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

Shakey

Site Supporter
#21
@groch how do you feel about gas everyday? But you are use to it correct? Commodities prices all over the place on daily basis but word deals with them. What will you be paying for Florida fruits and veggies this year compared to last? Trucking has lots of delays that have no attachment to drivers performance but cause them lost income as well trucking companies. Why do you think this is impossible to change?
 

loaders

Site Supporter
#22
Shakey, I believe we are all experiencing the effect that the "commodity" called transportation is having on our industry. A dramatic increase is cost. This has occurred without any quantum leap in how rates are determined. It occurred naturally as supply decreased. No one is disputing the fact that rates were overdue to increase, but to say that the entire rating process has to be changed to deal with the new reality is perhaps a bit premature. I support Michael's idea that carriers should look at how they calculate their rates in a different manner based on this new climate, but as long as you are getting what you need to be profitable, who cares with how you come up with that number? If you need one dollar, what is the difference if you get it in four quarters or ten dimes?
 

Freight Broker

Well-Known Member
#23
This brings to mind a customer sales call I did years ago..The shipper was obviously an older guy who had no time for BS. I quoted him a rate.. plus fuel adjustment.. plus time after two hours.. plus plus plus.. He called me back and hollered: "CAIN'T YOU JUST GIVE ME A F***NG NUMBER?! In a nutsell that's what all shippers want.. How much is this going to cost?.. just one number please.. most will tolerate a fuel surcharge.. and one or two conditions.. but an hourly rate plus conditions? I doubt it.
 

Jim L

Active Member
#24
Time for me to chime in - there are a lot of angles that are being put out there.

The idea of per hour rate for our trucks and drivers has been kicked so many times it isn't funny. I believe that Michael has suggested this a dozen times at least. I believe that this thinking is coming around because we need drivers and we're trying to find a way to make it lucrative enough for a driver to come work for me instead of someone else. Hourly pay for drivers starts the ball rolling and it gets extrapolated to hourly pay for equipment.

Lets start with the driver; the driver is an unsupervised employee working in his/her own environment. Yes we have visibility to speed, moving times and a variety of other aspects in his life while at work but do we have the time to micromanage every point of these? It would not make sense to pay a person to watch a drivers every move when it is expected that the drivers do what they are supposed to do to the best of their ability. If you did hire a person to manage it, the cost for this person may not add sufficient value to a cost effective alternative. The fact is that the industry has paid by the mile to give the incentive to the driver to do the best possible job under the conditions they are given. If the problem stems from dispatch or load availability, they will have to push their concerns up or choose to go somewhere else that may be better. A good management team will constantly review the driver pay with all the other metrics they check and work at its best to ensure the company is running at its optimal balance. The fact is that a driver needs to make X per year and how the carrier gets there doesn't really matter. How they come up with their pricing will include their driver costs.

Charging freight costs by the hour would be nice but I don't think it will get anywhere. Just like it is hard for the carrier to manage the drivers optimal performance, there are less options for the customer to manage the time. As a carrier, we have removed the volatility of fuel by adding a fuel surcharge component to the freight costs for regular freight. This came about due to the fact that fuel was erratic and volatile. If everything was spot quoted we wouldn't need it but shipper CEO/CFO's want price stability and this was a way to get a year round price locked in. Driver pay, at a per trip level, is not volatile enough for the carrier to come up with a way to mitigate its potential risks by passing it down to the freight payor. The analogy of the taxi cab is not pertinent because the payor is in the cab with them and can be assured the driver is working to the best of their ability.

All businesses take the risk that their costs are not always going to be reflected in the price they receive for their goods and services. The margins they expect may be less or even negative if the costs change quickly. Do you think that shippers in the past quarter saw the freight increase coming and increased the costs to their end customers? Some may have but not the majority. I don't think we'll see per hour rates for the truck no matter how we decide to pay the driver.
 

Freight Broker

Well-Known Member
#25
Productivity based compensation is better than hourly because then everyone, from the business owner on down, is incentivized to be productive. Most of us who own businesses are paid straight commission... why shouldn't people who work for us be paid the same way?.. or on some other performance based system? The idea that hourly pay will bring more drivers into the industry is flawed in that the amount of money available for driver pay hasn't changed.. its still X dollars no matter how it's doled out.. i.e. hours on the job.. percent of revenue, or mileage. Drivers get excited about hourly pay because they see MORE money at the end of the rainbow.. they think that now they'll get paid for ALL of their time.. and maybe they will.. only the rate of pay will be watered down so it comes out to the same as mileage (or maybe less even).
 

Michael Ludwig

Well-Known Member
#26
Sooo late getting back into this. Some very, very good points realized here.

Here's the basic carrier issue ... I am not competing with Jim for drivers, nor is Jim competing with me. Jim and I are both competing with manufacturing, and manufacturing pays by the hour. The relevant driver pool is drained. There's none left, so we have to look for other sources of labour. Retired professionals, secretarial pools, manufacturing lines all fit that bill. How do we get them to come drive a truck? You can't say to them you are making $21.50 an hour now, but I am going to pay you 52 cents a mile. It just doesn't equate in the minds of most fledgling drivers. They can't correlate the two.
However, if you can say "You're making $21.50 an hour now, and I'm going to pay you $23.50 an hour." you have piqued their interest. The fact that today you will start your workday in Simcoe, and tomorrow you will start in New jersey, and the day after in Montreal, is something the potential driver will have to work through on his or her own. At least the issue of comparative pay is off the table.

A brief word about "fixed" costs to the customer; some one earlier mentioned something about buying goods shipping included. Essentially the Amazon model. Two questions come to mind;
1) What do you think the chances are that Amazon includes a shipping cost in their selling price?
2) More importantly, what do you think the chances are that Amazon loses money on their shipping budget?
If your answers are 1) Yes, and 2) Zero, then you get a gold star :)
Every manufacturer who sells shipping included, sells by the very same model. The simple truth is if they don't they are no longer manufacturing anything because they are out of business.
So, the argument is not that shippers might pay too much, cost accountants have already accrued for that (or should have), but should the shippers be afforded the opportunity to make money on their shipping budget?
Fixed costs are one thing, but give a CFO the opportunity to profit and you have a whole new ball game. Now you, carrier or broker, have something to sell.

And an issue I would like to take up with someone ... it was mentioned earlier by a broker that they (brokers) try very hard to negotiate fair rates with their customers. The inference was that they do so at the expense of their carriers. That offends me. Are carriers not your customer too?

Well, that's my soapbox speech for the day :)
 

Freight Broker

Well-Known Member
#27
Mike, you make some good points. But the reality is that an hourly wage would transfer every act of god delay that a carrier may encounter on to the balance sheet as a liability to the company. Lets say I quote a shipper $2000.00 on a particular lane.. Margins are slim as it is.. but oh no.. there's an accident, and your truck is delayed 10 hours.. and to make matters worse, bad weather has further delayed your truck, and you're now looking at 15 hours above and beyond your normal travel time. 15 hours times $21.50 an hour equates to $322.50 additional cost on that trip.. Do you intend to recover that additional expense from your customer? I would love to meet the shipper who would be agreebale to that. Or, alternatively, do you quote a high flat rate at the outset to take into account worst case scenarios? In that case you'll always be high, and again, I would love to meet the shipper who will pay premium rates.. i.e. rates that are generally over market. Bottom line, one has to ask where the additional pay to support a high hourly rate will come from. The pay pie, the amount of money available for driver pay, doesn't grow by simply switching payment methodology.. If I have $500.00 budgeted for driver pay on a given load then that amount doesn't change if I go from mileage to hourly. But I suppose from a driver recruitment standpoint hourly pay would make alot of sense.. but once those hourly pay drivers realize they're no further ahead really then that's where you realize you traded your hiring problem for a retention problem.

About brokers quoting "fair" rates, sure.. I make my quota of sales calls every day, 50% of the time I'm too high.. 45% of the time my rates are close, and too close, really, for the prospect to want to consider changing.. 5% of the time I get them for reasons other than price.. just dumb luck that they've got a new lane.. they're current vendor is failing them.. or.. most rarely, that my price is substantially lower than who they're presently using. Brokers (at least in my experience) have very little latitude in pricing.. sure.. I'd like to quote premium rates all day long.. and I can.. if all I want to do is provide pricing without ever moving any loads. In reality the market is a stern task master: we quote it "competitively" or we simply don't get the business.
 

loaders

Site Supporter
#28
Negotiating a fair rate, whether it is done directly by a shipper or indirectly through a freight broker does not have to be "at the expense" of the carrier. Michael, I am sure you have sat across the table from a shipper and participated in a discussion where you have had to justify, or at least, explain why you are charging a certain amount for a particular lane. As negotiating implies, there has to be an element of give and take. A good negotiator tries to ensure that both parties are satisfied and happy with the outcome. Negotiating fair rates for their customer is just another service that a freight broker provides. Again, the whole concept of freight brokering is to relieve, or minimize the burden of transportation for the shipper. As Freight Broker said, we provide "competitive" pricing that is based on the rates that carriers have given to us. I guess my question Michael, would be, are you "offended" when one of your own customers asks you to come in and review a rate, or discuss rates for a new lane?
 

lowmiler88

Site Supporter
#30
You cannot look at hourly pay on an individual load basis the same way mileage does not always work on an individual load basis. I think that with everyone on ELD's you will now have proper info into deciding an hourly rate and it will happen. Whether the driver makes the same amount of money or not they will know they are being compensated for all work done which will make them happier.
 

Michael Ludwig

Well-Known Member
#31
@Freight Broker ... okay, now that I have a clearer picture of where you are coming from, I might be able to explain myself a little better. As an example it takes 54 driving hours to go from Toronto to Seattle. It will take 2 hours to load and 4 hours to unload. It should take 15 minutes at the border. My rate to the customer is 60:15 hours times $xxx.xx per hour, plus any load related screw ups.
Let's be realistic and honest with ourselves here ... there is no way that anyone, regardless of what business they are in, can charge a customer for acts of God and Darwin.
Back to our load ... Johnny Jerkoff was supposed to show up at 9:00 AM Sunday morning to load the load. We were there at 8:30. Johnny, because he was out getting high with his posse last night didn't show up to work until noon, then he still had to pick the load. We got out of there at 5:00 PM.
The shipper uses Fly-By-Night Customs Brokers Inc., and they're pretty good Monday to Friday from 9:00 AM to 3:30 PM, but this is Sunday night, and they really don't give a rat's ass if they do this one or not. We finally get clearance Monday morning at 11:00 AM.
As luck would have it the trip is incident free all the way from Detroit to Seattle and the receiver only to 45 minutes to unload.
So here we are, there are extra costs to loading and customs clearance, but a break on the unloading side. Because it's an hourly rate everything is covered. There is no additional bargaining/begging/arguing between the carrier and the broker, nor is there any ambiguity between the broker and the shipper. Makes everything kind of simple ... at least I think so anyways.

@loaders ... I love those conversations !!! That's where you get to sit down with your customer and he/she gets a really good feel for your business, and you get a really good feel for their business. Between the two of you, invariably you always come up with a better idea for getting things done and it is usually more profitable for both parties.
 

lowmiler88

Site Supporter
#35
It's funny if you look at the 50 to 70 hrs it's 78K to 109K a year but you go on their website and it say their drivers avg 60 to 80K a year it's all in the marketing. We've got drivers home every weekend making 80K (they are hard workers) and we just gave them a 10% increase. I was always told "the proof is in the pudding" don't be fooled by advertising.
 
#36
It's funny if you look at the 50 to 70 hrs it's 78K to 109K a year but you go on their website and it say their drivers avg 60 to 80K a year it's all in the marketing. We've got drivers home every weekend making 80K (they are hard workers) and we just gave them a 10% increase. I was always told "the proof is in the pudding" don't be fooled by advertising.
More likely numbers on the website based on a previous pay structure.. New structure suppose to raise it, otherwise company will loose some current drivers..
And, yes, it's very interesting....
 
#38
It's funny if you look at the 50 to 70 hrs it's 78K to 109K a year but you go on their website and it say their drivers avg 60 to 80K a year it's all in the marketing. We've got drivers home every weekend making 80K (they are hard workers) and we just gave them a 10% increase. I was always told "the proof is in the pudding" don't be fooled by advertising.
But seriously, how many guys get fooled by the advertising ...earn up to ..., yada yada yada.
 

lowmiler88

Site Supporter
#39
But seriously, how many guys get fooled by the advertising ...earn up to ..., yada yada yada.
You would be surprised how many come through from other companies that promised them the moon and these are people with experience. We spend time educating drivers on their pay throughout the year so they don't make the mistake of jumping ship. A lot of it comes down to how much is deposited into their account and they do not know what made that number up.
 

Michael Ludwig

Well-Known Member
#40
I took a look at that link. It's Zavcor. I know some people there and asked them to explain it to me. This Kevin Wobschall fellow is on the right track. While it's not my place to divulge their company information, I can tell you that I think his system has a very good chance of being successful. He seems to have put all the right pieces in all the right places.
 

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