The debate between hourly or mileage-based pay is a hotly contested one, but often overlooks the vast gulf that exists between the two extremes. A hybrid approach that rewards drivers for their mileage but also compensates them for time lost for reasons beyond their control and rewards productivity is one that can bring satisfaction to both drivers, and fleet owners. Just ask Gerry Dowden.
The president of Newfoundland-based, 20-truck auto hauler East Can Transport Services, gave his company’s compensation package an overhaul in an effort to reduce driver turnover. Drivers were experiencing long waits at the ferry terminals and many felt their mileage-based pay was insufficient, causing some
to leave the company as a result.
Back then, they were paid a mileage rate plus a fixed rate per vehicle transported.
“We had a mileage rate combined with a vehicle rate, but it didn’t do anything for the drivers who were delayed waiting for the ferry, or waiting for a load,” Dowden told Truck News, noting that drivers weren’t compensated for ferry-related delays until they’d been sitting for 24 hours.
“That wasn’t sufficient,” Dowden acknowledged. “We changed that. We reduced the waiting time back down to 16 hours and after 16 hours, we pay them for a full shift of nine hours.”
That was just one of many changes made after the company re-examined its compensation practices and transitioned to a “productivity-based” pay structure. Dowden began the process with a series of driver interviews, conducted by a consultant to encourage drivers to be honest and forthcoming with their concerns.
“Not everything that came back from that survey was doable,” Dowden said. “But some of the comments that we heard, and some of the suggestions that they made, were great.”
One of the challenges facing East Can was keeping pace with demand during seasonal peaks. The company implemented a bonus system for drivers who attained certain mileage thresholds during busy times.
“In the spring and summer, there’s a great opportunity for our drivers to make good money and be productive,” said Dowden.
East Can Transport
During the summer, drivers are asked to run 4,500 miles in a two-week pay period and if they do so, they are paid an additional three cents per mile for every mile accumulated during the period.
“It’s a bit of an incentive for them to be a little bit more productive and it works for us as well, because the trucks are more productive,” Dowden said. “Of course, this goal has to be attained within the legal parameters of the logbook and the driver’s physical ability to produce.”
The new pay package, which better compensates drivers for delays and rewards them with bonus pay for maximizing their miles (and even per diems for meal expenses), has nearly eliminated driver turnover, Dowden said, while improving productivity
“We had a regular turnover of drivers in the past and it gets expensive to recruit and train drivers, especially in the auto carrier division,” Dowden said. “The benefit for us is we’re able to satisfy the drivers a little bit better, the ones we have are better trained, their longevity with us is better and we don’t have to spend the time looking for new drivers and training them and so on.”
And reducing turnover has also translated into fewer damaged cars, driving down claims by 50%. East Can has taken some of the savings and given it back to drivers who’ve gone claims-free.
“We’ve built in a claims-free incentive bonus. In short, we pay them a quarterly bonus for the vehicles they transported damage-free,” Dowden explained. “If they’ve completed a full year damage-free then they receive another annual bonus that rewards them for going the full year. If somebody were to go a full year, for example, it would work out to be somewhere between a four and five cents a mile bonus to them at the end of the year. Again, the benefit to us is that we don’t have to deal with the claims. We still have claims, but since we put in this claims-free incentive structure, our claims have gone down.”
The same logic has applied to injury prevention. Since it began paying drivers a bonus for staying accident- and injury-free, East Can has also seen injuries decrease.
“Our insurance premium has not only stabilized, but we will receive a premium rebate for our low loss ratio last year,” Dowden said. “Our injury rate is almost eliminated resulting in rebates and a rate reduction with our local Workers’ Compensation Commission.”
It took about a year for the company to completely revamp its pay structure. Dowden admits it’s a more complex system now and requires some hands-on management to oversee. Still, the overhaul has brought benefits to both the drivers and the company – proof that with some creativity and flexibility, a mutually beneficial driver compensation package can be arrived at.
“We have a business to run and it has to be profitable,” Dowden reasoned. “The sky is not the limit when it comes down to drivers’ pay. But within the design of our pay structure, the money we save/earn from reduced driver turnover, reduced damage claims, reduced accidents/injuries and stable rates from select customers is better used on this pay package and a live person to administer it. Most importantly, our drivers are happier and proud of their accomplishments.”