Many truckers are paid by the mile. However you're paid, I'd bet you are very familiar with the old phrase if the wheels aren’t turnin’, I’m not earnin’. As part of the big 2021 infrastructure package, Congress mandated a study to examine driver compensation and its possible impact on safety. The Federal Motor Carrier Safety Administration subsequently commissioned the Transportation Research Board (TRB) to conduct that study, examining numerous methods of driver compensation and the role they play in both safety and driver retention at trucking companies. In essence, the TRB will attempt to determine if there is a correlation between driver compensation and safety performance/retention.
Yet these are not particularly new notions. In fact, in a 2013 Congressional hearing, then-FMCSA Administrator Anne Ferro asserted just such a connection -- between compensation and safety. “Driver pay and extreme loading dock delays have a significant impact on a driver's ability to be efficient, professional, and safe,” she said in her prepared remarks. “In short, uncompensated delays force drivers to press legal and physical limits to capture that day's pay. The logistics industry gets this time free on the backs of drivers and the backs of small business. Uncompensated detention time needs your attention because what makes the job better often makes the job and the driver safer.”
Yet here it is 2023, and we are still waiting to hear what truckers already know.
[Related: FMCSA's new boss emphasized compensation, detention issues]
Though most company drivers I'd wager are paid by the mile, there are some companies that pay hourly, or offer guaranteed weekly salaries and hourly detention pay. As Todd Dills has made clear in Overdrive, much of the owner-operator world leased to companies today are paid in a percentage-of-the-load system. Whether paid by the mile or percentage, all operators as a general rule are not directly compensated for pre- or post-trip inspection time, fueling time, drop-and-hook time, often the first couple hours sitting at a dock waiting, or time lost sitting in traffic jams.
I include percentage-paid drivers in this group. Unless the pay package explicitly includes these items, operators running under percentage schemes still think principally about miles when analyzing how much they are earning. (It’s a must to know what the truck is earning to compare that to what it costs per-mile to run the truck, necessary knowledge for tracking costs for more effective negotiations.)
The Fair Labor Standards Act exempts trucking companies from paying overtime, or time and a half after any 40 hours worked weekly. If you are over-the-road like me and only take one weekend a month at home, what might you be missing given that exemption? Assuming 60-70 hours worked in a week, that’d be 980-1,479 hours of time-and-a-half pay.
Although miles-pay rates for company operators and others have increased since COVID came into play three years ago, generally speaking, in my view trucking has gone off the rails in efforts to recruit drivers or filch them from other companies. In some cases, operators with one year or less experience are being paid the same rates as those who have 5, 10, even 20 years of experience and a proven safety record. Though some companies offer sign-on bonuses and referral bonus, those bonuses can drag out over months, sometimes years, before being fully paid. And, generally, who out here really has time to actively recruit other drivers? We share an opinion about a company if asked, but referral bonuses are not something most actively seek, I’d wager.
I think most of us appreciate bonuses for safety or fuel conservation, yet those can be hard to find in my experience.
If the FMCSA truly cared about safety, in my view, regulators would make considerable efforts to incentivize or force change from the pay-per-mile practice to hourly schemes with overtime, as well as make safe parking a top priority.
[Related: Forget speed limiters: Safe parking, highway infrastructure should be top priority]
It seems simple common sense that if drivers are paid by the hour, they have no need to rush from point A to point B. Take away this need to rush, and aggressive driving would drop, which would mean far fewer rear-end accidents, accidental side swipes or lane-changing accidents. Better fuel economy, too. At the same time, we would see improved health outcomes for drivers with a reduction of stress levels.
Simply put, I feel like a broad shift to hourly pay structures would lift the entire industry. If companies are forced to pay by the hour and pay overtime, I predict an increase in rates to compensate.
How could an hourly rate be structured? Say a driver is currently paid .50 cents a mile and averages 60 mph. An hourly wage to fully take that earning potential into account would be $30/hour. With overtime, of course, that’s $45 an hour.
If you’re a percentage-paid driver or owner, convert percentage compensation to a mileage rate and go from there.
As an example, assume an owner-operator compensated at 80% of $3,500 for a 1,400-mile trip. $2/mile at 60 mph = $120 an hour of revenue.
[Related: Know the value of your time to assess true profit]
Owner-operators’ expenses come out of that, of course, and depending on how an owner accounts for their own pay -- or if they have driver employees to pay -- any overtime considerations need to be accounted for in that hourly rate, too.
Can pay reform improve safety? I believe so. Until hourly pay overtakes the currently predominant systems or is actually required, though, we’ll never know the real answer, no matter how many studies are completed.
While it may be a painful step for some, I feel like it’s a necessary one toward meaningful reform, and a way to seed motivation for the next generation of truckers.
Other possibilities in that regard: Further return to a hub-and-spoke freight model (not as difficult as it may seem), creating more local positions and growing the LTL side of the industry. This would also open the door for more women in the business, and likely improve quality of life broadly. The model of home daily/still making decent money would appeal to younger families and individuals who don’t want to miss out on home time. Of course, these are just my thoughts, and you are welcome to disagree!
[Related: Time-based compensation could improve fairness, reduce detention]
Per-diem reimbursements -- a final thought
In the Trump-era Tax Cuts and Jobs Act, company drivers lost the ability to the deduct the daily federal per-diem reimbursement rate from their taxable wages. While owner-operators can still deduct $69 per day away from home (well, 80% of $69), company drivers no longer automatically get that benefit. Trucking companies can, however, offer the per-diem reimbursement as a pre-tax element of a driver’s pay package to compensate them for time away from home without adding to drivers’ tax liability. (The companies benefit, too, in that they don’t pay the employer’s share of Social Security and Medicare taxes on that money.) If a carrier doesn’t offer pre-tax per-diem, company drivers get no benefit to save on taxes.
Personally, I negotiated a 6 cents/mile per-diem reimbursement with my company, which means I average about $30/day for per-diem. Even when I worked heavy highway construction I was paid per-diem for every day I was away from home. I think it should be mandatory for all over-the-road truckers sacrificing time with their families to work. One of my friends, who passed a few years back, voiced this thought, too. He also felt it was only right that drivers who have to take a 34-hour restart on the road instead of at home with families should be paid an hourly wage for that time. I agree with that, especially if that driver’s not paid any per-diem.
Even if they are, that wouldn’t meet mandatory minimum wage requirements if you consider all of that time as on the clock for the company, as it were. Two days of per-diem at $138 breaks down to about $4.06 per restart hour to sit and wait away from families.
[Related: Clark Transfer: Minimum guaranteed revenue for leased owners gaining traction]