Hiring delivery drivers is one thing. Figuring out how to pay them correctly is another challenge altogether. If you’re starting a delivery operation or scaling one up, you’re likely asking yourself how to pay delivery drivers in a way that’s legal, practical, and appealing enough to attract talent. There’s no one-size-fits-all solution.
Decide Between Employee or Independent Contractor
Before setting pay rates, you need to classify your drivers. Are they employees or independent contractors? This decision shapes how you handle wages, taxes, and benefits.
Employees are on the payroll and may qualify for overtime, sick leave, and other labor protections. Contractors, on the other hand, usually get paid per delivery or mile. They manage their taxes and don’t receive benefits.
Misclassification can lead to fines or legal trouble. It’s important to check with local labor laws so your business avoids mistakes. For startups using third-party apps or managing multiple freelancers, the contractor route might feel easier. However, long-term growth often leans toward employee-based models for better control and loyalty.
- Consider Hourly Pay for In-House Drivers
Hourly pay works well if your drivers are on the clock during specific shifts. This approach offers predictability for both parties. You set a base wage, often influenced by minimum wage laws or the local cost of living. Some businesses also add mileage or time-based bonuses to account for traffic or longer routes.
This model suits companies with fixed schedules and consistent delivery demand. Restaurants, grocery chains, and retail stores with in-house delivery services often follow this structure. Drivers know what they’ll earn per hour. You can plan your labor costs more easily.
- Offer Per-Delivery Pay for Flexibility
Some businesses prefer to pay per delivery. This system rewards speed and efficiency. It’s popular among gig economy platforms and food delivery services. You pay a flat rate for each completed job. Depending on the location and complexity, some deliveries may offer a higher payout than others.
- Factor in Mileage and Gas Reimbursements
Mileage matters when it comes to delivery work. Wear and tear, gas prices, and travel time all add up. If you don’t cover these expenses, your drivers may end up losing money while working for you. One option is reimbursing mileage using the IRS standard rate. Another is offering a flat gas stipend or fuel card.
- Think About Tips and Incentives
Tips can make a big difference for delivery drivers. If your business allows tipping, let your customers know. Display tipping options clearly during checkout or on receipts. Some businesses give drivers 100% of their tips. Meanwhile, others split them across the team.
Incentives are another way to motivate drivers. Bonuses for fast delivery, positive reviews, or high volumes can push performance higher. Even small perks—like a free meal during long shifts—can improve morale. Think about what will keep your drivers happy without hurting your margins.
- Understand Legal and Tax Responsibilities
Paying delivery drivers means more than just setting a wage. You also need to meet local, state, and federal requirements. This includes tracking hours worked, deducting taxes for employees, and filing the correct forms for independent contractors.
For employees, you’re responsible for withholding income tax, Social Security, and Medicare. For contractors, you usually need to send out 1099 forms if they earn over a certain amount.
Ignoring these steps can lead to audits or penalties. It’s smart to stay updated on labor laws in your area. If you’re new to this, consulting with a payroll expert or HR team can help prevent problems.
- Use Payroll Software or Staffing Services
Manual payment systems can lead to mistakes and confusion; using payroll software simplifies the process. These systems can calculate taxes, track hours, and even log mileage. Some software also allows employees or contractors to submit time logs and invoices, making communication easier.
- Adjust Pay Based on Demand and Location
Not all delivery jobs are the same. Routes that cover rural areas or large distances may need higher pay to attract drivers.
Urban areas with traffic and parking challenges may also require added compensation. Adjusting pay based on distance, order type, or delivery time can make your job offers more appealing.
You should also consider peak hours. Some businesses add bonuses for nights, weekends, or holidays. Others offer a base rate plus a performance-based incentive. These adjustments help balance driver workloads and meet customer demand.
How General Workforce Can Help
General Workforce understands what it takes to run a dependable delivery operation. We connect businesses with skilled, reliable drivers who are ready to work. But we don’t stop at placement. We also handle payroll, taxes, and transportation coordination for your team.
If you want to hire drivers without the stress of managing pay or paperwork, we’re ready to step in. Our experienced account managers learn your business and tailor staffing support around your delivery schedule. From small shops to national brands, we help clients stay focused while we take care of the labor side.
Ready to simplify driver payments and build a reliable team? Contact us today, and let’s talk about what we can do for you.
