Guaranteed pay for truck operators is becoming a more common driver retention tactic for fleets, says the National Transportation Institute’s Gordon Klemp. And for good reason, he says: It works.
“Clearly we can quantify the fact that there’s a growing number of people providing guaranteed pay to improve retention,” Klemp says, citing improvement in driver turnover rate at small fleets as evidence. “Guaranteed pay improves turnover and is not expensive, if you do it right,” he says.
Klemp spoke Feb. 26 in a conference call with investors and reporters in an update on driver pay, hosted by Stifel Transportation and Research Group.
Though driver pay increases often are cited as the key component for improving driver retention, Klemp says evolving compensation packages — not necessarily pay increases, per se — are becoming more widely used as retention tools. He pointed to hourly pay for truckers and incentive-based pay as growth areas. Incentive pay, he said, “is a catalyst not only for higher wages, but for cost reduction. Safe drivers are a lot more cost efficient for carriers than one who has an average or less than average safety record,” he said.
Moreover, he says, fleets are shooting themselves in the foot financially if they can’t shore up their turnover rate. “I can’t come up with a model that comes up with driver turnover costing less than $5,000 a driver,” he says.
Klemp’s colleage, Leah Shaver, says fleets need to embrace those costs at a core level. “Everybody [should] know what turnover costs,” she said. “Shippers, employees — everyone needs to know how vital a driver is and focus on retention.”
Shaver said the industry needs to focus on drawing more women into truck driver jobs, potentially even truckers’ spouses, and make trucking an aspirational career for children.
The 30-year decline of driver wages
Klemp noted in his presentation that trucker pay has seen a dramatic drop in the last 30 years relative to inflation.
Annual driver pay averaged $38,618 in 1980, he said, which, if adjusted to 2015 dollars, would be north of $110,000 a year.
Klemp also presented a chart that overlaid driver turnover rates with average driver pay at three fleets, one for-hire and two private.
Trucker pay at the for-hire fleet averages $54,000, and the fleet has a 100 percent turnover rate, per Klemp’s chart.
The two private fleets, which have more highly paid drivers, posted a driver turnover rate of 14 percent each. “The difference is huge,” Klemp noted. One of the private fleets pay drivers on average $66,00 a year. The other pays its drivers an average of $82,000.
Owner-operator and company driver pay has climbed since 2013, bucking the overall U.S. trend of declining household income in the same span, Klemp said.
The looming regulatory snare
Although carriers have trouble finding and keeping drivers now, the industry may be “at the lull before the storm,” Klemp said, effectively issuing a warning about the potentially major impact that coming federal regulations may have on trucking. “The big issue is: How many drivers are going to wash out just through regulations?” Klemp asked. “We know we’ve got a bunch of them retiring, but we don’t know what [the] regulations will do to productivity.”
Klemp cited three key regulations yet to take effect that could cut driver and fleet productivity by as much as 15 percent.
An electronic logging device mandate, set to take effect in December 2017, could reduce productivity by as much as 5 percent, he said. A speed limiter mandate, likely to take effect after the ELD mandate, could cut capacity by another 3 to 5 percent.
Efforts to make hair testing the standard method for drug testing truck operators will likely take a big toll on the driver pool too, Klemp said, potentially as much as 6 percent, given hair testing’s more effective than urine analysis at detecting substance use.