🚗 Per Diem & Travel Pay in Construction
Construction workers frequently travel to jobsites far from home — sometimes across town, sometimes across the state. Per diem, zone pay, subsistence, and travel time rules are some of the most confusing and frequently mishandled areas of construction payroll. Get them wrong and you're either overpaying or facing compliance violations.
Per diem and travel pay rules come from multiple sources — and they stack. Your obligations may come from the prevailing wage determination, the union CBA, the project contract, federal tax rules, and state labor law — all at the same time. You need to know which rules apply to each project and each worker.
Key Terms
| Term | Definition |
|---|---|
| Per diem | A daily allowance to cover meals, lodging, and incidental expenses when working away from home |
| Subsistence | Similar to per diem — daily amount for living expenses on out-of-area projects (common in union CBAs) |
| Zone pay | Extra hourly pay based on the distance from a reference point (usually the union hall or city center) to the jobsite |
| Travel time | Compensable time spent traveling to/from a jobsite (beyond the normal commute) |
| Mileage reimbursement | Payment for using a personal vehicle for work-related travel |
| Mobilization | One-time payment for the initial trip to a distant jobsite |
Per Diem Basics
When Is Per Diem Paid?
Per diem is typically owed when a worker is assigned to a project far enough from home that daily commuting is impractical:
| Source | Typical Trigger |
|---|---|
| Federal (GSA rates) | Overnight travel required for business purposes |
| Union CBA | Distance from hiring hall exceeds the "free zone" (often 25–50 miles) |
| Prevailing wage determination | If the determination includes per diem or subsistence |
| Company policy | Whatever your company establishes for out-of-area work |
| Project contract | Some contracts specify per diem requirements |
Federal GSA Per Diem Rates
The General Services Administration (GSA) publishes per diem rates by location. These are the standard for federal employees and are widely used as a benchmark:
| Component | Standard Rate (2024) | High-Cost Areas |
|---|---|---|
| Lodging | $107/night | $150–$400/night (NYC, SF, DC, etc.) |
| Meals & Incidentals (M&IE) | $59/day | $64–$79/day |
| Total standard per diem | $166/day | $214–$479/day |
Per diem paid at or below GSA rates is tax-free to the worker (not subject to income tax, FICA, or withholding) — as long as the worker is on temporary assignment (generally under 1 year) and maintains a "tax home." This makes per diem a very tax-efficient form of compensation for both the contractor and the worker.
Taxable vs. Non-Taxable Per Diem
| Situation | Tax Treatment |
|---|---|
| Per diem at or below GSA rate, temporary assignment, worker has tax home | Non-taxable |
| Per diem exceeds GSA rate | Excess is taxable income |
| Worker doesn't have a tax home (itinerant) | Fully taxable |
| Assignment exceeds 1 year | Fully taxable (no longer "temporary") |
| Per diem paid but worker commutes home daily | Fully taxable (no overnight stay) |
Zone Pay
What Is Zone Pay?
Zone pay is an additional hourly premium based on the distance from a reference point (usually the union hiring hall or a city center) to the jobsite. It's extremely common in union construction.
How Zone Pay Works
| Zone | Distance from Reference Point | Premium |
|---|---|---|
| Free zone | 0–25 miles | No premium |
| Zone 1 | 26–35 miles | $3.00–$5.00/hr |
| Zone 2 | 36–50 miles | $5.00–$8.00/hr |
| Zone 3 | 51–75 miles | $8.00–$12.00/hr |
| Zone 4 | 76+ miles | $12.00–$20.00/hr (or subsistence) |
Distances, zones, and premiums vary significantly by local agreement.
Zone Pay Key Points
| Point | Details |
|---|---|
| Measurement | Usually measured by the shortest driving route, not straight-line |
| Reference point | Union hall, county courthouse, or city center (per the CBA) |
| Taxability | Zone pay is taxable wages (it's compensation, not reimbursement) |
| Overtime | Zone pay is typically included in the regular rate for OT calculations |
| Prevailing wage | Zone pay may or may not be credited toward prevailing wage obligations — check the determination |
Subsistence
Union Subsistence Rules
When a jobsite is beyond a specified distance (often 50–75 miles from the hiring hall), many CBAs provide subsistence instead of (or in addition to) zone pay:
| Component | Typical Amount |
|---|---|
| Daily subsistence | $60–$120/day |
| Weekly (Mon–Thu) | 4 nights × lodging rate |
| Travel day allowance | Mileage + travel time for initial trip |
| Return trips | Some CBAs allow a weekend trip home every 2–4 weeks |
Subsistence vs. Per Diem
| Feature | Subsistence (Union) | Per Diem (Company/Federal) |
|---|---|---|
| Source | CBA requirement | Company policy, GSA, or contract |
| Amount | Fixed by CBA | GSA rates or company rates |
| Tax treatment | Often taxable (paid as flat amount) | Non-taxable if structured correctly |
| Applies to | Union workers on out-of-area projects | Any worker on temporary out-of-area assignment |
If you're paying subsistence or per diem, how you structure it matters enormously for taxes:
- Accountable plan (worker substantiates expenses) → Non-taxable up to GSA rates
- Non-accountable plan (flat payment, no substantiation) → Fully taxable as wages
Work with your accountant to set up an accountable plan. The tax savings for both you and your workers are significant.
Travel Time Compensation
When Is Travel Time Paid?
| Scenario | Compensable? | Details |
|---|---|---|
| Normal commute (home → regular jobsite) | No | Portal-to-portal rule — normal commute is not work time |
| Travel between jobsites during the workday | Yes | Always compensable under FLSA |
| Reporting to a distant site (beyond normal commute area) | Excess time may be | Per DOL rules, excess travel time beyond normal commute may be compensable |
| Travel with overnight stay (out-of-town) | Partially | Travel during normal work hours is compensable; outside normal hours generally is not (unless driving) |
| Riding as passenger outside normal hours | Generally no | Unless performing work while traveling |
| Driving a company vehicle with tools/materials | Often yes | This is performing a service for the employer |
Union Travel Time
Many union CBAs have specific travel time provisions:
| Provision | Example |
|---|---|
| Show-up at shop, then travel to site | Travel time from shop to site is paid |
| Travel time beyond free zone | Paid at straight-time rate |
| Initial mobilization | Paid travel day at 8 hours |
| Demobilization | Paid travel day when project ends |
| Weekend travel | Some CBAs pay travel time for weekend trips home |
Prevailing Wage Travel Time
On prevailing wage projects, travel time rules depend on the wage determination:
| Feature | Federal (Davis-Bacon) | California |
|---|---|---|
| Travel time | Per FLSA rules (no special PW travel rule) | Per IWC Wage Orders |
| Zone pay | Not typically in federal determinations | Some CA determinations include travel/zone provisions |
| Subsistence | Not typically in federal determinations | Some determinations include subsistence |
| Employer-required travel | Compensable under FLSA | Compensable as work time |
Mileage Reimbursement
IRS Standard Mileage Rate
| Year | Rate per Mile |
|---|---|
| 2024 | $0.67 |
| 2023 | $0.655 |
The IRS rate is designed to cover gas, maintenance, insurance, and depreciation.
When Mileage Applies in Construction
| Situation | Mileage Owed? |
|---|---|
| Driving personal vehicle from home to regular jobsite | No (normal commute) |
| Driving personal vehicle between jobsites during the day | Yes |
| Driving personal vehicle to a distant/temporary jobsite | Excess over normal commute (company policy varies) |
| Using personal vehicle to pick up materials | Yes |
| Company provides vehicle | No mileage — but fuel may be covered |
Union Mileage
Some union CBAs specify mileage reimbursement for workers who drive to distant jobsites:
| Provision | Details |
|---|---|
| Rate | Usually IRS rate or a CBA-specified rate |
| Trigger | Beyond the free zone |
| One-way or round-trip | Varies by CBA (usually one-way measured from hall to site) |
| Carpooling | Some CBAs pay mileage to the driver only |
Per Diem and Estimating
Impact on Project Costs
When estimating projects that require per diem or travel pay:
| Cost Element | How to Estimate |
|---|---|
| Per diem | (Number of workers traveling) × (daily rate) × (project duration in working days) |
| Zone pay | (Zone premium per hour) × (hours per worker per day) × (workers) × (days) |
| Subsistence | (Weekly rate) × (number of weeks) × (traveling workers) |
| Travel time | (Travel hours per day) × (worker hourly rate) × (workers) × (days) |
| Mileage | (Miles round-trip) × (IRS rate) × (vehicles) × (days) — or company vehicle costs |
| Mobilization/demob | One-time travel costs for crew and equipment |
Example: Estimating Per Diem for a 6-Month Project
10 workers traveling to a project 150 miles from home:
| Item | Calculation | Cost |
|---|---|---|
| Per diem (M&IE) | 10 workers × $59/day × 130 days | $76,700 |
| Lodging | 10 workers × $107/night × 130 nights | $139,100 |
| Weekend trips home (monthly) | 10 workers × $0.67/mile × 300 miles RT × 6 trips | $12,060 |
| Travel time (initial + final) | 10 workers × 3 hrs × $50/hr × 2 trips | $3,000 |
| Total per diem / travel cost | $230,860 |
Per diem and travel costs can easily reach $20,000–$30,000 per worker on a 6-month out-of-area project. Forgetting to include these costs in your estimate is a common and expensive mistake on distant projects.
Best Practices
For Tracking and Compliance
- Identify per diem and travel requirements at bid time (CBA, wage determination, contract)
- Set up an accountable plan for tax-free per diem reimbursement
- Track per diem payments per worker per project in your payroll system
- Calculate zone distances before the project starts — don't guess
- Document travel time separately from work time on daily timesheets
- Review CBA subsistence provisions carefully — they vary by local
- Include per diem and travel costs as a separate line item in your estimates
For Reducing Travel Costs
- Negotiate project housing for large crews (cheaper than individual hotel rooms)
- Use extended-stay hotels for discounted weekly rates
- Arrange carpooling for mileage-eligible workers
- Consider hiring local workers through the local hiring hall (union) to reduce travel needs
- Factor travel costs into your go/no-go decision for distant projects
Related Resources
- Prevailing Wage Guide — Travel and zone provisions in wage determinations
- Union Construction Guide — CBA travel and subsistence rules
- Overtime Rules for Construction — How travel time affects overtime
- Fringe Benefits in Construction — Per diem as a benefit component
- Government Contracts Guide — Travel requirements on federal projects