How do I pay my driver and explain each settlement?

Chapter 01

Is my first driver an employee or a 1099 contractor?

The label you pick does not decide it. The IRS looks at who controls the work and its financial side. It also looks at the kind of relationship you have (the IRS page). The Department of Labor asks whether he is really in business for himself. Paying by the mile or by the load does not make a driver a contractor. If he drives your truck on your loads under your rules, the facts point to an employee. Your accountant or attorney should decide before his first paycheck.

Here is how that looks in real life. Say you run two trucks under your own authority. You drive one, and the second has sat parked for a month. On Friday, July 31, 2026, you hire Dan to drive it, starting Monday, August 3. Hiring him also brings federal checks of his record and a drug testing program. Our guides on screening a new driver and running a DOT drug testing program cover both. Owners of small fleets ask the next question in just these words on trucking forums: how to pay my driver. And the first answer at the truck stop is always the same: “just 1099 him”.

Owners search it as 1099 vs W2. A W-2 is the form an employer gives an employee each year. A Form 1099 goes to a contractor. The difference is money and risk. For an employee, you hold back income tax, Social Security and Medicare from his pay. You add your own share of Social Security and Medicare, and you pay unemployment tax. For a real contractor, you generally hold back nothing (the IRS page). That is why the 1099 sounds cheap. It stops being cheap if the IRS decides he was an employee all along. If you had no reasonable basis for calling him a contractor, you can owe the employment taxes for him yourself, the IRS says.

So look at Dan the way the IRS does. It sorts the facts into three groups. The first is control: do you decide what he does and how he does it? You pick his loads and tell him where to be. The second is money: who owns the tools, who pays the costs, and how he is paid. Dan drives your truck, fuels it on your card and pays for nothing himself. The third is the relationship: will it last, and is his work the core of your business? Driving is your business, and you hope he stays for years. The IRS says there is no “magic” number of factors. You weigh them all and write down how you decided. If you still cannot tell, either of you can file Form SS-8, and the IRS will decide. That may take at least six months.

The Department of Labor has its own test for pay law, and it has shifted since 2024. A rule from 2024 set out a list of six factors. On May 1, 2025, the Department told its investigators to stop using that rule in their cases (its news release). They went back to an older list from 2008 (the bulletin). It asks how much the worker invests in equipment, and whether he can make or lose money by his own choices. It asks how long the work lasts, how much you control it, and whether it is part of your business. One line in it matters for truck owners: “the time or mode of pay does not control” whether someone is an employee.

In February 2026, the Department proposed to replace the 2024 rule (the proposal). We searched the Federal Register on September 22, 2026, and found no final rule. Until one arrives, the bulletin says the 2024 rule still counts when a worker sues on his own. The Department also says plainly that employers are responsible for deciding who is an employee (its page on misclassification). The law puts that job on you.

Dan’s facts all point one way. He owns no truck, takes no business risk and works only for you. Your accountant agrees that he is an employee. You sign up with a payroll provider, who will handle the tax withholding and the yearly forms. The IRS’s own guide for that work is Publication 15. Your State has its own tax and wage laws, so ask your accountant about those too. The rest of this page follows Dan as your employee. A driver who owns his truck and leases it to you is a different case, and it comes up later. First you need to decide how to pay Dan.

Chapter 02

Should I pay per mile, by percentage, by the hour or by the day?

Any of these can work, as long as each week’s pay reaches the minimum wage for the hours worked. The pay law expects a record of the basis of pay, such as a rate per hour or per week (the recordkeeping fact sheet). What matters most is writing the terms down before the first trip. Mileage pay must say which miles count. Percentage pay must say a percentage of what. Hourly pay must say what counts as an hour of work. And every model needs a list of extras, with the amount for each.

On the forums, this is the old argument of percentage vs per mile. Here is what each model pays for, and what your written terms must pin down.

Mileage pay looks simple until you ask which miles. The ELD records the miles the truck really drives. A mileage guide gives the miles of a standard route between two places. The two numbers are rarely the same. Detours, fuel stops and closed roads add real miles that a guide does not count. Some carriers pay loaded miles only, and some pay empty miles too. None of these is wrong. But your terms must name one. Say a guide puts a trip at 1,050 miles, and the ELD shows 1,130. At 62 cents a mile, those 80 miles are worth $49.60 to your driver. If the terms say nothing, you will argue about it every week.

Percentage pay raises its own question: a percentage of what? Say a load pays $3,000 for the line haul, which is the base rate for the trip, plus a $450 fuel surcharge. At 25 percent, the line haul alone gives $750. The whole amount gives $862.50. Extras the broker pays, such as detention, can go either way too. So the terms must name each part. And a driver on percentage can only check his pay if he sees what the load paid. For a company driver, we found no federal rule that makes you show him the rate confirmation. Showing it anyway saves an argument. For an owner-operator leased to you, the federal leasing rules require a copy of the rated freight bill, as a later section shows.

Hourly pay covers waiting without any extra rules, because every hour of work is paid. Then you need good records of his hours, and your State’s overtime law may apply. A day rate is simple, but a day of 14 hours pays the same as a day of 6. A weekly salary is the simplest of all. With a day rate or a salary, you still check each week. The pay must cover the minimum wage for all hours worked (the Labor Department’s answers on pay).

Whatever the model, write down the extras. These pay for work that miles or a percentage do not cover. The usual list is detention, which is waiting at a shipper or receiver. Then layover, a day held over waiting for the next load. Then extra stops, breakdown time, tarping a flatbed load and unloading by hand. Some owners also agree on pay for a day in court over a ticket. Our ticket guide counts that day as part of the cost of fighting. Federal law sets a floor, the minimum wage, and leaves extra pay to what you agree. The Department’s own answers treat extra pay for nights or weekends the same way (its answers on pay).

Here is what you and Dan sign on July 31. Pay is 62 cents a mile on ELD miles, loaded and empty. Detention pays $20 an hour after the first two hours at a stop. Each extra stop pays $25. The week runs from Monday to Sunday, and payday is the Friday after. Money he spends on a trip, such as a lumper fee, comes back to him with the receipt. He can ask for an advance on his pay, and it comes out of the next settlement. These rates are made up for the example. They are not a market rate. You both sign, and each of you keeps a copy. The pay law asks you to keep that rate sheet for at least 2 years after its last use (the two-year rule). Notice what the terms leave out: breakdown days. That gap will matter soon. First comes Dan’s second week, and his first full settlement.

Chapter 03

How do I build a settlement my driver can check?

Build it from the supporting documents. Start with the loads he ran that week. Match each one to its signed bill of lading and the ELD miles for that trip. Add documented extras and reimbursements for money he spent on your behalf. Take out only what the terms allow. Attach the papers and send it before payday. Most carriers call the result a driver settlement, or a settlement sheet. FMCSA’s rules name the settlement sheet as one of the papers behind the driver’s logs (the supporting documents rule).

Take the week from Monday, August 10, to Sunday, August 16. On the next Monday morning, you sit down with the week’s papers. Work in the same order every week. The order is what makes it fast and hard to get wrong. Here it is.

1. List the week’s loads from your dispatch, each with its rate confirmation, the broker’s written load offer.
2. Match each load to its bill of lading, the shipping paper signed at delivery. Check the dates, the in and out times and the number of stops.
3. Take the miles for each trip from the ELD, as the terms say.
4. Collect his receipts for money he spent on the trip, and any advance he took.
5. Apply the terms line by line, and check the week against the minimum wage.
6. Attach the papers, and send the settlement before payday.

Dan hauled two loads that week. Load A left Dallas on Monday and delivered in Atlanta on Wednesday. The bill of lading shows he reached the receiver at 7:00 a.m. and left at 11:30. That is four and a half hours, so two and a half hours count as detention under the terms. His ELD log shows his duty changes and where the truck was, which helps if a receiver forgets to write the time. Load B picked up near Atlanta on Thursday and delivered to two receivers near Chicago on Saturday. The second receiver is one extra stop. Dan paid a lumper fee there, the charge for workers who unload the truck, and sent you the receipt.

Next come the miles. The ELD shows 850 miles for Load A, counting the empty miles to the shipper, and 800 for Load B. On Wednesday, Dan asked for a $200 advance on his pay, and you sent it. He signed a short note saying it comes out of this settlement. Now you have everything. Yours could look like this. It is only an example, its figures are made up, and the law does not require this form.

Driver settlement. Dan R., truck 2. Week of Monday, August 10, to Sunday, August 16, 2026. Paid Friday, August 21.

Pay terms used: 62 cents a mile on ELD miles, loaded and empty. Detention $20 an hour after 2 hours at a stop. Extra stops $25 each. Signed July 31, 2026.

Load A. Dallas, TX to Atlanta, GA, August 10 to 12. ELD miles: 850 × $0.62 = $527.00. Detention: 2.5 hours × $20 = $50.00 (bill of lading: in 7:00, out 11:30).

Load B. Near Atlanta, GA to the Chicago area, August 13 to 15, two receivers. ELD miles: 800 × $0.62 = $496.00. One extra stop: $25.00.

Gross pay: $1,098.00. Taxes are withheld by the payroll provider and shown on the pay stub.

Paid back to you, not pay: lumper fee, receipt 3317, $150.00.

Taken out: pay advance of August 12, signed note, $200.00.

Hours worked: 58, from the ELD. Pay for each hour worked: $18.93.

Papers attached: 2 rate confirmations, 2 bills of lading, ELD mileage report, lumper receipt, advance note.

Look at what makes it easy to check. The terms sit at the top, so Dan does not have to remember them. Every line names the paper behind it. Wages, expense reimbursements and deductions appear separately. The lumper fee is his own money coming back, so it is not part of his wages. The advance is his own pay, given early. Taxes are not worked out on this sheet at all. The payroll provider does that from the gross pay. And the last lines show your minimum wage check. Dan earned $18.93 for each hour worked, well above the federal $7.25 (the Department of Labor).

Keep the settlement and its papers together. The logs rules make you keep papers like these for at least 6 months (the logs rule). An auditor uses them to check that the logs are true, as our audit document list explains. The pay law asks you to keep them longer, as the last section shows. The very next week showed why the minimum wage line is on the sheet.

Chapter 04

Do I owe a truck driver overtime or the minimum wage?

Usually no federal overtime, but always the minimum wage. Federal overtime law has a motor carrier exemption. It covers a carrier’s drivers whose work affects the safety of trucks moving between States (the Labor Department’s fact sheet). The rule behind it says the exemption covers overtime “but not” the minimum wage (the rule on the exemption). So each week, his pay must reach at least $7.25 for every hour he worked, or your State’s rate if it is higher. The check runs week by week, not averaged over a month.

Dan fits the exemption. You are a motor carrier, he drives, and his trips cross State lines. Two things can change that. The exemption does not apply in any week he works on vehicles of 10,000 pounds or less, such as a light pickup. That holds even if he drives the big truck that same week. And a driver who never leaves one State needs a closer look. His trips can still count as interstate. One example is a trip inside the State that carries goods still on their way from another State (the fact sheet). Some States have their own overtime laws. Where both apply, the driver gets the higher standard (the Labor Department’s answers on pay). Check whether your State’s law covers truck drivers.

The minimum wage is where small fleets get caught. The federal rate has been $7.25 an hour since July 24, 2009 (the Department of Labor). Many States set their own. The Department says “employers must comply with both”, so you pay the higher rate. It keeps a table of State rates, last updated July 1, 2026. Which State’s rate applies to a driver who crosses five States in a week is not a simple question. We could not find one answer for all cases, so ask your attorney.

The check needs his hours worked, and for a truck driver that means more than driving time. The federal rules on hours worked give truck examples. A driver who waits at or near the dock while his truck is loaded “is working during the loading period” (the rule on waiting time). So is a driver told to look after the truck while he waits. But say you relieve him of all duty, long enough to use the time for himself, and tell him when to start again. Those hours are not work. Driving is work. The rule on travel leaves out real meal breaks. It also leaves out time he may sleep in proper sleeping space you provide (the rule on work while traveling). Whether a sleeper berth counts as that space is a question for your attorney. Dan’s ELD shows most of the rest.

Now take the week of August 17. On Monday, Dan drives 300 miles, and the truck breaks down. A tow truck takes it to a shop, and the part takes three days to arrive. You tell Dan to stay with the truck and the load and to deal with the mechanics. He waits at the shop from opening to closing on Tuesday, Wednesday and Thursday. On Friday, he drives the last 260 miles and delivers. His ELD and your notes show 51 hours of work that week, and 560 miles.

Run the terms. At 62 cents, 560 miles pay $347.20. The terms say nothing about breakdown days, so that is all he earned. Divide it by 51 hours, and you get $6.81 an hour. That is below $7.25. For 51 hours, the law says he must get at least $369.75 (the Department of Labor). So you owe him $22.55 more. Put it on that settlement as its own line: “minimum wage top up, week of August 17”. And if your State’s rate were $15, the floor for those same 51 hours would be $765.

The lesson is not the $22.55. It is the gap in the terms. On August 24, you add breakdown pay to Dan’s terms: $150 for each full day the truck is down and he stays with it. Under the new terms, that week would have paid him $450 more. Change terms only for weeks that have not started yet, and do it in writing. Keep the old sheet with your records. The week after that brought a question every owner meets sooner or later: can you make a driver pay for damage?

Chapter 05

Can I take money out of my driver’s pay?

Sometimes, within limits. Federal law says wages must be paid “free and clear” (the rule on free and clear pay). You cannot take out costs that are really yours if that pushes his pay for the week below the minimum wage. That limit covers damage to your truck, tools, a physical you require and customers who do not pay. It holds even when the driver was careless (the Labor Department’s fact sheet). An advance on his own pay is different. Your State may be stricter, so check before the first deduction.

On Wednesday, September 2, Dan backs into a post in a shipper’s yard and bends the bumper. The repair bill is $900. Your first thought is to take it out of his pay. The Department’s fact sheet lists this very case as a typical problem. An employee driving the employer’s vehicle “causes a wreck”. The employer makes him pay for the repairs, and his pay drops below the minimum wage. Look at his week. He earned $1,050 for 55 hours. The minimum for 55 hours is $398.75. So under federal law, no more than $651.25 could come out that week. You could spread the rest over later weeks, as long as each week stays at or above the minimum. Asking him to pay you back in cash instead changes nothing, the fact sheet says. The same limit applies.

That is only the federal floor. Your State’s wage law can be stricter, and the rules on deductions differ from State to State. Your State may limit what you can deduct at all, or require his written consent first. We did not check all fifty. So call your State’s labor office before you take out anything beyond taxes and agreed advances. The Department of Labor lists every State’s labor office. In the end, you pay the $900 yourself. Then you ask your attorney to help write a line about damage into Dan’s terms.

Two kinds of money are simpler. A pay advance is his own pay given early. The Department’s handbook for its investigators says the amount advanced may be taken back even below the minimum wage. Interest or fees on it may not cut into the minimum wage (the handbook, section 30c10). Money he spends for you, like the lumper fee, is the other side. If he pays your costs and you never pay him back, it works like a deduction, with the same limit. So reimburse the expenses shown on his receipts in the next settlement. And whatever you add or take out, write it down. The pay law asks for the date, the amount and the reason for each one (the payroll records rule).

A driver who owns his truck is a different case. Say a second driver, Ray, owns his tractor and wants to lease it to your company and haul under your authority. Then the federal leasing rules shape much of his settlement (the lease rule). The lease must state his pay. You must pay him within 15 days after he turns in the delivery papers. On percentage pay, you give him a copy of the rated freight bill before or at settlement. A chargeback is a cost you pay first and take out of his pay later. Each one must be listed in the lease, with how it is worked out. A deduction for cargo or property damage needs a written, itemized explanation before you make it. Money you hold back as security, called escrow, earns interest at least every quarter and comes back within 45 days after the lease ends. The same rule says the control the lease gives you over his truck does not, by itself, decide whether he is your employee. Our guide to leasing an owner-operator walks through that lease.

Chapter 06

How do I make every settlement easy to understand, and what has changed?

Send one every payday, in the same order, with the papers attached. Federal law does not require a pay stub (the Labor Department’s answers on pay), but your State may. And a clear settlement is how a driver comes to trust his pay. Put the terms at the top and name the paper behind each line. Keep wages, expense reimbursements and deductions separate. Fix mistakes openly on the next settlement. Then keep the records for as long as the pay law asks, which for payroll is at least 3 years (the recordkeeping rule).

A settlement Dan can check in five minutes saves you a phone call every Friday. Use the same layout each week, so he knows where to look. Show the week’s dates and the payday. Show the miles trip by trip, not just a total. When a line depends on a paper, such as detention on the bill of lading, name that paper. Say you later find an extra stop you missed. Pay it on the next settlement as its own line: “correction, week of August 10, extra stop, $25.00”. Do not bury it in the total. If Dan finds a mistake, the attached papers are how you both check it. A driver who asks about his pay is doing some of your checking for you.

Your State sets how often you must pay. The Department of Labor keeps a table of State payday rules, but it is dated January 1, 2023. So check with your State’s labor office too.

Keep the pay records longer than the logs. The pay law asks you to keep payroll records for at least 3 years. It asks for at least 2 years for the papers the pay was worked out from (the two-year rule). Those include rate sheets, records of what you added or took out, bills of lading and your invoices to customers. The Department sums this up in its recordkeeping fact sheet. For a driver exempt from overtime, like Dan, the rule drops the overtime items. It adds one item instead: the basis of his pay, such as the rate per mile (the rule for exempt drivers). The logs rules ask for only 6 months, so the pay law decides how long you keep these papers.

The settlement totals feed your own numbers too. Dan’s pay goes straight into your cost per mile. It is also the driver line in a profit and loss view for each truck.

What has changed? The federal minimum wage has not moved since July 24, 2009 (the Department of Labor). The test for worker classification has. Advice written in 2024 often presents the 2024 rule as the test the Department enforces. Since May 1, 2025, its investigators have not used it (the bulletin). A proposal from February 2026 would replace that rule, and on September 22, 2026, it was still a proposal. State rates move more often, and some States adjust theirs every year. The Department’s State table was last updated July 1, 2026 (the State table).

Some things we could not check. We found no single rule for which State’s wage law covers a driver who works in many States. We did not check each State’s rules on deductions or on notice of pay changes. And the sources we read do not settle whether a sleeper berth counts as proper sleeping space in the hours count. Those are questions for your attorney. The figures in Dan’s story are made up, and none of them is a market rate.

We do not run payroll or write settlements. But every settlement is built from rate confirmations, bills of lading, invoices and bills. Keeping those in order is part of our payables and receivables work: here is what it costs.