The Human Edge: Competitive Compensation

A competitive compensation package can be used to attract new drivers and retain existing employees alike. But while compensation typically accounts for about 40% of a fleet’s operating budget, there is clearly no one-size-fits-all package that will work for every organization. The trucking industry’s wide range of schedules, routes, duties, equipment and rates simply introduce too many variables for that.

As unique as the approaches can be, however, every package will include some combination of base pay, variable pay and benefits. A focus on each aspect will ensure that compensation is as competitive as it can be.

Base pay is the basic hourly rate or salary that an individual makes, not including bonuses or incentives.  For drivers, this includes mileage pay (rate per mile/kilometre) accessorial pay (for non-driving activities like dropping a trailer) and premiums (based on experience or a specific type of work).

A great way to confirm that a fleet offers a competitive base pay is to conduct a salary survey. In some cases, fleets might share compensation details with a researcher in exchange for a copy of the results. Other options include scanning the internet to see if competing fleets post their compensation packages online, asking drivers approached by other companies to share the nature of any offer, or contacting a third-party provider who can conduct salary surveys for a fee.

Variable pay, meanwhile, is any type of incentive that is linked to performance. Fuel and safety bonuses offer two of the most common examples of this. Just keep in mind that ill-designed or poorly communicated variable pay can backfire. Programs which reward high mileage without a concern for speed or safety can risk drivers, equipment and freight.

Benefits include non-cash compensation on top of base pay and variable pay.  Examples include paid holidays, drug plans, pension plans, life insurance, wellness programs, and supplemental health insurance.

Employees can value their benefits as much as the base and variable pay itself. The 2012 Sonofi Canada Healthcare Survey found that 61% of employees see health benefits as a “strong incentive” to stay with their current employers; in 2011 it found that 59% of employees would rather keep benefits than receive $10,000 in cash.

With these factors in mind, there are a few key steps to consider when designing a compensation strategy that works for your company:

1. Start with a compensation philosophy
   Identify whether your fleet’s existing pay package is above, at, or below market values. Then decide where you would like it to be. Keep in mind that the decision might also need to consider compensation offered in other industries.
   The Canadian Trucking Alliance’s Blue Ribbon Task Force concluded that truck drivers tend to make or slightly exceed the average annual wage for all workers. But drivers also tend to work significantly more hours to make that wage. Set the value too low and potential employees may opt for a different career altogether.
2. Decide what goals you want your compensation package to accomplish
   Compensation packages should be fair and equitable to employees, but the best combination of base pay, variable pay and benefits will also help achieve business goals. A safety bonus, for example, can encourage drivers to follow the safe practices that play a role in reducing collision rates and controlling insurance premiums. A fuel bonus can convince drivers to travel at slower speeds, burning less fuel, reducing equipment wear, and enhancing safety.
3. Communicate your compensation package to existing and new employees
   If you know that you offer a competitive compensation package, share the information with existing drivers and job candidates alike. Include the results of a salary survey if it helps to prove the point. It can also be helpful to offer some explanatory information about a pay package, particularly when hiring drivers with limited experience. Drivers who know how many runs they can expect in a specific period of time will have a better idea of how much they will actually make per week or month.

Above all, remember that a fair, equitable and competitive compensation package will always reward the behaviors that are critical to any company’s success.