Your wallet is a few bills short of a decent paycheque because your carrier's bottom line, despite the booming economy, remains a few bills short of robust. And that's the case because the shippers fo...
Your wallet is a few bills short of a decent paycheque because your carrier’s bottom line, despite the booming economy, remains a few bills short of robust. And that’s the case because the shippers for whom your carrier does business are squeezing their freight costs until blood drips. And they do that because they know their customers – you, for example – demand the lowest cost for the products they buy.
It’s a vicious cycle that makes truckers both victim and scapegoat, and one that you have probably come to know well as an owner/operator or company driver. Well, don’t rush out to buy that Harley just yet, but that vicious cycle may be coming to an end.
Why? The industry’s traditional ways of compensating drivers are showing signs of crumbling. The desperate need to attract people to sit behind the wheel, drivers’ mounting frustration over uncompensated tasks, and government pressure to improve the industry’s safety record are chipping away at the foundation of the way you’re paid.
Pay by the mile has become a vital part of the industry’s economic culture because it’s viewed as a very efficient check on productivity. A truck is making money only when it’s rolling down the road, so it makes sense to pay drivers to keep the wheels rolling. But pay by the mile may become a victim of its own efficiency. No matter how generous current pay-per-mile rates are, it’s doubtful they fairly compensate company drivers and owner/operators for the amount of time they are having to spend on tasks that don’t keep the wheels turning. The Truckload Carriers Association in the U.S. released an eye-opening study on the issue last summer. According to the survey, the typical dry van driver makes five stops per week to load and unload. He spends 2.4 hours per stop waiting to load; 2.0 hours waiting to unload; 1.1 hours loading and 1.2 hours unloading. That’s a total of 33.5 hours per week of non-revenue generating time, 22 of which are completely wasted just waiting.
Owner/operators and company drivers are complaining evermore loudly – the summer’s O/O shutdown of the Port of Vancouver is the best example – that mileage-based pay or trip rates shift the economic burden of delays onto them.
“That’s a very important part of this issue that’s simply being glossed over,” says George Bradovka, an owner/operator who hauls for a small carrier out of Hamilton, Ont., and also a member of the ComCar Owner/Operators Association’s board of directors. “An hour spent loading or unloading is fine, but when some places take three, four, five hours…we should be compensated for that. But it’s not in the interests of carriers and shippers to address that because it’s ultimately going to cost more money.”
In the U.S., the Owner/Operators-Independent Drivers Association is openly calling for a switch to hourly pay as a way to solve the situation. It argues that, if carriers bore the burden, they would have more incentive to force customers to make improvements.
Economy Carriers is one of the few for-hire Canadian carriers that pay drivers by the hour. It’s entering its fourth year of doing so and the Calgary-headquartered company says there’s no turning back.
“The problem with traditional trucking pay scales (based on miles, hours and regional differentials) – whether in small companies or with larger union contracts – is that they are complicated and people don’t really know at the end of the day whether they are getting paid properly or not,” says Don Bietz, executive vice-president of the ECL Group of Companies, which owns Economy Carriers. “When you cut it right back to the basics, our economics on revenue revolve around revenue and cost per hour, so pay by the hour for professional operators makes sense. And the drivers love it because they can see very easily if they put in eight hours they get paid for eight hours. This way they get paid for what they actually do.”
Fears that abandoning a mileage rate in favor of paying by the hour would bring carriers to financial ruin are unfounded, Bietz adds.
“The biggest argument for companies not going to hourly pay is that they think they can’t control the hours that the drivers will work. But we promote efficiencies through the use of trip standards and measure that with on-board computers that are monitored on a daily basis. With those tools it works very well,” he says.
Economy Carriers was already paying its drivers for loading and unloading but had to start paying for pre-trip inspections once it moved to hourly pay. Yet Roy Craigen, general manager of the special commodities division of Economy Carriers says paying by the hour is helping the fleet save money, which is the reason the move to hourly pay was initiated.
“The original thought was to streamline administration, to make the whole thing simpler. What cost savings could we create by simplifying driver pay? We were dealing with not only pay by mile but also pay by jurisdiction and axle configuration. It takes a lot of effort to first know that and then apply it,” Craigen explains. “We have seen savings since moving to hourly pay. We use a computer system to track hours of work and pay off that. It makes it a heck of a lot easier to pay the driver for his work time based on a computer-generated log rather than plowing through piles of bills of lading or reading handwritten documentation on time spent at some location.”
Despite his belief that paying drivers by the hour is the better way to go, however, Craigen doesn’t believe the industry’s reliance on mileage rates is necessarily to blame for the growth in drivers’ unpaid time.
“I think it contributes but I don’t think it’s the root cause of the abuse of unpaid time. I think the root cause is the qualifying of customers in the negotiation of rate agreements,” he says. “At some point, all of us have to sign on the dotted line and say we agree to do this work within these parameters. If we are agreeing to big chunks of work and failing to either qualify our work so we know exactly what we’re getting involved in, or if there are unnecessary dead hours, there should be compensation for that for both the carrier and the driver. If your relationship with the shipper is a true partnership, you are both going to be interested in minimizing delays. You really have to question someone who is your customer and will inflict 22 hours of delay time in a week. That’s not a very good customer. I’m not interested in signing on the dotted line for that.”
Pay based on mileage is also coming under attack as a cause of driver fatigue. Drivers who were recently interviewed for our annual Mood of the Canadian Trucker survey were emphatic that – if they were to log all the time spent waiting to load and unload, or to clear Customs, or in traffic snarls – they would quickly run out of the hours they are legally allowed to spend on the job. So the delays are bogusly marked down as time spent in the bunk, even though they weren’t sleeping.
“Drivers are compelled to do that because there’s no compensation. In a 24-hour period, it’s physically impossible to get more than four or five hours of sleep,” says owner/operator Bradovka. “Every carrier says (delay time) is factored into mileage pay. Unfortunately, it’s not enough.”
Although the Canadian government hasn’t indicated a similar concern, one proposal in the U.S. Congress calls for a study into how driver pay affects safety.
Economy Carrier’s Craigen certainly thinks there are safety benefits to be gained by moving to hourly pay.
“I think the benefit for the driver, if you consider that our goal in going to hourly pay was not to increase or decrease his pay, was in the area of safety. If you’re paid by the mile and you’re geared to going from point A to point B in a certain period of time, you may push the envelope in certain driving conditions to maintain your road speed,” Craigen says. “The pay by the hour basically told them to use their own good judgement. If they had to slow down they were not going to lose nothing in an hourly pay system by taking measures to operate safely.”
The large private fleets are the most likel
y to pay their drivers by the hour or pay for delay time if they use a mileage pay scheme. And Bruce Richards, who heads the Private Motor Truck Council, says that’s one of the reasons private carriers have lower turnover rates.
“I think it does make a difference. I don’t think it’s the only factor…it comes down to a host of issues, but I know of private fleets that haven’t had to hire new drivers in two or three years,” Richards says. “So while a carrier’s accountant might rub his hands in glee and say, ‘by not paying waiting time we save this amount of dollars a year and the owner/operator or driver is going to eat it,’ maybe he should look at the turnover that results from that and try to put a dollar value on that. The cost of rehiring and training are enormous.”
Craigen’s and Richards’ remarks aside, it’s fair to say that most carriers, particularly those in the for-hire sector, remain unconvinced that pay by the hour is the best or only approach to improving driver compensation.
“I’m not sure it makes any difference if it’s hourly pay or pay by the mile. Rather, what we’re looking at is how big a pot of money is available. If we changed to paying by the hour I wouldn’t want people to think that the pot of money available would change dramatically for anybody,” says Dan Einwechter, chairman of the Ontario Trucking Association and head of the Challenger Group of Companies. “…What I’m hoping will occur is that day of enlightenment when the greater majority of the shipping public acknowledges they have been the recipients of a very efficient system and now it’s time to address some of the inequities that exist… And I believe the increases that the carriers deserve should be shared with the employees. I wouldn’t want to say what the split should be, but it can’t be that carriers go for a rate increase just to increase their OR. I don’t think that’s going to accomplish a lot.”
Which brings the issue around to something all carriers can agree on – if they are going to better compensate drivers, shippers have to come to the table.
“We’re not going to have people that want to do longhaul unless they’re making a premium doing it. In my opinion, it doesn’t matter how you do that – either the mileage rate goes up substantially or you pay hours – but the driver is going to be making a lot more money than he is today and that has to be passed on to the shipper,” says John Stollery, chairman of the Canadian Trucking Alliance and head of TST Solutions. “And the shippers also better realize that if they’re going to demand waiting time and hand bombing and all the other things they demand, it’s not going to get done because there is not going to be anybody to do it.”
Those are fighting words, but are they realistic in a deregulated market in which shippers respond to higher rate requests by pointing out there are a dozen other carriers willing to do it for less? Is this approach feasible when dealing with individuals who are often rewarded according to how much they reduce the freight bill every year? A Compas poll of Canadian shippers conducted late last year found that rates remained their top concern despite the fact that the majority of shippers had not swallowed a price increase in the past year. Only one out of every four shippers surveyed was paying higher rates compared to a year ago while six per cent were actually paying reduced rates. The poll was conducted for the Canadian Industrial Transportation Association, Canadian Chemical Producers Association and Canadian Fertilizer Institute.
Regardless, Stollery says there is no better time than now to push shippers for higher rates.
“I think that right now there is more freight than there are trucks… We’re saying to (shippers) that if you want our services this is what you’re going to pay. If you’re not going to pay then go get somebody else,” he says.
But not everyone is as confident as Stollery that carriers and shippers will be able to address the problem. ComCar’s Bradovka believes the only solution is for government to step in and legislate what types of duties – such as loading and unloading, handling customs forms, etc., – should be compensated. “If there was an agreement which defined the parameters of what gets paid, the carriers would pass the cost on and the push to work for nothing to accomplish almost impossible delivery tasks would be eliminated,” he says.
It’s too early too tell which approach to driver pay will win out in the end. But one thing appears certain: as long as a booming economy keeps freight volumes up and the driver shortage leaves carriers scrambling for people to move that freight, chances are that the price of getting you into the driver’s seat and keeping you there is going to rise. SignPost Inc., which has been tracking driver wage trends south of the border since 1997, reports that, in the third quarter, one in five U.S. carriers increased driver wages by an average of 4.4 per cent. The dry van sector increased wages by 6.3 per cent.
It’s not known how many of these carriers were able to pass part or all of their higher labor costs on to shippers. But even if our carriers don’t succeed in getting shippers to come to the table, they may have no choice but to go it alone.
“I don’t know if (the driver shortage) will force more carriers to pay by the hour but it is going to force us, as an industry, to – in some way – pay for all the work that a driver does,” Craigen says. “The issue isn’t can you afford to pay the driver. The issue is how can you take a $135,000 tractor and even a barebones trailer that’s worth $40,000 out of service? The cost of trying to run your business that way far exceeds the percentage of cost that you would pay your drivers.” n