Lease Purchase
Even small carriers can find ways to help their owner-operators trim costs.
Patricia Smith
Senior Editor
Anything a carrier can do to help its owner-operators save a few pennies here and there is likely to help with recruiting and owner-operator loyalty. But while discount purchasing programs seem to be expanding among larger fleets, many of the small carriers approach the idea with caution and even fear.
"Some carriers are terrified about the balancing act between employee and independent contractor," says Michael Lawrence, small fleet manager for Roemer Insurance. "Different jurisdictions interpret it differently but, generally speaking, carriers with strongly worded agreements will protect themselves."
An attorney should be consulted but, basically, contracts should make it clear that the owner-operator is responsible for operating expenses such as fuel, insurance and repairs. Even when those items are purchased through a company program, the owner-operator is held accountable for the costs.
To avoid conflicts with leasing rules, any program sponsored or arranged by the carrier should be optional to the owner-operator. Participation should not be a condition of the lease and there should be no pressure placed on owner-operators to go along with the plan.
Setting up a program can be as easy as checking with the carrier's own vendors. Fuel stops, repair shops, tire dealers and other suppliers are usually happy to extend negotiated volume discounts to a carrier's owner-operators – especially if that carrier is willing to take over the burden of billing and collections.
"We don't have to spend our time chasing down monthly premiums," notes Lawrence regarding the savings to insurance companies with carrier-sponsored programs.
If costs are to be deducted from owner-operator settlement checks, the hauling contract should include an itemized list of chargebacks, including methods of computation. Leasing regulations don't prohibit mark-ups or administrative fees, but if you add something to the actual cost, attorneys say you should make that clear in the contract.
Fuel purchasing programs are no doubt the most popular among owner-operators because piggy-backing on a fleet's volume can usually save them money. Moreover, many like the convenience of buying fuel through a fleet card program.
With today's card systems, it's relatively easy to control what, where, when and how much the owner-operator spends. Changes in those limits can be made almost instantly – often via the Internet.
And fuel cards now offer financial services that are appealing to owner-operators. For instance, Comdata's Express Cash option enables carriers to deposit settlements into individual owner-operator accounts. Owner-operators can access the account via most ATMs or make transactions at retailers using the Maestro debit system. They can also write ComChecks against their Express Cash account or transfer funds to their own bank accounts. Fees depend on usage but Comdata Marketing Director Deby Samuals says it can cost less than many traditional checking accounts and is usually cheaper than check cashing fees.
Fuel, cash and credit card issuers also offer flexible programs to accommodate special circumstance. If, for instance, an owner-operator has a mechanical problem on the road, the carrier can negotiate costs with the nearest repair shop and, through Comdata's Business Link program, obtain a special Mastercard number good only with that merchant for the agreed-upon amount.
"We call it trust enabled, which is a little ironic because it effectively guarantees trust," says Samuels of the many ways companies can monitor and control use of charge cards and electronic purchasing services. "Fleets can open up or lock down cards according to their own rules. They can do it online, or they can do it through our 24/7 customer service."
Truck insurance is another cost area where carriers can help. Premiums depend on the safety record of the group and the insurance market, but Lawrence says even a fleet as small as 25 trucks can usually see a difference. For instance, an owner-operator buying non-trucking liability coverage on his own may pay $40-$45 a month. Buying through a group might reduce that to $30.
"That may no seem like a lot, but to an owner-operator running his own business anything is beneficial," he notes. To avoid jeopardizing independent contractor status, group insurance for owner-operators is usually set up as a separate program from that of the company fleet.
Lawrence says group insurance programs can help owner-operator retention, but another benefit is that the carriers know that their owner-operators have the required insurance at the proper levels. Roemer has streamlined the paperwork with an online system at insuremyrig.com that enables carriers to add or delete owner-operators online, get e-mail confirmations, and even print certificates of insurance. "You're not waiting for an insurance company to fax back a certificate," he says. "The carrier has a little more control than they would with normal systems."
Cost breaks for health insurance are rare for everyone these days, but finding good coverage at affordable prices is especially hard for owner-operators who seldom have time to shop. So one way carriers can help is to do some of the legwork for their owner-operators, using their own resources to find programs that suit varying owner-operator needs.
DBG Benefits Solutions, a Scottsdale, Ariz., benefits management company, offers Benefits Dispatch, an insurance package for truckers. According to DBG's Katie Pock, the menu has a variety of insurance products including major medical, limited medical, accident insurance, critical illness, life insurance, dental plan and a medical discount card.
This isn't a group plan – owner-operators enroll individually. And Pock says premiums are competitive with plans they can buy on their own, but not necessarily cheaper. The major benefit: one-stop flexibility. Owner-operators can choose and even customize coverage to suit their needs and budgets. For instance, major medical premiums are based on various levels of deductibles and co-pays. Limited medical, typically purchased as supplemental insurance, offers three levels of maximum benefits at set premiums.
Small carriers that don't believe they have enough buying clout on their own, or carriers that prefer to keep independent contractors at arms length, can still offer assistance by referring their owner-operators to non-affiliated group buying plans.
Many of the state trucking associations have special membership programs for owner-operators that offer discounts on truck insurance, tires, breakdown services, even some medical needs such as prescription cards and dental insurance.
TruckersB2B, started five years ago by the Celadon Group, offers discounts and rebates on a long list of products and services. President and CEO Jon Russell says the program is open only to small and medium sized fleets – carriers with national accounts or those that deal directly with manufacturers cannot join. Currently there are just under 20,000 members, including many owner-operators. The average fleet size is about 23 trucks.
Russell emphasizes that this isn't a traditional buying group where members purchase products and services at a negotiated group price. Some programs are based on discounts, but most allow members to cut their own deal, then get a rebate on what they buy. For example, a member can go to any of the tire vendors on the TruckersB2B list and negotiate the best price they can. Then they submit proof of purchase and TruckersB2B sends them a rebate – typically $7 to $12 per tire, depending on the type and brand.
"No matter what they negotiate, they get our rebate on top of it," says Russell. "If you're a good negotiator and you have a good relationship with your local dealer, none of that goes away. You can still use that, and still get the TruckersB2B help."
TruckersB2B offers fuel rebates of up to 3 cents per gallon. The amount is based on the member's own volume and the percentage of that volume purchased at stops within the designated network. Thus the owner-operator and the fleet of 200 have an equal chance of earning the maximum rebate.
The company will provide customized promotional and sign-up materials for carriers that want to present the option to their contractors, but owner-operators join on their own. The $12 monthly membership fee is deducted from rebates and charged only in months a member uses the services. Members pay vendors for products and services, no billing goes through TruckersB2B.
Individual membership "allows owner-operators to buy the way they want to buy and make their own decisions," Russell notes. At the same time, he adds, "it allows fleets to offer a benefit to their contractors, but still keep the 'independent' relationship.' "
