2013 US Trucking News — American Trucking Companies Reconsider Hourly Pay Rates of Truck Drivers

During last month’s American Trucking Associations Management Conference and Exhibition in Orlando, the issue on safety was set aside, and the panel focused on truck drivers, changes to the new hour-of-service regulation and driver recruitment and retention. The highlight of the discussions was whether to pay truck drivers on an hourly basis, which TL carriers labeled as “financial suicide”, or on a monthly basis.

It turned out that the fleet executive panel agreed on paying the drivers in mileage. However, compensation will all depend on the time truck drivers spend and the work they accomplish when not driving but still at work. The discussion started with ATA Chief Economist Bob Costello presenting his recent survey on the current trends in the trucking industry. Due to the impacts of the truck driver shortage that trucking companies are facing, Costello explained that fleets are conducting measures to address the issue through increasing wages and offering higher benefits to attract new drivers.

“While the driver shortage is generally confined to only certain segments of the trucking industry, it is having real impacts on how fleets recruit and retain their drivers,” Costello said. He continues to say that in the first 2 quarters of this year, the turnover rate among long-haul truckload carriers reaches to 99%. This now leads many trucking companies to increase their individual truck driver’s salary this year.

In addition to Costello’s survey, it was revealed that TL carriers are confused whether to practice across-the-board increase in pay, or incentive-based plans. Costello went on reporting about the incomes of the government. He calculated that when it comes to spending power, the driver’s pay is less than 10 percent since 1990. Due to recession, the length of long-haul trucks productivity averaged to 10,000 miles per month and is now 8,100 miles. Costello is pertaining to the shortened hours-of-service rule.

“Is it time for trucking to move to hourly pay rates for drivers?” asked moderator Dave Osiecki, ATA senior vice president of policy and regulatory affairs. Paying the drivers by the hour would be “financial suicide,” said Steve Gordon, COO of Gordon Trucking Inc. “Disconnecting driver pay from how we get paid by our customers is a very frightening thought for this industry,” Gordon said.

Gordon went on saying that the time drivers spend on loading and unloading or simple dropping goods would consume already an hour. And with the shortened hours of driving, at the same time the delays that usually happens during delivery, truck drivers have no other ways to offset the time and money wasted while the wheel is not running. “Drivers are gambling their paycheck every week on our ability to build a good, sustainable, fluid network. If we could line-out a schedule so a guy could know what he was going to do over the next five days that would have an impact on turnover. But we’re at the mercy of the shipping community,” Gordon said. “The drivers are the ones taking the risk, not the shippers and not the carriers. That psychology is really tough.”

On the other hand, the president and CO of Werner Enterprise, Derek Leathers said that they had been paying drivers by the hour and that they employ all kinds of pay in his company, but are not paying by mileage. Leathers also responded that so long as clients are paying the trucking companies by mileage, then it would be “impractical to disconnect driver pay from that basic aspect of the trucking business.” He continued to explain that drivers must be kept focused and interested with regards to the utilization of equipment as the companies do. Leathers feared that they would lose important aspects due to inefficiencies in case the payment of drivers by the hour will be implemented.

However, the case as compared to private for-hire long-haulers is different in a sense that they do not face many uncertainties in the challenges when it comes to the turnover issue. In addition, the private fleet’s turnover rate is at about 10 percent, reported Costello. However, for-hire fleets still need to compete with private fleets in looking for drivers.

In Wal-Mart’s case, its vice president of transportation, Jeff Flackler reported that the company’s turnover rate is even lower at 5to 6 percent. Nonetheless, Wal-Mart is still “working harder” in recruiting at the same time retaining drivers among its fleets in the country.

Meanwhile, at Werner, the number of drivers ages 60-67 remained, but 90 days after prior to the implementation of the new HOS ruling, half of those drivers moved on and the others will soon retire.

Flackler said that one of the challenges they face in Wal-Mart is that they are both chippers and carriers at the same time. He added that Wal-Mart’s transportation efficiency is one top concern in trying to keep prices of retail low. “We face different challenges than [for-hire carriers], but we have some of the same: How do you make a driver’s life better?”

When Flacker reported the amount of a new hire at Wal-Mart and as how they get paid, he caught the panel’s attention as well as the audience’s. For the first year, a new truck driver receives an average pay of about $76,000. Aside from substantial benefits, one third greatly depends on the driver’s activities and about two thirds is based on mileage. Flacker added that his company only recruits experienced drivers as evidenced last year where they only signed 350 from 13,000 applicants.

With a 25 percent average pay gap of truck drivers between for-hire private fleets, Leathers suggested that for-hire must negotiate with private fleet shippers. “If the higher driver pay that we’re advocating and pushing for is inappropriate or too much, then how do they justify within their own four walls that they pay those kinds of dollars?” Leathers said.

Leathers continued saying that the issue on how truck drivers get paid as well as retaining them cannot be solved, or not unless the whole trucking industry sings in the electronic logs to provide a standardized metric to guide the policy. “The experimentation that we continue to have in tinkering with hours of service or pay methodology or any other thing doesn’t make a lot of sense. It’s way too dark out there. Turn the lights on,” Leather said “Let’s prove that we are serious about compliance and that we are committed to obeying the laws – before they continue to write new ones. We can argue about this as long as we want, the more likely it is that other things will come at us that we like even less.”

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