Driver Pay: What's In A Mile?
Attracting the best drivers means a competitive package of pay and benefits.
Patricia Smith
Senior Editor
It could be months or even years before we know the impact of the new hours of service rules on driver wages and earnings. An analysis done for the U.S. Department of Transportation concludes that the extra hour of driving time will increase productivity for most truckload drivers - and higher productivity, in most cases, means higher earnings. The effect of the new rules on less-than-truckload and short-haul drivers is projected to be minimal, at worst.
What we do know, right now, is that getting and keeping good drivers is a challenge for most fleet managers - a task not likely to get easier in the months and years ahead. However, HDT economist Jim Haughey predicts it may be a while before driver supply reaches the crisis levels of 1999 and 2000. Unemployment and slow recovery in non-trucking areas should prevent shortages of semi-skilled labor - the primary source of truck drivers - through this year and well into next.
Driver "churn" accounts for most vacancies today and turnover among long-haul fleets remains high, says Gordon Klemp, president of the National Transportation Institute (formerly SignPost), which publishes The National Survey of Driver Wages. As tonnage increases, so will competition for drivers. The result, he believes, will be a sharp increase in driver pay.
For less-than-truckload carriers, the pace has been set by the new National Master Freight Agreement that covers Teamster drivers for most of the country's biggest LTL fleets. The contract gives union drivers a guaranteed 3.4% increase in wages and benefits over the next five years, plus another penny per hour for every 0.2 point increase in the consumer price index after 3%. That means wages will go up at least $2.25 per hour or 5.63 cents a mile by 2008. Employer contributions to the Teamster Health & Welfare and Pension Plans increase $3.10 per hour over the next five years. According to Teamster officials, it's the highest wage and benefit increase in more than a decade.
Out-of-pocket health care expenses won't increase for drivers and the new contract prevents trucking companies from subcontracting work in the U.S. to Mexican carriers when access issues are resolved. Other changes include an extra week of vacation for 30-year veterans (20-year veterans now get five weeks), air conditioning on new city trucks and walk-in sleepers on new sleeper cabs.
Truckload: Raises Will Resume
Wages for truckload drivers appear to be inching forward after a small step back. NTI's fourth quarter 2002 survey put average base pay at 31 cents a mile for 58 of the country's biggest truckload carriers. That was about the same as fourth quarter 2001, but down slightly from early 2001 and 2002. The average among large refrigerated carriers was 30.5 cents a mile, compared with 30.4 cents a year earlier. The average for flatbed carriers was 31.2 cents versus 31.4 cents. Major van carriers averaged 31.3 cents versus 31.4 cents.
Klemp notes that starting and longevity pay has been relatively flat among the top paying fleets for the past five years. During the same period, some of the lower paying companies have continued to make adjustments, thus narrowing the low/high gap. Nevertheless, he adds, "it's our belief that as ton miles begin to pick up, pressure on hiring drivers will ratchet up and the top payers will distinguish themselves by boosting pay packages to attract drivers from the pool."
NTI looks beyond the biggest fleets, examining some 200 company driver pay packages per quarter. In the fourth quarter, wages rose at an overall annualized rate of 0.9% - only the second increase in the last seven quarters. Some 9.5% of all carriers in the survey adjusted wages and benefits. Approximately 17.5% of flatbed fleets made changes, 6.7% of dry van fleets, 4.2% of refrigerated operations. The first quarter 2003 survey is expected to show more upward movement as carriers review pay and benefit packages in anticipation of economic and freight growth.
The place to start: base pay. At the end of last year, according to the survey, van, flatbed and reefer fleets were offering new hires with one year of experience from 22 cents to 36 cents a mile. For drivers with three years of experience the range among van fleets was 25-36 cents. Among flatbed and reefer fleets it was 26-34 cents.
Bonuses are still part of many packages - especially those that reward safety. Fuel efficiency bonuses are less common, while productivity and performance bonuses are relatively rare. The trend to more simplified pay packages will continue, says Klemp. "There will always be some bonuses out there to reward specific behaviors, but we've seen a big improvement in how easy they are to understand and how achievable they are."
Many carriers in the survey pay extra for service going into New York City and surrounding boroughs, with fees ranging from $35-$100. The majority pay drivers for layovers, ranging from $25 to $100. Extra stops for most carriers can earn $5 to $30. There seems to be a variety of ways to figure extra pay for loading/unloading, but the most common is a flat fee ranging from $10 all the way up to $150.
But the whole issue of driver loading and unloading, as well as loading dock delays, may get some renewed attention with the new hours of service rules. As the DOT analysis noted, any reduction in loading times makes more on-duty time available for driving. Therefore, drivers have even more reason to look for carriers that can reduce the time spent loading, unloading or waiting - or adequately compensate them for lost driving time.
Benefits Add Up
As Klemp notes, the most valuable pay packages are not always those with the highest base pay. To be competitive, carriers must look at other benefits. One of the most important seems to be health care benefits.
Skyrocketing premiums have forced many carriers to pass on more of the cost for health insurance to their drivers. A few carriers in NTI's survey still pick up the full tab for the driver, and a couple even pay the premium for family coverage. Among the majority that pass on all or part of the cost, drivers paid from $1 to $34 a week for themselves and $11 to $95 a week for their families. As Klemp notes, however, many carriers offer a variety of plans and the costs reported are for the plans with the lowest weekly premiums.
Holiday and vacation pay are now almost universally offered. So are 401(k) or profit sharing programs, with some portion of the driver's contribution (typical range is 4-15%) partially matched by the company. Some companies have a match rate of 100%, to specified limits, but the most common is 50%.
Programs for novice drivers seemed to have waned with the lagging economy and with steep increases in insurance rates. Roughly a third of carriers said they reimburse all or part of driving school tuition. More than half of the carriers in all categories have student drivers in their pay plans. Weekly pay is generally in the $250 to $400 range. Trainees paid by the mile are getting 10-15 cents.
Klemp estimates that half of those carriers are actively pursuing entry-level drivers. Whether or not carriers revitalize their training programs when freight picks up depends largely on the potential impact on safety and insurance costs.
Job hopping may not be as lucrative as it was a few years ago, with less than a third of carriers now offering sign-on bonuses. The low is $150 but some carriers still are willing to go as high as $2,500. Klemp says carriers dropped the programs because they weren't needed - not because they didn't work - and he expects to see more as the economy revives.
Referral bonuses, on the other hand, remain common. Here too, there is a wide range - from $200 to $2,500.
Drivers are also looking at non-wage items when shopping fleet packages. One of the most important is still time at home. On that score, companies with regional and/or dedicated operations may have a bit of an edge since many drivers, says Klemp, are willing to settle for less in their pay checks if it means getting home more often or on a regular schedule.
Today's drivers also seem to place value on anything that will reduce the hassles of the job. TripPak, for instance, is a plus because quick paperwork processing means they get paid faster. Automatic vehicle identification systems, like PrePass, mean fewer stops at weight stations and ports-of-entry.
Competition For Owner-Operators
Klemp says a survey NTI did within the past year indicated that adding more owner-operators is the preferred method of growth for fleets already using contractors. But luring good owner-operators is becoming even harder than attracting good company drivers.
The NTI survey also includes details of 170 owner-operator pay packages. Among van carriers minimum base compensation ranged from 76 cents to 93 cents a mile. Maximum base pay was 80 cents to $1.50 per loaded mile. Whether a job pays at the bottom or the top of the pay scale is determined by region, distance, who furnishes the trailer and, in a few cases, longevity. The loaded per mile minimum for reefer operations was 80-87 cents, the maximum was 81 cents to $1.38. Loaded minimum among flatbed fleets was 79-90 cents a mile, maximum was 82 cents to $1.53.
Many van carriers said they pay the loaded rate for owner-operator deadhead miles, while the range among others was 55-87 cents. A few reefer carriers said they don't offer deadhead mileage pay to owner-operators, while a handful said they pay the loaded rate. In between was a range of 57-86 cents. A third of flatbed operations specified a deadhead mileage, several at the loaded rate. Among others the range was 55-90 cents.
Flatbed carriers prefer paying owner-operators a percentage of the load. The loaded minimum range was 55-83%, the loaded maximum range was 65-86%. Percentage pay was far less prevalent among van carriers but - when offered - was similar to flatbed rates. Among reefer fleets that paid a percentage, the minimum range was 65-76%, the maximum was 70-92%.
Reefer and flatbed carriers most often base owner-operator pay for service to New York City and for loading and unloading on what they can negotiate with the shipper - or what the owner-operator can negotiate with the carrier. Layover pay for owner-operators is rare.
About a third of van carriers offer lump sum payments for NYC service, mostly in the $50 to $100 range, about a fourth offer from $20 to $80 for layovers, and just about all offered a specific fee for loading/unloading either by the hour, the case, or sometimes a flat fee in the $20-$100 range.
Stops beyond the first and last almost always earn extra compensation for owner-operators. The range was from $15 to $70 with some carriers increasing the amount as the number of stops increases. Here too, many carriers base owner-operator stop pay on what they can negotiate with the customer.
The majority of van carriers pay all or part of the base plate costs for their owner-operators but the practice is less prevalent among reefer and flat bed operations. The same is true for excess fuel taxes and road taxes - about a fourth of van carriers pick up the tab for owner-operators but the practice is relatively rare for reefer and flatbed carriers. The majority of van carriers and less than half of reefer and flatbed carriers pick up permit costs.
Considering today's high cost of insurance, it makes sense for a carrier to put together group programs for its owner-operators at below market rates - and most do. Bobtail insurance through these programs runs from $25 to $65 a month. Workers' compensation or occupational accident ranges from $125 to $280 a month.
Only a few companies are offering sign-on bonuses for owner-operators, but referral bonuses are still prevalent with a range from $100 to $1,500 or - in some cases - mileage based.
Klemp says in-house tractor lease programs remain an effective tool for recruiting owner-operators. One interesting development is the emergence of female drivers as lease candidates. Klemp says carriers are beginning to realize that reaching out to women and minorities is the most likely way to grow the driver pool, and fleet recruiters tell him that the percentage of women who are able to qualify for lease programs is much higher than men. "Overall, it seems that women do a better job of managing their credit," he notes.
Dealing with Drivers continued...
