Carriers favoring sign-on bonuses, performance-based driver pay

By Linda Longton on
Gordon Klemp spoke to a group fleet executives May 21 in Birmingham, Ala., at the 2013 CCJ Spring Symposium about trends in driver pay.

Gordon Klemp spoke to a group fleet executives May 21 in Birmingham, Ala., at the 2013 CCJ Spring Symposium about trends in driver pay.

Nearly half of carriers are offering sign-on bonuses, compared to only 12 percent two years ago, consultant Gordon Klemp told trucking fleet executives today during the 2013 CCJ Spring Symposium in Birmingham, Ala.

Bonuses range from $250 to $5,000 for solo drivers and $2,000 to as much as $15,000 for teams, said Klemp, principal with the National Transportation Institute.

“Recruiters say bonuses are here for the forseeable future,” Klemp said. All bonuses are job- or location-specific, with bonus amounts varying by supply and demand.

Increases in base pay are less likely, Klemp said. Although driver and owner-operator pay in all segments – dry van, refrigerated, flatbed – increased slightly year-over-year in the fourth quarter of 2012, current freight rates do not support further increases. One caveat: Carriers who haul high-value freight may see rates go up enough so that “they may be able to grow their fleets by giving a little of those increases back in pay,” he said.

In the fourth quarter, year-over-year dry van pay increased just 1.1 percent to an average 36.5 cents per mile, Klemp said. Refrigerated driver pay increased 0.6 percent to 34.7 cpm. However, refrigerated drivers’ median annual pay was higher than dry van –  $47,721 versus $46,614 – due to more consistent miles and better detention pay, Klemp said.

“Refrigerated has been very stable. Drivers were able to maintain their income even during the economic dip,” he said. Flatbed pay ranked highest, at 38.9 cpm. It also saw the greatest year-over-year increase, 1.3 percent, and the highest median annual pay at $48,931.

Owner-operator rates also increased slightly year-over-year, with median dry van rates increasing 2 cents to 92 cpm. The highest paying dry van carriers are in the Northeast, where “we’ve seen a number of carriers paying $1.02 to $1.05 per mile,” Klemp said. Owner-operators hauling refrigerated freight saw their rate increase 1 cent to 93 cpm. Flatbed owner-operator rates improved to 95 cpm from 94 cpm in fourth quarter 2011. These numbers do not include fuel surcharges, Klemp said.

The gap between what owner-operators and company drivers make is narrowing,  Klemp said. “If you looked at it rationally, you’d see it’s not much more money for the risk and effort to become an owner-operator.” And it’s becoming more difficult to become an owner-operator – at least without the help of a carrier.

Carriers face an increasingly difficult task in finding qualified drivers and owner-operators from a pool that’s shrinking due to a variety of factors, Klemp said, including generous unemployment pay that may encourage some drivers not to find jobs until their benefits run out. He also pointed to the “underground economy,” where drivers can plow snow, mow lawns or do other work for cash that isn’t reported as income for tax purposes.

At the same time, with more part-time jobs being created in the current economy, drivers can work two or three jobs and make enough money to allow them to stay home instead of going back on the road.

The shortage of qualified drivers will only get worse: In the next 10 years, 25 percent of today’s drivers will retire or leave due to a physical issue, Klemp said.

As finding new drivers becomes more difficult, carriers are looking at ways to improve driver retention, such as using productivity pay based on performance measures: on-time, preventable accident, equipment utilization, roadside inspection results, miles per gallon and idle time, among others. “These carriers understand that if the driver does this for me, I can do this for them,” Klemp said, but “it takes a fair amount of time to build your model to get the result you expect.”

For example, Classic Carriers, Versailles, Ohio, has had good results using a guaranteed pay program to retain drivers, said Ed Ruhe, vice president of operations/sales, who attended Klemp’s presentation. If a good-performing driver typically makes $900 per week and that drops on a given week, perhaps because of lower miles, Classic raises the driver’s pay up to the usual $900.

“We mark it on his pay check as a ‘management adjustment,’” Ruhe said. When Classic instituted this program in 2000, turnover dropped to 25 percent and has stayed there.

Linda Longton

Prior to her promotion, Linda served as Vice President of editorial for Randall-Reilly for nine years. She served as editor of Overdrive beginning in 1996 before being promoted in 1999 to Editorial Director of Trucking Media. Prior to joining Randall-Reilly, Linda worked in public relations and corporate communications at Communication Concepts Unlimited in Racine, WI. Before that, Linda spent 10 years in editorial positions with Johnson Hill Press, now Cygnus, in Fort Atkinson, WI. Linda is a Summa Cum Laude graduate of University of Wisconsin-Whitewater.

5 comments
ClaudeSeadler
ClaudeSeadler

Ok lets see at  the companies will pay sign bonus but they say they cant pay a living wage. Oh I forgot the cost of labor is too much but the execs get a 6 figure bonus every year. Has anybody noticed that the true cost of labor is the top 2% of any company? But it goes beyond wages how about respect home time and decent conditions. I worked for a carrier and in orientation the class was told that we the drivers will be screwed from time to time and then had the gall to say we would be at fault in an accident should we have one. And this came from the president of that company. No I did not stay there as that showed me how he "respects" the drivers. Plus he was very arrogant to say the least.  And the companies as a whole have this type behavior and claim they cant get drivers WOW!!!

JohnKirkDeRitis
JohnKirkDeRitis

just how the he** do you survive on .36 a mile anymore.

Cliff Downing
Cliff Downing

One thing that is missing in all of this is the fact that the dollar has lost almost a third of it purchasing power in the last decade.  Well, not according to the Government who conveniently disallows a number of economic factors in calculating inflation... you know... Food, Fuel, etc.  Until everyone figures out that it isn't all about some stupid bonus that will draw me in to driving for someone who is carrying the same goods to the same customer that the last carrier I was with for the same average pay.  I'll stay long enough to qualify for the bonus and then do it all over again with another carrier.  And let's be real here... most of the so-called shortage of drivers has more to do with lateral movement of drivers in the industry as opposed to a vastly shrinking pool.  Though, the shrinkage is occurring, but again I point back to my earlier comment.  Overall, the pay has not kept up with the loss of value of the dollar.  Until this is fully addressed, good luck getting out of this hole you have dug for yourselves carriers.

jfitz58
jfitz58

This is a lot of the same old stuff, lets do something really tangible and raise rates to pay the driver better. CPM and yearly pay figures haven't changed in decades. I have been in the industry for 25 years, but never a driver so I know first hand how the inside works. How do expect to recruit and retain new comers into the industry with pay like that and be able to support a family and be out on the road. Take a real hard look at the census figures from the DOL you will find that $45k income is nearly considered poverty level. Sign on bonuses, make sure you read the fine print on that because there are stipulations before you get that bonus and it for certain you don't get it all at once. Everyone likes to talk about retention yet many have no plan and the ones that do are doing that same things they feel has been working for the last 10 years yet turnover is at or above 100%. Just like all the other bonuses that are offered at many companies the carrier finds means not to pay the driver, like detention, idle time, and so on. I talk to drivers everyday all day, talk to other recruiters and O/O. Do I have a absolute answer, no, although what does work for me and my drivers is that I give them respect, I listen to their concerns. Sometimes I can do something about it and sometimes I can't and I tell them that upfront. I currently work in part of trucking that is small and very specialized and we pay drivers a salary and earn bonuses. I did like the comment of guaranteeing pay and I know drivers would like to know what they are getting every week instead of it being a surprise very time the open there settlement envelope. From my vantage point try a little respect it will go farther than you think, and that should start right from first contact by the recruiter and the recruiter should be honest and up front with a potential hire. If you have to sell it, then you are not doing it right is my view point. Whether with my current company or when I was doing freight I never sold the company the applicant, while I don't always fill my trucks, but the ones I do hire stay an average of 4 years with us and I make myself available to my drivers as well.

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