Per-mile or percentage? The better choice isn’t always cut and dried.
Evaluating a carrier’s compensation package was once fairly simple if the carrier paid by the mile. Ask owner-operators already leased there about expected miles and multiply them by the mileage pay rate. Add or subtract accessorial and chargeback items and there’s your bottom line. In today’s pay landscape, however, even a mileage pay system can be complicated by rates that vary by length of haul.
But what about percentage pay? Many years ago, percentage programs for owner-operators prevailed. When deregulation came along in the 1980s, “everybody was on percentage when the rates dropped,” says Mike Bethea, Schneider National director of independent contractor operations. To help leased owner-operators stay in business and to help carriers get freight moved, many carriers shifted to straight mileage programs, says C.B. Mahaffey, J.B. Hunt vice president of operations for independent contractors.
An owner-operator running on percentage shares the brunt of market conditions with the carrier, earning less money in bad times. In today’s environment, however, with rates rising slowly but steadily, that can mean a built-in pay raise without running more miles.
If you’re accustomed to mileage pay, evaluating your earning potential under a percentage plan can be tricky. Hunt and Schneider are among carriers making the transition easier by offering parallel mileage and percentage programs. Having those options can provide a mileage safety net in bad times, enhance freedom of choice, and in some cases result in greater income on fewer miles.
Overdrive 2011 Trucker of the Year Dan Heister is in Boyd Bros.’ Independent Express program, which combines 70 percent of gross pay with self-dispatch capability. He carved out a Southeast-Midwest regional niche that, when the economy began to improve, resulted in a big boost in income in 2010. Typically he takes five loads a week and gets home to Erin, Tenn., most weekends. He says he’s netting upward of $80,000.
Boyd launched its Independent Express program eight years ago, before most other carriers who offer a choice between percentage and mileage did so. Director of Owner-Operator Support Steve Bredigkeit says it’s reserved for operators who either come to Boyd with their own truck or who finish payments in Boyd’s lease-purchase program (paid by the mile) and who want more control and opportunity.
“We were particularly concerned about wanting to create an incentive for lease-purchase guys,” he says. “What do they do when they pay off their truck? We wanted to do something dramatic.”
Owner-operator Steven South came to Boyd in 2009 after working elsewhere as a company driver. After five months running a company truck, he leased one from the carrier. He ran eight months on mileage pay. “I did good with it,” he says, but he wanted more.
South purchased a 2006 Freightliner Classic and leased it to Boyd, joining the IE program. “When I first started, I picked my own loads, and [IE Fleet Manager Jim Davis] let me do it about three to four weeks,” South says. Then Davis began giving him closer guidance on load selection.
Now South says he’s getting a better handle on what lanes are good and what will keep him profitable. He’s established a weekly revenue target of $5,500, largely from shorter hauls that get him home most weeks.
Parallel pay program
Schneider National owner-operator Sam Mobley, of Charlotte, N.C., also learned about load selection and his business preference after years of operating under mileage pay. Mobley, who owns a 2009 Western Star 4900 EX, was one of the Schneider contractors who supported the parallel percentage pay program for the company’s owner-operator fleet.