Drivers

Driver Pay: Making the Grade

Part 1 of the 3-Part Driver Series

January 2018, TruckingInfo.com - Cover Story

by David Cullen, Executive Editor - Also by this author

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Throwing money at a problem isn’t always the solution. But if you need to find and keep long-haul truck drivers in today’s competitive job market, how much to increase their pay — in one form or another — has to be a key tactical consideration.

Boosting driver pay has long been avoided or at least downplayed by many long-haul fleets bedeviled by the twin demons of a driver shortage and high turnover — not surprising, as no business ever finds it easy to roll back pay hikes.

Hence many fleets have done everything but outright increase pay to recruit and retain drivers. Instead, these operations have focused more on providing new equipment spec’ed for driver comfort; implementing as many driver-friendly operational tweaks as possible, such as promising “no-touch freight” and more time at home, and offering generous healthcare and retirement benefits. These fleets may have also upped pay, but typically only through various incentive and bonus offerings, rather than dishing out straight-up increases in mileage-based or hourly pay rates.

But those approaches are increasingly seen as not good enough. Not with a U.S. economy that is by nearly all measures booming, after having escaped the doldrums that constrained it after the Great Recession. Now, the country’s reinvigorated economic engine is forcefully impacting the driver market with a one-two punch: Just when there are more desirable job opportunities available in years for high school graduates, demand for drivers is being driven up and up by a sizzling freight market.

The Labor Department’s December jobs report bears this out. Employers added 228,000 jobs in November, which kept the unemployment rate at 4.1% — the lowest it’s been since 2000. And employers have now added jobs every month for 86 months in a row. The upshot is not many people are still looking for work. And that means you won’t likely hear, as you once did, anyone saying, “I can always drive a truck.”

Peer closely at trucking and the picture looks even bleaker. According to the American Trucking Associations, the turnover rate at large truckload fleets rose five full percentage points in the third quarter of last year. That equals an annualized rate of 95%, the highest churn recorded since the end of 2015.

“Since bottoming out at the end of 2016, the turnover rate at larger fleets has steadily risen — a function of an improving economy, rising demand for freight transportation, and fierce competition for drivers,” reports ATA Chief Economist Bob Costello. “Fleets continue to tell us that competition for good, safe and experienced drivers is fierce, pushing wages higher in hopes of attracting the best talent.”

The overall driver shortage isn’t any more encouraging. In October, ATA released its latest update, estimating the shortage would climb above 50,000 drivers by the end of 2017 and, if current trends holds, to over 174,000 by 2026.

So don’t expect that raising driver pay will be a short-term phenomenon for long-haul fleets.

Phil Byrd, president of Bulldog Hiway Express (second from right), seen here with several senior drivers, says the carrier wants the pay and compensation packages it offers “to hit the bull’s eye for as many drivers as possible.” Photo: Bulldog Hiway Express
Phil Byrd, president of Bulldog Hiway Express (second from right), seen here with several senior drivers, says the carrier wants the pay and compensation packages it offers “to hit the bull’s eye for as many drivers as possible.” Photo: Bulldog Hiway Express

Feeling the squeeze

According to Gordon Klemp, president and CEO of the National Transportation Institute, which tracks driver wage trends across all trucking segments, the pay of a unionized truck driver in 1979 would be the equivalent of $101,600 in 2016. Yet NTI data shows a similar driver in 2016 earned just $52,406.

Klemp made that telling point in a November conference call hosted by Stifel Capital Markets. He and NTI COO Leah Shaver explained that economic and demographic trends coupled with the rising tide of freight will sharply push up driver pay and benefits.

Things are getting so tight that even private fleets are feeling the squeeze. Klemp said that while private fleets tend to recruit from a more experienced driver pool and lure drivers away from for-hire carriers, it’s no longer “a cake walk for them. Now, there are advertisements consistently, announcing first-year wages of around $50,000, even sometimes $70,000. They’re having a difficult time finding the drivers they want; the pool is diminishing.”

“The job and pay package has been completely re-engineered over the last decade,” Shaver said. “It is now rare to see pay packages without regionalization. There are simply not enough drivers to sustain the long-haul model.”

She said pay increases for drivers are now averaging 1 to 2 cents per mile, but in some cases, pay hikes are heading up into the range of 4 to 7 cents per mile. “Changes in pay are weighted to region and experience now. It’s no longer one or the other.” Shaver also explained that fleets are offering referral bonuses more often. These can net a driver $3,000 or more just for referring an applicant, plus extra mileage pay for three months to a year.

In addition, she said fleets are still serving up sign-on bonuses. Some are real eye-grabbers. “We’ve seen the re-emergence of $10,000 sign-on bonuses with 40% paid out in the first four months. And established drivers team can command a $20,000 sign-on bonus, based on location, that’s paid out over 12 months.”

Turning to demographics and the expectations of a new generation of job seekers, Klemp said that not only is the average age of truckers rising (NTI data pegs it as north of 52), but also fewer young workers will consider trucking, no matter the pay. “Millennials are totally disinterested in truck driving as a career,” he said. “It’s physically demanding work, with higher than average injury rates, because you are doing things the human body — young and old alike — doesn’t like to do.”

Klemp pointed out another downside to trucking that doesn’t help make it appealing to younger drivers: the irregular nature of driver pay, especially in for-hire, which “makes it difficult to lead a regular life.”

Yet another negative is that trucker pay largely has not kept pace with inflation. He said that from 2006 to 2017, net growth in for-hire truck driver income was a “very low” 6.3%. During that same time, pay for private fleet drivers rose 16.5%, which compares favorably to the inflation rate of 18.5%. Also during that same time, minimum wage climbed 45.6%, and companies such as McDonald’s hiked hourly pay a whopping 94%.

“That puts driver pay in perspective,” Klemp said. “It’s become less attractive over time, putting a real damper on growing the driver pool over the years.” And now with a superheated freight market, the only place driver pay can go is up.

All the signs are there for the reading. Klemp said GDP growth remains in the 3% range and as a result, “blue collar jobs are going unfulfilled in many employment sectors.” He noted that housing build times are “stretching out by months due to the labor shortage,” and hourly rates for laborers and semi-skilled workers are increasing rapidly. Little wonder, then, that NTI projects driver wages will continue increasing into this year.

A study conducted by WorkHound, which provides fleets with actionable insights on driver retention, found that drivers not only want to be paid well, but also are very concerned about the confusing and uncertain aspects of getting paid. Not surprisingly, for example, they get turned off when carriers calculate their pay based on household goods or practical miles vs. the actual, physical miles the driver tracked.

“A lot of people expect drivers to complain about wanting more money,” observed Max Farrell, WorkHound co-founder and CEO, during a recent Stifel Equity Research conference call. “But one of the biggest challenges is how drivers are paid. [They] often have to fight for their correct pay weekly. Office staff doesn’t don’t have to deal with this issue, as their salaried pay is predictable and expected” and so they may not grasp how important this is to a driver.

He said part of the problem rests with there being “no great payroll system designed for trucking,” which often means drivers may “receive reports from two systems and struggle to reconcile them.” Drivers surveyed also complained that “recruiting promised one level of pay, but they were set up at a different rate.”

According to Farrell, other pay issues managers should be well versed in include how reimbursements are handled, confusion over different payroll systems, and explaining complex formulas for detention pay and toll and scale reimbursements.

Yet another potential pitfall that can send drivers packing is how frequently pay is raised. A study by ERE Media, which offers services to professional recruiters, found that looking across all industries, 35% of new employees would look to switch jobs if they did not receive a raise within 12 months. By comparison, Driver iQ, which provides employment screening of truckers, found that 70% of its fleet customers schedule a pay raise within the first year, while others set them for sometime within the first three to six months. Some of the carriers make a distinction based on driver experience when determining pay increases, while others factor in DOT violations.

Driver iQ also points out that truckload fleets have historically limited their estimates of the costs of driver turnover to just recruiting costs, leaving out retention costs. But respondents to a survey indicated that their retention costs included incremental pay increases, training, and seniority benefits. And included in “other” were both the cost of recognition awards and of delayed sign-on bonuses, which of course are another form of driver pay.

Certainly, the biggest challenge for a given long-haul fleet is figuring out how much to raise pay and in which manner to do so to both help find and keep drivers. Also worth pondering, especially when recruiting, is whether to stress other elements of total compensation— such as company-paid healthcare, life insurance, retirement accounts, and other “fringe” but valuable benefits — or strictly sell on pay per mile and potential cash bonuses.

Boyd Bros. is one of several flatbed haulers that’s now offering a weekly minimum pay guarantee. Chris Cooper, president, says the idea is to provide “baseline [pay] that adds predictability to a driver’s life.” Photo: Boyd Bros.
Boyd Bros. is one of several flatbed haulers that’s now offering a weekly minimum pay guarantee. Chris Cooper, president, says the idea is to provide “baseline [pay] that adds predictability to a driver’s life.” Photo: Boyd Bros.

Rewarding experience

To be sure, there is a lot of room to be creative. Consider the tack just taken by Joplin, Missouri-based CFI. In late November, the truckload carrier launched what it calls an Experienced Driver pay package that aims to “pay current and future drivers for their professional, over-the-road truck driving experience” on top of the 2-cent-per-mile solo and 5-cent-per-mile team increases the company announced early last year.

The distinguishing feature of the program is that it compresses the years it takes for a driver to reach top pay, explains CFI Vice President of Human Resources Bert Johnson. Under the plan, a driver with one year of experience starts at 40 cents per mile, while an experienced driver receives an additional 1 cent to 5 cents per mile, depending on their specific experience. He notes this is all in addition to the driver benefiting from CFI’s “robust” benefits package.

Johnson says the genesis of the experienced driver offering traces back to CFI’s own experience selling its compensation package to prospective drivers. “We found that when we spoke of total compensation and ‘average pay,’ it worked to a certain extent. But drivers weren’t so interested in the total package, benefits and all, when they were ‘shopping’ among carriers” for the highest pay. Yet, he adds, “we must still provide healthcare and 401k benefits, as well as high-quality equipment and safety bonuses” to stay competitive. It’s just that those factors are not what pulls them in the door.

“We started looking at it more closely and found that 53% of our drivers had less than one year of experience, including those from our student-driver program, and that the other 47% felt they were not being rewarded for their experience,” says Johnson. “And with freight capacity driving up the shortage, we needed to reach out further.

“The training program is still in place to help fill the pipeline,” he continues. “But now we’ve opened up the funnel to attract those drivers with experience elsewhere. We’re still starting new drivers at 40 cents per mile. But now after every 125,000 miles, a driver will receive a 1-cent increase. So a full penny per mile is gained each year. This compressed our pay scale. With an increase each year, the time it takes to reach top pay is shrunk from 21 years to just nine years. For drivers coming in with prior experience, we reward them for that up front by as much as 45 cents per mile. So they could come on board here being paid as much as 10% more than in the past.”

He adds that CFI is also covering existing drivers with the program. “We had to protect our current drivers as well. They’re getting credit for the mileage they’ve driven on our scale plus any previous years of experience outside CFI.”

Johnson says any pay scheme has to be a work in progress. “You constantly have to look at it, especially with the looming driver shortage. What are your demographics and what can you tweak? And it’s important to be transparent with drivers — especially about their pay. We work very hard to build trust with our drivers.” That effort appears to be paying off. CFI’s driving force consists of some 2,000 company drivers along with about 500 owner-operators, and Johnson says that as of November, turnover stood at 77%, well below ATA’s reported national average.

Driver iQ points out that truckload fleets have historically limited their estimates of the costs of driver turnover to just recruiting costs, leaving out retention costs. But respondents to a 2017 Driver iQ survey indicated that their retention costs included incremental pay increases, training, and seniority benefits. Source:  Driver iQ Driver Retention Survey, July 2017
Driver iQ points out that truckload fleets have historically limited their estimates of the costs of driver turnover to just recruiting costs, leaving out retention costs. But respondents to a 2017 Driver iQ survey indicated that their retention costs included incremental pay increases, training, and seniority benefits. Source:  Driver iQ Driver Retention Survey, July 2017

Addressing uncertainty

Another innovative approach is to offer some form of weekly guaranteed pay, which helps address some of the concerns about the irregular nature of driver pay that tends to concern younger drivers and spouses who want to stick to a routine bill-paying regimen.

The idea behind a guaranteed weekly minimum is to provide peace of mind for when a driver is not driving due to circumstances beyond his control, such as delays at the customer, traffic congestion, or weather delays.

It’s one tactic being used by a number of flatbed/specialized carriers owned by the Daseke Company.

Included in a 4-cent-per mile pay increase for company drivers announced in September by Daseke’s Boyd Bros. Transportation is a $900 per week pay guarantee that’s available to company drivers at all levels.

“Our drivers make much more than $900 per week,” says Boyd Bros. President Chris Cooper. “The guarantee takes away any financial concern about not having enough coming in. It also eliminates the perceived risk that can come with starting a job with a new company. We preach predictability for drivers, and that can be difficult running irregular route. We’re finding this guarantee has had a positive impact, in a psychological sense, as it creates a baseline that adds predictability to a driver’s life.”

Daseke’s Bulldog Hiway Express is now offering what it calls Salary Plus, a guaranteed minimum weekly of $1,000 for drivers in its open-deck division. As at Boyd Bros., the offering essentially sets a floor, as Bulldog Hiway flatbed drivers typically average $1,300 per week, or more than 60 cents per mile.

CEO Phil Byrd explains the thinking behind the Salary Plus branding of the weekly pay guarantee this way: “The ‘salary’ shows they will make a minimum of $1,000, while the ‘plus’ references the many short-haul miles they can run, which maximizes their daily earning potential without taking long trips.” So the package sells pay, predictable pay, and more home time.

“We also try to communicate the full compensation package we offer,” he continues. “That includes free health insurance and $50,000 of life insurance, a 401(k) plan with match up to 4%, and a stock ownership grant. It’s a gold-standard benefits package. Still, we know there is no one size that fits all. That’s why we want what we offer to hit the bull’s eye for as many drivers as possible.”

70% of Driver iQ customers report having a scheduled driver pay raise within the first year while others schedule them during the first three to six months. And while some carriers make a distinction based on driver experience, according to Driver iQ, others factor in DOT violations. Source:  Driver iQ Driver Retention Survey, July 2017
70% of Driver iQ customers report having a scheduled driver pay raise within the first year while others schedule them during the first three to six months. And while some carriers make a distinction based on driver experience, according to Driver iQ, others factor in DOT violations. Source:  Driver iQ Driver Retention Survey, July 2017

For owner-operators, says Cooper of Boyd Bros, it’s different. “A company driver has to align himself with what we offer; that is they have to do the research to see if a carrier is offering the pay and benefits they want. But an owner-operator receives a percentage of each load. They get an automatic pay increase whenever a customer’s rate goes up — so that’s what they are looking to see.”

Convinced the driver shortage will only grow, bulk hauler and logistics firm Kenan Advantage Group is guaranteeing pay increases for the next three years with an eye to significantly boosting driver pay to ensure it can meet freight demand.

“The perfect storm is upon us,” says KAG President Bruce Blaise, “including the industry-wide driver capacity impact of the ELD mandate, an economy near full employment, and an aging workforce. We simply have to make the adjustments needed to attract new drivers to our company and industry.”

According to KAG CEO Dennis Nash, the company has already spent handsomely on new equipment, advanced technology, safety support, and “respect and appreciation from management.” But he says “ultimately, we have to provide a compensation package that can compete effectively with other industries for what is a shrinking pool of available candidates. This move provides drivers with the certainty that they will experience an improving personal financial situation well into the future.”

In other words, fleets are no longer competing just with other fleets for drivers. Now, they’re competing with every industry that needs to pull in blue-collar workers from a rapidly shrinking labor pool. That means it’s time to pay up like never before.

“When all is said and done,” says CFI’s Johnson, “the irregular route driver has to spend time in his truck. And that was fine for the older generation. But millennials want to be home at night. They want to make a decent living and have a good quality of life. Going forward, we’ll be asking drivers to more efficiently manage their time to make more money. But they will still have to spend time in their trucks to do that.”

Comments

  1. 1. Robert Pluh [ January 14, 2018 @ 11:28AM ]

    Throwing pennies at drivers is not the answer.Hourly pay is.

  2. 2. Jim Stauffacher [ January 21, 2018 @ 10:54AM ]

    As an experienced retired driver,driving since 1969(70 years old), with a record I’m proud of, in the past decade I have tried to secure either part time or full time employment. I have found that I get no credit for experience, getting no extra incentive than a truck driving school graduate, despite a record of longevity with previous employers. Also get no extra compensation when waiving the benefits(health insurance and life insurance) which was offered to all employees (extra $ saved without compensation) and with the complicated tier of raises, pay levels, mileage, and bonuses which is seemingly up to the carriers discretion to honor. Also some of the recruiters for some of the major carriers I have talked to have little or no actual trucking experience. I considered some to be rude. The pay levels very seldom, with no guarantees, exceeded what I was making 20 to 30 years ago.

  3. 3. Richard Davis [ January 26, 2018 @ 03:20PM ]

    Truck driving is not like any other job out there. I don't really think being paid by the hour is realistic.When do you start getting paid? Is it when you leave your house? What if your gone 3-4 weeks before you get back home? What if you want to, say visit family while you are gone on a trip. I think mileage pay is just fine. But you need to be on the clock once your 14 hrs. start at least. Meaning if your not driving hourly time starts. I think maybe drivers should get paid for sleeping. Being if you have a CDL, you are realistically ON-DUTY, 24/7 365 days a year. So you should be paid for losing some of your rights, for having a CDL. Being on straight hourly would be confusing.

  4. 4. James Hall [ January 28, 2018 @ 12:05PM ]

    Driver pay is just a small part of the problem. There is No shortage of qualified drivers. However there is a shortage of drivers who are willing to spend weeks away from home being treated like dirt by shippers & receivers. Putting up with lying dispatchers , Elds, vorad systems , driver facing cameras, speed limiters, agressive law enforcement who see truckers as an ATM with no limits and massive over regulation all for the benefit of slave wages. Now why do you suppose no one wants to drive a truck anymore?

  5. 5. Brian [ February 19, 2018 @ 09:12AM ]

    I still cant believe people are accepting 40 CPM as a good pay. I can name companies off the top of my head that are paying better than that. I know of no reason a Company driver should earn less than 80k per year, and still be home 2 days a week consecutive, if not more. Some of my drivers are home daily, and are still earning 90-100k, Our O/O are earning great pay, with guys making enough to buy a new truck after a year of service, and hiring a second driver. The driver shortage is without a doubt a real thing, but as the earlier poster said, its a qualified driver shortage.

  6. 6. Steve webster [ April 09, 2018 @ 08:00PM ]

    In 1980 a truck driver in Ontario made $8.00 per hour plus overtime after 44 hours per week the same as ttc bus driver or fireman or teachers made. A semi detracted house cost $50,000 gas 25cents per l a new pickup base 5000 plus taxes. Today that pickup $28,000 gas 125 cents per l semi detracted house cost $600,000 to have the same spending power that driver should make $30 per hour like what a go or tcc drivers make today. Do that and provide parking for the 10 hours off when out of hours at shippers and receivers,the truck driver shortage would disappear in 18 months. 716 800 5814

 

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