. When calculating overtime, employers must use a weighted average of the different rates paid during the week.

Texas

Texas generally follows federal FLSA rules without imposing additional state requirements for travel time compensation. The state’s law focuses primarily on timely payment of wages rather than creating unique travel time obligations. However, Texas employers must remember that any travel on company business within a normal workday is compensable under both state and federal law.

Texas law allows employers and employees to agree on a lower rate for travel time, as long as the rate meets the federal minimum wage. This agreement must be in place before the travel occurs. Employers should document these agreements in writing to avoid disputes about whether employees understood and accepted the different travel rate.

Florida

Florida follows the FLSA with no additional state-mandated travel time requirements. Employees are generally paid for travel time during the regular workday, including travel between job sites or to special project locations outside the typical work area. However, employers do not have to pay for daily commuting time from home to the regular worksite and back.

Florida’s minimum wage is $13.00 per hour as of September 30, 2025, and will increase to $14.00 on September 30, 2026, and $15.00 on September 30, 2027. Any compensable travel time must be paid at least the applicable minimum wage rate. Florida does not have state-specific overtime requirements beyond the federal standard of time-and-a-half for hours over 40 in a workweek.

Washington

Washington State requires employers to pay for travel time when employees begin their workday at a location specified by the employer, such as a job site. Travel from that location to other sites during the day must be compensated. For assignments requiring travel between cities or states, the travel allowance should cover reasonable expenses consistent with the state’s prevailing wage requirements.

Washington employers must keep accurate records to ensure compliance with the state’s labor standards, including certified payroll requirements for public works projects. The state minimum wage is $16.66 per hour as of January 1, 2026, which applies to all compensable travel time.

Independent Contractors vs. Employees: The Critical Classification Decision

The most consequential decision a contractor makes regarding travel time is whether workers are properly classified as employees or independent contractors. This classification determines whether travel time must be paid under wage and hour laws, and misclassification triggers severe penalties from both the IRS and the Department of Labor.

The IRS uses a three-part test to distinguish between employees and independent contractors, examining behavioral control, financial control, and the relationship between the parties. Behavioral control asks whether the company directs how work is performed. If a business dictates a worker’s schedule, specifies what tools to use, and controls methods for completing work, the relationship tends toward employment. Financial control examines whether the worker has opportunity for profit or loss based on their own business decisions. If the worker makes substantial investments in equipment, pays their own expenses, and markets services to other businesses, they are likely an independent contractor.

The relationship test considers whether the business provides benefits like health insurance or retirement plans, whether there is a written contract describing the relationship, and whether the work performed is a key aspect of the business. Permanent or indefinite relationships suggest employment, while fixed-term projects suggest independent contractor status.

The consequence of misclassification is severe. Under Internal Revenue Code § 3509, employers who misclassify workers without a reasonable basis face liability for employment taxes at increased rates, plus interest and penalties. The IRS can assess these taxes going back three years (six years for substantial understatements). Employers also lose the relief provisions available to those who consistently treated workers as independent contractors and filed all required Form 1099s.

Beyond IRS consequences, misclassified workers can sue for unpaid wages under the FLSA, including minimum wage violations, overtime violations, and travel time violations. The federal statute of limitations allows recovery of unpaid wages for two years (three for willful violations), plus an equal amount in liquidated damages. If ten misclassified workers claim $10,000 each in unpaid travel time wages over two years, the employer faces $200,000 in liability ($100,000 in back wages plus $100,000 in liquidated damages), plus attorney fees.

California uses an even stricter standard called the ABC test, which presumes workers are employees unless the hiring entity proves three elements. First, the worker must be free from control and direction in performing the work. Second, the work must fall outside the usual course of the hiring entity’s business. Third, the worker must be customarily engaged in an independently established trade or occupation. Failure to satisfy any one element results in employee classification.

For construction contractors, the ABC test creates particular challenges. If a general contractor hires a framing crew and exercises any control over when, where, or how the framing is performed, the first prong fails. If the framing is part of the general contractor’s usual business of building homes, the second prong fails. Only if the framing crew operates an independent business performing framing work for multiple clients does the third prong succeed.

When workers are properly classified as employees, contractors must pay for all compensable travel time under the rules discussed above. The travel time must be included in calculating overtime, and employers must maintain accurate time records showing all hours worked, including travel. When workers are properly classified as independent contractors, they set their own rates and decide whether to build travel time into their pricing.

Four Methods Contractors Use to Charge for Travel Time

Independent contractors who set their own rates must decide how to recover travel costs while remaining competitive in their market. Four primary methods exist, each with distinct advantages and disadvantages.

Method 1: Hourly Rate for Travel Time

Many contractors charge an hourly rate for travel time, typically ranging from 50% to 100% of their regular service rate. This method provides transparency and ensures contractors are compensated for time spent driving to job sites. The rate reflects the fact that contractors cannot perform other billable work while traveling, making the time economically valuable.

For example, a plumber who charges $120 per hour for service work might charge $60 per hour for travel time. If a job requires 30 minutes of travel each way, the plumber bills 1 hour of travel time at $60, plus the actual service time at $120 per hour. The consequence of this method is that clients clearly see the travel charge as a separate line item, which can lead to questions about why travel time is billed.

Some contractors cap travel time billing at 8-10 hours per day, even if travel takes longer. This cap addresses client concerns about paying for extended travel while still recovering most travel costs. For contractors who fly to remote job sites, they often bill only the hours during the client’s normal business hours (typically 8:00 AM to 5:00 PM) rather than the full door-to-door travel time.

Industry data shows that billing full hourly rates for travel time is most common among consultants and specialized contractors who provide unique services not readily available locally. Contractors providing commodity services in competitive markets often face pushback on full-rate travel billing and must use alternative methods.

Method 2: Mileage-Based Fees

Mileage-based billing charges clients based on distance traveled, typically using the IRS standard mileage rate as a benchmark. The 2026 IRS business mileage rate is 72.5 cents per mile. This rate is designed to cover fuel, maintenance, insurance, depreciation, and other vehicle operating costs.

Contractors using this method typically charge between $0.50 and $1.25 per mile, depending on their industry and local market conditions. For example, an electrician might charge $0.75 per mile for jobs beyond a certain radius from their shop. If a job is 40 miles away, the electrician would bill 80 miles round-trip at $0.75, resulting in a $60 travel charge.

The advantage of mileage-based fees is transparency and ease of calculation. Clients understand the relationship between distance and cost, making the charge easier to justify. The disadvantage is that mileage fees do not account for time spent in traffic. A 20-mile trip might take 30 minutes on rural roads or 90 minutes in urban traffic, but the mileage fee remains the same.

Research on contractor billing practices shows that landscaping contractors charge $0.60-$0.90 per mile, while HVAC contractors using scheduling software report 25% more accurate mileage tracking compared to manual methods. The consequence of accurate mileage tracking is fewer disputes with clients about travel distances and corresponding charges.

Method 3: Flat-Rate Trip Charges

Flat-rate trip charges or service call fees represent the most common method for residential service contractors. These fees typically range from $100 to $200, though they can vary from $40 to $250 depending on the trade, market, and company size.

A service call fee covers the cost of dispatching a technician to the customer’s location, including travel time, fuel, vehicle wear, and the technician’s time for the initial assessment. Many contractors waive or credit the service call fee toward the total job cost if the customer proceeds with recommended repairs.

Industry surveys reveal specific patterns in service call fees by trade. HVAC contractors most commonly charge $69.99 to $89.99, with enterprise companies most likely to charge over $100. Plumbing companies show three main patterns: no diagnostic fee, $90-$100 fee, or approximately $150 fee. Electrical contractors typically charge $100-$200 for service calls.

The advantage of flat-rate trip charges is simplicity. Customers know the cost before the technician arrives, reducing sticker shock and improving booking rates. The disadvantage is that the flat rate may not adequately compensate contractors for very long drives, unless the fee is tiered based on distance.

Some contractors implement tiered service call fees based on distance zones. For example, a plumber might charge $75 for jobs within 10 miles, $125 for jobs 10-25 miles away, and $175 for jobs 25-40 miles away. This tiering ensures adequate compensation while maintaining the simplicity of fixed pricing.

Method 4: Hybrid Models

Hybrid models combine elements of the above methods to balance fair compensation with customer acceptance. One common hybrid approach charges mileage for distance beyond a certain radius (such as 25 miles from the shop) plus an hourly rate for time spent traveling.

Another hybrid approach includes travel costs in the overall hourly rate charged for on-site work. For example, a contractor might charge $90 per hour for work at their shop or for clients within 15 miles, but $120 per hour for on-site work beyond 15 miles. The higher on-site rate (33% premium in this example) compensates for travel time and expenses without separately itemizing them.

The consequence of this approach is that clients see a single rate and understand they are paying more for the convenience of on-site service. The disadvantage is less transparency about the actual travel cost component. Contractors using this method should clearly communicate that on-site rates include travel costs to avoid client confusion.

Concrete Examples: How Different Trades Handle Travel Time Billing

Understanding how specific trades structure travel time charges provides practical guidance for contractors establishing their own policies.

Plumbing Contractors

A residential plumber in a mid-sized city charges a $125 service call fee for jobs within 20 miles of the shop. This fee covers the truck roll, initial diagnosis, and up to 30 minutes of on-site time. The plumber’s hourly rate for actual repair work is $110 per hour. For a toilet repair taking 1.5 hours of actual work, the customer pays $125 (service call) + $165 (1.5 hours × $110) = $290 total.

For jobs beyond 20 miles, the plumber adds $1.00 per mile for the distance beyond the 20-mile radius. A job 35 miles away would include the $125 service call plus $15 (15 extra miles × $1.00) = $140 for travel, plus the hourly rate for actual work. The consequence of this tiered approach is that the plumber recovers costs for longer drives without losing jobs to local competitors for nearby work.

Commercial plumbing companies often operate differently. A commercial plumber working on multi-day projects typically includes travel time in the daily rate. Instead of charging $110 per hour plus separate travel time, the plumber might charge a day rate of $950 that includes travel to the site, time on-site, and return travel. For projects lasting multiple days, the plumber only charges travel time on the first and last days, not for daily commutes from the hotel to the site.

Electrical Contractors

An electrical contractor responding to a service call charges $150 for the service call fee, which includes the first hour of labor. Additional labor is billed at $95 per hour. For emergency calls outside normal business hours, the contractor charges 1.5 times the regular rates: $225 service call and $142.50 per hour for additional labor.

For commercial electrical work bid on a project basis, the electrical contractor includes estimated travel time in the overall project bid rather than billing it separately. On a project with an estimated 200 hours of on-site labor, the contractor might include 20 hours (10%) for travel time, miscellaneous trips for materials, and other non-billable activities. The total bid is calculated based on 220 hours even though only 200 hours are spent on actual electrical work.

The consequence of this approach is that the contractor ensures profitability even when unexpected trips for materials or plan reviews become necessary. If the project requires only 15 hours of travel instead of the estimated 20 hours, the contractor’s profit increases. If travel requires 25 hours, the contractor absorbs the 5-hour difference.

HVAC Contractors

An HVAC contractor charges $89 for a diagnostic visit within a 30-mile radius of the shop. This fee covers the trip to the customer’s location, diagnosis of the problem, and a repair estimate. If the customer approves the repair, the diagnostic fee is credited toward the total repair cost. If the customer declines, the diagnostic fee is retained to compensate for the technician’s time and travel.

For HVAC installation projects, the contractor typically provides a turnkey price that includes all labor, materials, and associated costs. A new AC unit installation might be quoted at $5,500 total, with travel costs built into this price rather than itemized. The contractor estimates that the installation requires 12 hours of labor at $85 per hour ($1,020) plus 2 hours of travel time at $85 per hour ($170), plus the equipment cost of $3,000, plus overhead and profit of $1,310, totaling $5,500.

For commercial HVAC service contracts, the contractor might establish a monthly retainer that includes a certain number of service visits per year. A $500 per month service contract might include quarterly preventive maintenance visits with no additional trip charges. Emergency service calls beyond the contracted visits incur the standard $89 diagnostic fee. This approach provides predictable revenue for the contractor while giving the customer unlimited service calls during contracted visits.

Understanding IRS Mileage Rates and Reimbursement Rules

The IRS standard mileage rate serves as a critical benchmark for contractors determining how to charge for travel. For 2026, the business mileage rate is 72.5 cents per mile, up 2.5 cents from the 2025 rate of 70 cents per mile. This rate represents the IRS’s calculation of the average cost of operating a vehicle for business purposes, including fuel, depreciation, insurance, maintenance, and repairs.

Contractors can use this rate in two distinct ways. First, independent contractors who use their personal vehicles for business travel can deduct mileage at this rate on their Schedule C tax return. This deduction reduces taxable income, resulting in tax savings. For a contractor who drives 10,000 business miles in 2026, the deduction equals $7,250 (10,000 miles × $0.725), which saves approximately $1,812 in federal taxes for a contractor in the 25% tax bracket.

Second, contractors can use the IRS mileage rate as a baseline for setting their own client billing rates. A contractor might charge clients $0.75 per mile, which is slightly above the IRS rate, ensuring full recovery of vehicle costs plus a small profit margin. The consequence of billing below the IRS rate is that the contractor subsidizes the client’s project with their own money.

For contractors who employ W-2 employees, the IRS mileage rate establishes the maximum amount that can be reimbursed to employees tax-free. If an employer reimburses employees at exactly 72.5 cents per mile, the reimbursement is not taxable income to the employee and is fully deductible for the employer. If the employer reimburses at a higher rate (such as $1.00 per mile), the excess above 72.5 cents ($0.275 in this example) must be reported as taxable wages to the employee.

Contractors must maintain detailed mileage records to support deductions or reimbursements. The IRS requires documentation showing the date, business purpose, starting location, destination, and miles driven for each trip. Mobile apps and GPS-based mileage tracking systems can automate this record-keeping, reducing the burden on contractors and employees.

For prevailing wage jobs, contractors must pay employees the appropriate prevailing wage rate for all compensable travel time, not a reduced “travel rate”. If a worker’s prevailing wage classification pays $45 per hour, that is the minimum rate for travel time on the public works project. The consequence of paying a lower travel rate is a prevailing wage violation, which can result in back wage claims, penalties, and debarment from future public works projects.

State public works projects have similar requirements under state prevailing wage laws. Some states have specific provisions for travel and subsistence payments beyond hourly wages. These payments are typically based on the distance from a designated location to the job site and are separate from compensable travel time.

Common Mistakes That Trigger Wage Claims and IRS Audits

Contractors make several recurring mistakes when handling travel time compensation, each with significant legal and financial consequences.

Mistake 1: Failing to Pay for Mid-Day Travel Between Job Sites

The most common violation occurs when contractors treat mid-day travel as unpaid commuting time. Once an employee reports to the first job site of the day, all subsequent travel to other job sites must be paid under the “all in the day’s work” rule. The consequence of not paying for this travel is a clear FLSA violation that can result in back wages, liquidated damages, and attorney fees.

For example, a framing contractor sends a crew to frame a house in the morning. At noon, the contractor directs the crew to drive 45 minutes to a different job site to frame another house. If the contractor does not pay for the 45-minute drive, each crew member has a valid wage claim for that time. With a five-person crew working 200 days per year, each making similar unpaid trips, the liability can quickly reach $50,000 or more in back wages alone (5 workers × 200 days × 0.75 hours × $30 per hour = $22,500 in back wages, plus $22,500 in liquidated damages, plus attorney fees).

Mistake 2: Misclassifying Employees as Independent Contractors

Contractors who misclassify employees as independent contractors to avoid wage and hour obligations face severe consequences from multiple government agencies. The IRS can assess employment taxes, penalties, and interest going back six years. The Department of Labor can pursue FLSA violations, including unpaid minimum wage, overtime, and travel time. State agencies can pursue similar claims under state wage laws.

A painting contractor who treats painters as independent contractors while controlling their work schedule, providing the equipment, and directing their work methods has likely misclassified them. The consequence is that all travel time that would have been compensable if they were properly classified as employees becomes the basis for wage claims. If ten painters were misclassified for three years, and each should have been paid for an average of 5 hours per week in travel time, the back wages total approximately $234,000 (10 workers × 156 weeks × 5 hours × $30 per hour = $234,000), plus an equal amount in liquidated damages.

Mistake 3: Paying a Flat “Travel Allowance” Instead of Hourly Wages

Some contractors pay employees a flat weekly or daily “travel allowance” instead of paying hourly wages for actual travel time worked. For example, a contractor might pay $50 per day as a travel allowance regardless of actual travel time. If the employee travels 2 hours per day, the $50 allowance equals $25 per hour, which exceeds minimum wage. But if the employee travels 4 hours per day, the $50 allowance equals $12.50 per hour, which may violate minimum wage laws depending on the state.

The consequence is that flat travel allowances often fail to comply with minimum wage and overtime requirements. Travel time must be counted as hours worked at no less than the minimum wage, and must be included in calculating overtime. A flat allowance that does not vary with actual hours worked cannot satisfy these requirements.

Mistake 4: Failing to Include Travel Time in Overtime Calculations

Even when contractors pay for travel time, they sometimes fail to include those hours when calculating whether an employee has worked over 40 hours in a workweek. If an employee works 38 hours on job sites and 5 hours of compensable travel time, the employee has worked 43 total hours and is entitled to 3 hours of overtime pay at time-and-a-half.

The consequence of excluding travel time from overtime calculations is unpaid overtime liability. For employees who regularly work 40 hours on-site plus several hours of compensable travel, the accumulated overtime violations can represent thousands of dollars per employee per year. With multiple employees, the exposure can reach six figures.

Mistake 5: Poor Documentation of Travel Time

Contractors who fail to maintain accurate time records for travel time cannot defend against wage claims. The FLSA requires employers to keep records showing the daily and weekly hours worked by employees, including travel time. When records are inadequate, courts often accept the employee’s estimate of hours worked, placing the burden on the employer to prove the estimate is incorrect.

For example, if an employee claims they spent 10 hours per week on compensable travel over two years, and the employer cannot produce time records disproving this claim, the court may award $31,200 in back wages (10 hours × $30 per hour × 104 weeks = $31,200), plus an equal amount in liquidated damages. The consequence is that inadequate records make even questionable claims difficult to defend.

Do’s and Don’ts for Contractors Managing Travel Time

Do’s

Do establish clear written policies before travel time issues arise. A written policy should specify which types of travel are compensable, the rate of pay for travel time (if different from regular rates), and how travel time should be recorded. The consequence of having a clear policy is that employees understand expectations, and the written policy provides evidence of the employer’s good faith effort to comply with wage laws.

Do require employees to clock in at the first work-related stop of the day if they are required to report somewhere other than home to work. If employees must pick up a company truck at the shop before driving to job sites, they should clock in when they arrive at the shop. All subsequent time until they clock out at the end of the day is potentially compensable. The consequence is accurate time records that include all compensable travel.

Do calculate overtime using all compensable hours including travel time. When employees work 35 hours on job sites and 8 hours of compensable travel in a workweek, they have worked 43 total hours and are entitled to 3 hours of overtime pay. The consequence of proper overtime calculation is compliance with both federal and state wage laws.

Do use GPS-based time tracking for employees who travel between job sites. Modern time tracking systems can automatically record when employees arrive and depart from job sites, creating accurate records of travel time without relying on manual time sheets. The consequence is better records, fewer disputes, and easier defense of any wage claims.

Do factor all travel costs into pricing for independent contractors. Whether using hourly rates, mileage fees, flat charges, or hybrid models, ensure that the pricing structure recovers the true cost of travel including fuel, vehicle depreciation, insurance, and the opportunity cost of time spent traveling. The consequence of adequate pricing is profitability; the consequence of inadequate pricing is subsidizing customers with business losses.

Don’ts

Don’t assume regular commuting is compensable just because employees drive company vehicles. Time spent commuting from home to a regular workplace remains ordinary commuting time even if the employee drives a company truck. The exception is if employees are required to perform significant work during the commute, such as making calls to schedule jobs. The consequence of correctly treating regular commutes as non-compensable is reduced labor costs without wage violations.

Don’t pay travel time at rates below minimum wage. Even if employees agree to accept lower rates for travel time, the rate must meet or exceed applicable minimum wage laws. The consequence of paying below minimum wage is liability for the difference, plus liquidated damages, regardless of any agreement with employees.

Don’t treat all workers as independent contractors without proper analysis. Apply the IRS three-part test (behavioral control, financial control, relationship) to determine correct classification. When in doubt, classify workers as employees to avoid misclassification penalties. The consequence of proper classification is avoiding six-figure IRS assessments and wage claims.

Don’t mix compensable travel time with ordinary commuting in employee communications. Make clear which types of travel must be paid and which are personal commuting. For example, if employees must report to the shop to pick up equipment before driving to job sites, explain that time spent driving from home to the shop is personal commuting, but time from the shop to job sites is compensable. The consequence is that employees understand when they will be paid, reducing disputes.

Don’t fail to document the business purpose of travel for IRS deductions. Independent contractors deducting mileage on their tax returns must be able to prove the miles were driven for business purposes. Keep contemporaneous records showing the date, destination, purpose, and miles for each trip. The consequence of proper documentation is support for deductions if the IRS audits the return.

Pros and Cons of Charging for Travel Time

Pros

Pro 1: Ensures fair compensation for actual time spent on client work. Contractors who charge for travel time are paid for all time devoted to serving clients, not just time spent at the job site. This reflects the economic reality that travel time cannot be used for other profitable activities. The consequence is that contractors maintain adequate profit margins to sustain their businesses long-term.

Pro 2: Covers vehicle operating costs including fuel, maintenance, and depreciation. The IRS calculates that operating a vehicle costs 72.5 cents per mile in 2026. Contractors who charge for travel recover these costs rather than subsidizing them from revenue earned for actual work. The consequence is that vehicle expenses do not erode the profitability of the core work performed.

Pro 3: Properly compensates for opportunity cost of travel time. Time spent driving cannot be used for billable work at other locations. When a contractor spends 2 hours driving to a job site that pays $120 per hour for 4 hours of work, the contractor earns $480. If the same contractor could have performed 6 hours of work at a closer location without travel, the revenue would be $720. Charging for travel time helps offset this $240 opportunity cost.

Pro 4: Complies with federal and state wage and hour laws for employees. Contractors who properly pay employees for compensable travel time avoid FLSA violations, state wage claims, and the associated penalties. The consequence is avoiding back wage claims, liquidated damages, and attorney fees that can exceed the original wages owed.

Pro 5: Creates transparency about the true cost of service. When clients see travel charges on invoices, they understand that distance from the contractor’s location affects total project cost. This transparency helps clients make informed decisions about whether to hire a distant contractor or select a closer (but perhaps more expensive per hour) alternative. The consequence is fewer disputes about final invoices because clients understood costs upfront.

Cons

Con 1: May make bids less competitive in price-sensitive markets. When competitors absorb travel costs into their overall pricing without itemizing them, contractors who separately charge for travel may appear more expensive even if total costs are similar. The consequence can be lost bids, particularly when clients focus on the bottom line rather than understanding cost breakdowns.

Con 2: Can lead to client disputes about billing practices. Clients may question why they should pay for time when no actual work is being performed. This objection is particularly common for residential clients who are not accustomed to separate travel charges. The consequence is time spent explaining billing practices and potentially negotiating charges after work is complete.

Con 3: Requires accurate tracking and documentation systems. Charging for travel time by the hour or by the mile necessitates reliable systems for tracking time or distance. Manual tracking is time-consuming and error-prone; automated tracking requires investment in software or apps. The consequence is additional administrative burden and costs that reduce the net benefit of travel charges.

Con 4: May discourage clients from hiring contractors for smaller jobs. When a $200 repair includes a $125 service call fee, clients may delay the repair or attempt DIY solutions. The consequence is that contractors lose opportunities for small jobs that could lead to larger projects or repeat business.

Con 5: Creates complexity in explaining pricing to customers. Contractors must educate clients about why travel time or trip charges are necessary, which adds to the sales process. Less sophisticated contractors may struggle to justify these charges, leading to waived fees that erode profitability. The consequence is that effective travel time charging requires good communication skills, not just accurate cost accounting.

Federal and State Contracting: Special Rules for Government Work

Government contractors face additional complexity when billing travel time on federal or state contracts. The Federal Acquisition Regulation (FAR) and agency-specific regulations establish rules for what travel costs can be charged to government contracts.

For Defense Contract Audit Agency compliance, government contractors must have clear travel time policies and detailed documentation. Travel time during normal working hours can typically be charged as direct time when the travel is specifically required for contract performance. However, travel outside normal working hours often has different rules and may be limited or unallowable.

The critical factor for DCAA is documentation. Simply marking eight hours of “travel time” on a timesheet without supporting details raises immediate red flags. DCAA auditors require flight itineraries, meeting schedules, business justification, and clear correlation between the travel and contract requirements. Weekend and evening travel requires even more careful consideration, with the focus on business necessity versus personal convenience.

Common mistakes that trigger DCAA audit attention include charging full days for partial travel time, billing travel time at premium rates without justification, inconsistent policies between employees or contracts, and missing documentation linking travel to specific contract needs. The consequence of DCAA findings is that contractors must return charged amounts, potentially losing money on the contract and facing reduced future business with government agencies.

For prevailing wage work on federal construction projects covered by the Davis-Bacon Act, contractors must pay the prevailing wage for compensable travel time even if their collective bargaining agreement requires a lesser travel time payment. The prevailing wage rate for the worker’s classification applies to travel time, not a reduced rate. For example, if an electrician’s prevailing wage is $48 per hour, travel time on the public works project must be paid at $48 per hour, not at a $30 per hour “travel rate.”

State public works projects have similar requirements under state prevailing wage laws. Some states have specific provisions for travel and subsistence payments beyond hourly wages. These payments are typically based on the distance from a designated location to the job site and are separate from compensable travel time.

Frequently Asked Questions

Can I charge a different hourly rate for travel time than for actual work time?

Yes, you can charge clients a different rate for travel time as long as the rate is disclosed upfront and agreed upon. Many contractors charge 50-75% of their regular hourly rate for travel time. However, for employees, any travel rate paid must meet minimum wage requirements, and you must include travel hours in overtime calculations using a weighted average of rates paid.

Do I have to pay employees for travel time if they drive their own cars?

Yes, if the travel time is compensable under FLSA rules, the payment obligation exists regardless of whether employees use personal vehicles or company vehicles. The mode of transportation does not change whether travel time must be paid. However, you may need to reimburse employees for mileage when they use personal vehicles for work travel.

Can I include travel time in my flat rate bid instead of charging separately?

Yes, independent contractors can structure pricing however they choose, including building travel costs into overall project rates rather than itemizing them. Many contractors charge higher hourly rates for on-site work compared to shop work, with the difference covering travel costs and time.

Is travel time from home to my first job of the day compensable?

No, ordinary commuting from home to a regular workplace is not compensable under the Portal-to-Portal Act. However, if you are required to stop at your employer’s shop first to pick up equipment, the time from the shop to the job site is compensable.

How do I track travel time for multiple employees going to different job sites?

Use GPS-based time tracking software that automatically records when employees arrive and depart from job sites. These systems can distinguish between travel time and on-site time, create detailed records for payroll, and provide documentation if wage claims arise. Manual time sheets are less reliable and more prone to errors or disputes.

Can contractors bill travel time to government contracts?

Yes, but only for travel that is specifically required for contract performance and properly documented. Travel during normal working hours is generally billable. Travel outside normal hours has restrictions. DCAA requires flight itineraries, meeting schedules, business justification, and clear links between travel and contract requirements for all billed travel.

What is the difference between a service call fee and travel time charges?

A service call fee is a flat charge covering the cost of dispatching a technician, typically $100-$200. Travel time charges bill for actual time or distance, often using hourly rates or per-mile fees. Service call fees provide simplicity, while travel time charges more accurately reflect actual costs for long-distance jobs.

Do independent contractors have to pay themselves for travel time?

No, independent contractors do not pay themselves wages. Instead, they should factor travel costs into their pricing to ensure overall profitability. Use the IRS mileage rate (72.5 cents per mile in 2026) as a baseline for what vehicle operation costs, and add the opportunity cost of time spent traveling.

Can I be required to travel on my own time without pay?

It depends on your classification and the type of travel. Employees cannot be required to perform compensable travel on unpaid time. If travel qualifies as “hours worked” under the FLSA, it must be paid. Independent contractors negotiate their own terms and may choose to absorb travel time in their pricing.

How far can an employer send me without paying travel time?

Distance is not the determining factor under FLSA regulations. The question is whether the travel qualifies as compensable under one of the regulatory categories (mid-day travel, special assignment, overnight travel during work hours, etc.). An employer can send you 200 miles without paying travel time if it is ordinary commuting, or must pay for a 10-mile drive if it is mid-day travel between job sites.

What records do I need to keep for travel time deductions on my taxes?

Independent contractors must maintain contemporaneous records showing the date, business purpose, destination, and miles driven for each trip. The IRS requires this documentation to support Schedule C deductions. Mobile apps can automate mileage tracking and create records that satisfy IRS requirements if your return is audited.

Can California employers pay less than minimum wage for travel time?

No, California law requires that all compensable hours, including travel time, be paid at least the applicable minimum wage. Employers may establish different rates for travel time versus regular work time, but the travel rate must meet minimum wage requirements and be disclosed to employees before the travel occurs.

What happens if I misclassify an employee as an independent contractor?

You face liability for employment taxes, unpaid wages, and penalties from both the IRS and Department of Labor. The IRS can assess payroll taxes going back six years plus interest and penalties. Employees can sue for unpaid minimum wage, overtime, and travel time violations under the FLSA, recovering two years of back wages (three for willful violations) plus an equal amount in liquidated damages.