Drivers

How Important is Driver Pay?

Part 2 in HDT's Driver Dilemma series on the driver shortage.

February 2015, TruckingInfo.com - Feature

by Deborah Lockridge, Editor-in-Chief - Also by this author

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Truck driver pay is rising at a record rate. Is it the answer to the driver shortage? 
Truck driver pay is rising at a record rate. Is it the answer to the driver shortage?

The second half of 2014 brought the largest number of driver pay raise announcements Gordon Klemp has ever seen.

Klemp has been tracking data on driver pay packages since 1995 as the head of the National Transportation Institute. He says a cycle of pay increases began in the second half of last year, with Tennessee-based U.S. Xpress kicking things off with a 13% pay raise. Major truckload carriers such as Heartland Express, Crete Carrier, Barr Nunn and others followed. Some increases were as high as 20%, Klemp says. The highest were for teams that haul time-sensitive long-haul freight.

It’s not just the high numbers that are a first — it’s the pace. A normal cycle of pay increases runs about 33 months, Klemp says. If things continue at this rate, “we will probably wrap up the cycle in about 13 to 15 months.”

The reason, of course, as we explained in the first in this series last month, is that fleets are having a hard time getting enough drivers to meet high freight demand, thanks to demographic changes, tighter regulations and other factors.

Basic laws of supply and demand would seem to indicate that if the industry has a high demand for truck drivers and there is a shortage of supply, that a raise in pay would solve the problem.

It’s true that driver wages have not kept up with inflation (although that’s true of American wage earners as a whole.) Many trucking company executives acknowledge that driver pay needs to increase.

“The thing we all struggle with is that in order to attract new entrants, the average pay…is probably going to have to go up to $65,000-$70,000,” said Scott Arves, president and CEO of Transport America, a diversified carrier based in Eagan, Minn., speaking last fall at transportation research firm FTR’s annual conference. “All we’re doing now is stealing from those who can’t afford to pay. Raising pay from $45,000 to $46,000 is not going to suddenly make this job attractive.”

But it’s not that simple.

How important is pay?

When John Elliott started interviewing drivers who left and surveying existing drivers in an effort to improve driver retention at his trucking company, he got a big surprise.

“Everybody automatically assumes pay is the number one driving force,” says Elliott, CEO of the expedited and regional truckload carrier Load One in Taylor, Mich. “That’s not the case. Respect was it, hands down. It was almost two to three times higher in scoring” in the surveys, done by the third-party company Stay Metrics.

Tim Judge, director of research for Stay Metrics and a professor at Notre Dame, says what the firm has learned is similar to job attitudes in other industries he has researched.
“When people complain, they most often complain about their pay,” he says. “But while it’s true that drivers don’t like their pay, it is not one of the areas that best predicts turnover.
“It’s not that pay doesn’t matter – but it’s not the only thing that matters. It’s not the top issue, but it’s in the top three,” Judge says.

We’ll save those other reasons for a future story in this series. For now, it’s clear that trucking companies are turning to higher pay as a way to attract and retain drivers.

One of the companies that recently raised pay was Nussbaum Transportation. The Illinois-based truckload carrier last year implemented what HR Director Jeremy Stickling says is probably the biggest one-time increase in his time with the company.

“We like to keep our pay package above the industry average,” he says of the 6% increase. “We know we haven’t quite caught up to the private fleets.”

Although Nussbaum has traditionally enjoyed relatively low turnover, in the 30-40% range, officials started feeling the driver shortage last year.

“It was time to do something and get serious about it,” he says. “We wanted the average system driver to be breaking $60,000, with $70,000 possible for a very efficient, hard runner.”

How competitive is driver pay?

Going up….
Some of last year’s big pay increase announcements:

• U.S. Xpress, Chattanooga, Tennessee, increased base mileage pay for solo drivers an average of 13% and implemented simpler pay structure.

• Less-than-truckload carrier Con-way Freight announced an increase in pay rates and a simplified pay structure that cuts the time it takes drivers to reach the top pay scale

• Schneider increased compensation for its van truckload drivers, 8-13% higher per mile.

• Illinois-based Nussbaum Transportation announced a 6% pay increase for over the road drivers, plus a $1,050 minimum weekly pay guarantee.

• Crete Carrier, Lincoln, Nebraska, announced an 11% increase in the overall pay package. Sister company Shaffer Trucking announced a 17% increase.

According to government statistics and a recent association study, Nussbaum is definitely above average in pay for a truckload carrier.

U.S. Bureau of Labor Statistics numbers from May 2013 (the most recent available) show that “heavy and tractor-trailer truck drivers” earned an estimated mean annual wage of $40,940.

A recent study by the American Trucking Associations suggests that median pay for truck drivers is a little higher than that — on par with the national median for U.S. households. In seven of the nine categories of drivers covered by the survey, pay met or exceeded the U.S. median household income of just over $53,000.

The survey found 2013 median pay for truckload national, irregular route van drivers was just over $46,000.

Driver turnover discussions often include the fact that private fleets and less-than-truckload fleets have far less turnover than truckload fleets — and that they pay drivers more. ATA’s survey found that private fleet van drivers, at $73,000, earned 58% more more than the truckload van average. The National Private Truck Council’s annual benchmarking study found that average pay for drivers overall in the private fleet community was $62,000 in 2013.

ACT Research compared driver wages to those in construction, an occupation that attracts similar candidates and on average pays more.

Between 2004 and 2008, average annual wage growth for construction workers grew at almost three times the rate of long-haul truckload wages: 3.6% per year versus 1.3% per year (not adjusted for inflation).

From 2009-2014, however, long-haul truckload wages have grown at rate three times that of construction (4.2% vs. 1.5%).

As a result, long-haul driver wages have narrowed the gap relative to construction sector pay. An average $5.15/hour gap in 2010 closed to an estimated $3.29/hour gap in November.

“The difference in the wage growth rates certainly gives you an idea of where the hiring pressure has been the past few years,” says Kenny Vieth, ACT president and senior analyst.

Beyond pay per mile

“In terms of engagement surveys, right now the number one complaint of current drivers is unpaid time and wasted time at the shipper,” he says, followed by the wasted time at the receiver, and by wasted time between loads.No matter how much you pay drivers per mile, there are many factors that can reduce the actual amount they receive in their paycheck. And that’s a major problem, according to Rim Yurkus, president and CEO of Strategic Programs Inc., which does engagement surveys of current drivers as well as exit interviews for client fleets.

When doing exit interviews over the past two years, he says, the issue of pay doesn’t appear until number three on the list, and that’s disappointment in how much money they make compared to how much they expected to make.

“That’s where all those inefficiencies come in,” Yurkus says. “People get hung up on the cents per mile, when the real enemy is the inefficiencies around what the driver has to go through in order to optimize their earning potential,” he says.

Some carriers are trying to address the uncertainties of driver pay. They are negotiating with shippers to cut wait times and/or get detention pay to drivers to help make up for lost time.
A number of carriers added guaranteed weekly pay levels in their announcements last year, according to Klemp, either for new hires or all drivers.

“Some percentage of our turnover historically has been caused by inconsistency in income,” he says. “Fleets who implement this are trying to take some of the ‘lumpiness’ out of the pay cycle and retain drivers who may become discouraged.”

So is pay making a difference? “I think it is making some difference,” Klemp says. “I think on the front end it’s helping control turnover, and the second stage is I think everybody’s hoping it’s going to increase the number of hires they get.

“If we don’t raise pay, we’ll just have more people dropping out of the driver pool.”

Comments

  1. 1. Tim [ February 23, 2015 @ 04:54AM ]

    Compensation is everything in ANY business, Carriers/Drivers are no exception. The industry attempting to say otherwise is crazy, basing pay on $/mi, FCS, total distance, ... shows incompetency. One must use all Carrier expenses to calculate a rate for a specific load. No one does that today, yet it is the only way ANY Carrier can operate to be profitable.

  2. 2. John Mullen [ February 23, 2015 @ 05:58AM ]

    If we are really addressing the issue of pay as one of the problems in the driver shortage and turnover when do we deal with reality ? Drop the age old system of pay per mile and pay the driver for his on duty time. To continue the practice of no pay delays is disrespectful to every driver out there. Respect is not a matter of courtesy on the phone or qualcom it is practice what you preach. While drivers struggle to comply with unrealistic regulations they have the daily irritant of showing time on duty for which there is no compensation.

  3. 3. Robbdogg [ February 23, 2015 @ 07:52AM ]

    First company offering $1000 per week min guarantee with decent medical and no touch freight has drivers beating down there doors.

  4. 4. Shawn Donaldson [ February 25, 2015 @ 09:57PM ]

    sewell motor express Wilmington ohio
    Good people benifits home frequently and good pay if you want it. 937-382-3847 ext 8 ask for mike in Safty and tell them shawnaldson sent you.

  5. 5. John Bowlby [ February 27, 2015 @ 05:11AM ]

    Noticed the comment about mileage pay and no pay for the delay time. Our drivers at Carbon Express on mileage are paid for ALL of their loading and unloading time, plus any break down time as well. There is no free time to our drivers when loading or unloading, they get their mileage rate of .50 cents per miile, plus full hourly rate while at the customers.

  6. 6. Operations/Dispatch [ March 02, 2015 @ 07:47AM ]

    Stop pay, detention pay and break-down pay are designed to "fill in the gaps" when a driver's time is lost due to unforeseeable circumstances in some cases. But to move away from the $ per mile model is not sustainable. IMO there may be a few drivers that would look at this as a blessing and continue to do their job efficiently, but I'm sorry to say that in this entitlement society, most drivers would look at it as what they have coming to them, work the system and completely abandon their sense of urgency.

  7. 7. Ron S [ March 17, 2015 @ 09:39AM ]

    Driver pay should be as related to time as the worker at the plant or dock. Pay for the time you put in - at the same rate.
    I have driven a number of years and have done well - BUT - I pick the jobs I work at. Hazmat has become better paying, LTL work, niche market stuff too.
    Robbdogg seems to think 'no touch' freight might be the answer - and it likely is if you looking for a mediocre wage, poor health and wheel holders rather than a trained professionals.
    As mentioned in the 'Driver dilemma' article the issue of training is part of the mix. If you train people properly and regularly, pay them for their time, and treat them right , they don't quit. One number quoted is that for every driver that walks it takes upwards of $ 8000 to replace and retrain a new hire. How in the world can a carrier or any other business shoulder that kind of expense witha 50% turnover??
    Pay for the pretrip, the waiting, load and unload and the mileage - then we get to a living wage

  8. 8. Bob [ March 19, 2015 @ 08:19AM ]

    Any driver "milking the clock" will easily be found out. it's very easy to predict an ETA with all the technology available, heck my phone GPS nails down my ETA down to the minute! it even adjusts time for detours, accidents, rush hour, etc and is highly accurate. So no one is going to taking advantage of hourly unless the company is too dumb to figure this stuff out. Piecemeal work is what sweatshops use like the garment industry, every other modern workplace uses hourly.

    Percentage and hourly are the only ways I will run. keep your CPM scam to yourselves.

  9. 9. Henry [ April 10, 2015 @ 05:32PM ]

    the co. i work for is looking to have aim take over logistics not good. make good money and treat the co. best i can.

  10. 10. steve [ April 11, 2015 @ 03:29PM ]

    The pay levels are too low compared to jobs. i know of 3 teachers at age 55 were going to go into trucking spent 5 weeks of the summer and about $6,500 to get their class 1 lic. they said that on a per hour basis that they pay would drop in half . Their too many truck drivers who have been forced to use the homeless shelters for home sometimes when their company short changes them. i tell people i will go back to trucking at $22.00 per hour. Note when running i always push my log. I can not afford to run on a elog for less than $1,000 per week take home after taxes stephen webster 5193578686

  11. 11. stephen w [ April 19, 2015 @ 05:04AM ]

    Many trucking companies will mislead people on what they are going to make. I was making $1,800 per week. i was told i would make $2.000 per week driving for this company. i left after 3 months when averaged $ less than $1,500 per week. Many trucking companies tell their drivers they will be paid for dock time and layover and border cross time and do pay it. Many other jobs pay much better than driving a truck today 2268899299

  12. 12. Stephen [ May 08, 2015 @ 08:46PM ]

    Those suggesting to just drop the pay per mileage, how would you address drivers whose productivity would suddenly drop, or now they're suddenly "getting help up at the shipper" more. I'm all for increasing driver pay; I can't believe what some companies pay their drivers and still feel okay about themselves. That being said, I've also witnessed fleets where drivers are paid on an hourly or daily pay, and their productivity is horrible. Once we switched them to a more equitable pay package, their productivity suddenly came back in line with what we would have expected. I think the problem would best be solved by implementing two things: 1) increase the rates that you are paying drivers, 2) Implement pay for performance mixed with a "safety net" daily pay for the occasions where drivers are legitimately held up at shippers (basically detention pay). That way you keep the productivity, but the driver doesn't suffer when he's picking up a load and waiting two to three hours just to get on the road.

  13. 13. Kurt [ July 03, 2015 @ 06:48AM ]

    I have seen a lot of information on driver pay, but have not seen any information on what the pay of trucking company executives has done as a comparison. How many CEOs are working for the same dollar pay, with no corrections for inflation and time, as they were decades ago?

  14. 14. Gordon Tullett [ July 03, 2015 @ 07:32AM ]

    Having read your story on Driver pay I find it extremely difficult to understand why it cannot be recognised that probably the number one reason for non retention of driving personnel is the fact that for some strange reason trucking companiies delight in seperating the driving staff from the rest of the staff that work in any one given company unit.
    Dispatch is the area that drastically requires cleaning up. People think that if they work behind a desk they are superior to those who work behind a steering wheel. Once that attitude changes then perhaps we might all start the process of getting somewhere.
    Dispatch must appreciate that they cannot do their job without the co-operation of the driver and vice-versa. So, stop expecting people, and that is what we all are, to work for me and start working with each other.
    The industry is based upon the military and that attitude in civillian life has to change.
    After all said and done the driver is the qualified one and yet the dispatcher who is totally unqualified seems to demand respect and will become vindictive if he or she does not consider that is being afforded towards them.Believe me when everybody is governed by the E.L.D unless a respectful relationship is established between the two afore mentioned parties you will achieve exactly nothing. Have you noticed how the dis[atcher is all important monday to Friday and the driver is treated like a dummy and yet on a week-end or public holiday the driver invariabley becomes sufficiently intelligent and is expected to be completely able to cope with most situations as the dispatcher does not nor does he/she expect to have their private time encroached upon. Infact if the dispatcher was expected to work over those periods as the driver is then you would have a shortage of dispatchers.
    To emphasise the point the dispatcher will issue their instructions on a friday to whom they consider to be the inferior one and then leave those inferior people to ahieve excellenc

  15. 15. Deborah Lockridge, Editor [ July 09, 2015 @ 11:47AM ]

    Gordon, you're absolutely correct. I addressed this issue in my March editorial. "Are you treating your drivers like employees? That may sound like an odd question. Unless you use owner-operators, of course your drivers are employees. But … do you really treat them like the rest of your employees?" Read more: http://www.truckinginfo.com/channel/drivers/article/story/2015/04/would-you-drive-for-your-fleet.aspx

 

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