I had a thought about hourly pay for drivers ...

Michael Ludwig

Well-Known Member
#1
I love my job ... just because a big part of it simply involves thinking. So, just doing my job, I've been thinking about hourly pay for drivers.
These days we regulate almost everything a driver does. When he can start, stop, sleep, drive, how fast, how slow, pretty much right down to when he drop the kids off at the pool. Heck, we can even access their dash cameras and see what the weather is like where they are.
So, if we're monitoring and regulating drivers right down to that level, why aren't we paying them by the hour?
My thought on this is quite simple; Pay them by the hour for every hour they are on the clock. All of the on duty and driving time from their e-logs added up, multiplied by the per hour rate, and there you have it. Driver paid.
There are some inherent problems though;

1) How do you deal with the driver that had to wait 6 hours in off-duty status for a load?
a) Should you let him go off duty while waiting in the first place?
b) Is your shipper not somehow responsible for that time?
c) If it's a matter of dispatch sent him early of late, is that not dispatch's responsibility?
Why should the driver take the hit for someone else's inefficiency?

2) How do you deal with the driver that is seducing the canine?

3) What advantage is there to the driver to be paid by the hour? How can he work harder/smarter to make more money?

4) How do we determine what is a fair and equitable hourly wage?

It is my belief that this is eventually how we will pay drivers. For the most part we are all already calculating our rates based on revenue per hour. It's really a simple jump to pay drivers by the hour.

I would really like to hear from carriers and drivers alike on the issue.

For the broker community, here's one for you: How would you react if I told you the transportation rate from Toronto to Vancouver was $175.00 per working hour? That means you pay the aggregate on duty plus driving time, but you do not pay the aggregate off duty plus sleeper berth time.
 
#2
i think for short distance ex montreal to toronto or montreal new york is better per hour .but long distance is per mile .
i pay my driver around 2400$ for montreal to Calgary one pick one drop.
if i pay by hour is around 92 hours duty rond trip for same money is 26$ and hour no body pay 26 $ and hour this is my points
 

loaders

Site Supporter
#3
You got to tip your hat to a guy that's actually thinking on a Sunday afternoon, as opposed to watching golf, the Jays or NASCAR on TV! An interesting topic, as usual for Michael and well worth further discussion. My concern though is your last question, posed to the brokerage community. As often happens, I think you have made the very common mistake of thinking that brokers set transportation rates. As I, and others have said, as a broker, I really could care less what the rate is on any lane, or how the supplier of the service determined that rate. There are only 2 entities involved with rates, the carrier supplying the service and the shipper, who consumes that product or service. Freight Brokers, like real estate brokers merely facilitate the completion of the transaction between these 2 parties. For that, we receive a commission or percentage of the deal. If the rate to Vancouver is $2000.00 or $20000.00 or $175.00 per hour, it makes no difference to me, as long as that rate is close or similar to all of the suppliers of that same service. So, to answer your question " how would I react", indifferent would be my response, as long as my customer doesn't come back to me with " are you out of your mind" XYZ can do it for $100 per hour. A broker's job is to provide their clients with efficient service including negotiating competitive rates with quality carriers. Like a real estate agent, you tell me what you want for your house and I will try and sell that to my customer.
 

Michael Ludwig

Well-Known Member
#4
@loaders ... perhaps I should clarify vis-a-vis the broker question ...
How do you think your customer base would react if the transportation rate from Toronto to Vancouver was $175.00 per working hour? That means they pay the aggregate on duty plus driving time, but they do not pay the aggregate off duty plus sleeper berth time.

FWIW ... comparing freight brokers to real estate agents is a real disservice to the freight brokerage community. You should be ashamed. A freight broker, even a bad one, adds a level of value to the transaction between shipper and carrier (buyer & seller). The better the broker, the higher the level of added value. A real estate agent offers no such value. If you read a real estate agent's contract, they guarantee nothing, and they are responsible for nothing. As you complete a real estate agent's transaction, you still have to see a lawyer ... that should be a big tip off right there.
(If you can't tell, I have a real hate on for real estate agents.)
 

Michael Ludwig

Well-Known Member
#5
i think for short distance ex montreal to toronto or montreal new york is better per hour .but long distance is per mile .
i pay my driver around 2400$ for montreal to Calgary one pick one drop.
if i pay by hour is around 92 hours duty rond trip for same money is 26$ and hour no body pay 26 $ and hour this is my points
What do you mean nobody pays $26.00 an hour ? You just did !!! So, I really don't understand your point.
Hours are hours. What difference does it make where you go ?
 

loaders

Site Supporter
#6
My comparison to real estate agents was merely to create an easily understood analogy. Absolutley correct that a good broker brings much more to the table than the ability to negotiate fair rates for his customer. It is very easy to detect your distain for real estate agents! However, like school teachers, bank managers, etc., there are some good ones out there. Back to the original question. If the number of hours was constant, there wouldn't be a problem. If the number of hours fluctuated trip by trip, it would make it difficult, if not impossible for a customer to manage their transportation budget. CFOs like constant, dependable numbers, whether it is raw material cost, labour cost or transportation cost.
 

Michael Ludwig

Well-Known Member
#7
Agreed, CFO's do like constant numbers. It makes their cost accounting much easier. The other way to look at it though, is how is it any different than their own manufacturing cost accounting? If the widget in the boilermaker fouls up and slows down the line, or traffic is extra heavy in Winnipeg, what is the difference? If the manufacturing line has a 95% uptime, why aren't trucks allowed the same parameter?
 

loaders

Site Supporter
#8
So basically, you are suggesting that freight rates should be more like taxi rates. A base charge plus a mileage component and a time component. If the cab gets all the green lights, the weather is clear and the traffic is light, the cost from A to B is less. In your example, the shipper loads quickly, the driver is fresh and efficient, the roads are clear and there are no traffic delays, and the receiver unloads as soon as the truck arrives. A shipper might argue that the carrier can already recoup additional costs through accessorial charges covering excess loading and unloading times, items that are under the shippers control. Getting them to accept items not under their control, weather, traffic, a tired driver ( agreed, also not under the carrier's control) might be difficult. I see where your line of thought is going, and from a carriers perspective it is an important new way of reviewing your costs. I just think that getting shippers into that same mindset will be tough.
 

Michael Ludwig

Well-Known Member
#9
No, not a base plus, just straight up time. Mileage rating is dead (at least on life support). It has no further place in this business.
The shipper though would have to have access to e-log data as proof of compliance by the carrier and driver, and that is only fair.
As a carrier, I have to sell something, but what is left for me to sell?
Faster trucks? Can't their speed is regulated.
Shorter routes? They typically take more time.
Team drivers? Pay one, pay two, pay five, what difference does it make? You're still paying people, and it still takes X hours to go from point A to B.
If I have nothing special to sell, then I am really just a worker bee with a really cool set of tools.
And, you're right, 80 years of pay by the mile is going to be a tough change, if there even is one.

The sad part about it all, whether you rate/charge by the mile or by the hour, it all boils down to how cheap can you get the driver to work for.
 

Freight Broker

Well-Known Member
#10
The problem with hourly pay is that the shippers likely won't go for it. They get paid a flat rate for whatever it is that they make.. they're not going to want to pay a variable rate on their input costs. It would be like you and I going to the store to buy a bike. Each bike is priced differently because the cost to make each one was different. That model will likely never work..
 

ShawnR

Site Supporter
#11
We'd have to establish how long the shipment would take and pay per hour on that, adding in waiting time at pickup and delivery.
The hard part here is a load that goes smoothly and another one that gets caught up in traffic, on the same lane, with the same shipper/receiver, and the same carrier hauling the freight. Wouldn't the customer end up not agreeing with the more expensive load/driver cost?
$500 difference for no reason other than traffic. How would customers react to this type of situation.
 
#13
We'd have to establish how long the shipment would take and pay per hour on that, adding in waiting time at pickup and delivery.
The hard part here is a load that goes smoothly and another one that gets caught up in traffic, on the same lane, with the same shipper/receiver, and the same carrier hauling the freight. Wouldn't the customer end up not agreeing with the more expensive load/driver cost?
$500 difference for no reason other than traffic. How would customers react to this type of situation.
This happens now, the driver spends another 10 hours in the bunk before getting home because he ran out of hours, for no reason other than traffic. The driver is not compensated a nickel for spending an extra 10 hours on the road. He is expected to do it for FREE. Why should the driver, and myself as a trucking company take it on the chin? Simply because we always have?

The customer should ultimately pay. I agree with Mr Ludwig, the days of mileage based pay are numbered.
 

loaders

Site Supporter
#14
No one is disputing the fact the freight rates have been, up to this year, depressed. The shipping community, in spite of their claims about partnerships and collaboration, have reaped the rewards of low rates and actively encouraged carriers to drop their pants lower and lower. Sure, the shippers were being greedy, however, this greed was not only driven by the demands of the shippers, it was also the result of some carriers saying yes to rates that they knew (or should have known) were non-compensatory. Increasing costs of operation and difficulty in recruiting good drivers only made this situation worse. Now there seems to be an adjustment. Shippers are more responsive to increased rates due to lack of supply. It will be interesting to see how many in the carrier community decide to "stick to their guns" about rates, if and/or when the situation finds it's new balance. There will never be a consumer of this, or any product, that will say no to a lower rate.
 

ShawnR

Site Supporter
#15
@Navigator I understand what you're saying. Now with the rates going way up, this should level the playing field, whether it's hourly pay or per mile, if the rates make more sense for drivers/carriers to want to stay in the industry, then we've accomplished what was needed all along. The way the total amount is calculated probably doesn't matter, what matters is that total amount being more advantageous for the service provider so they can maintain a healthy profit margin and stay in business without having to keep cutting their rates
 

loaders

Site Supporter
#17
For a shipper selling their product with "freight included" costing, it would be a real headache. The widgets they shipped to their customer last week were $X.00, this week, they are $Y.00 because the carrier took longer (for whatever reason) to complete the delivery.
 

Shakey

Site Supporter
#18
but loaders this happens in the world with many industries every day.......

As Micheal said it is broken and not functional now it must change
 

lowmiler88

Site Supporter
#19
The only comment I have is that you can't look at the rate as one way because it may be $175 an hour into Vancouver but $65 an hour out. Customers want fixed costs guaranteed but their is no reason a trucking company can't operate hourly behind the scenes we check our rate per mile by the hour also.
 

ShawnR

Site Supporter
#20
@Shakey how upset would you be if milk was $4, then another day $8, and then another day $5, wouldn't this be annoying? This is how shippers see it, when they sell to their customer they have a shipping cost in the deal. For expensive items where the markup is much higher this could work very well, but for things that are more on the cheap side like recycled items, then it would be near impossible to ship not knowing your cost ahead of time.
 

Stats

Members online
1
Guests online
20
Total visitors
21