Forward Air Institutes Destination-Based Compensation Increase
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Forward Air Corp. is pursuing a new destination-based compensation increase for its fleet partners within its LTL and truckload divisions, the company announced June 8.
The model provides additional compensation to team and solo owner-operators based on the destination of their load. The plan comes after the asset-light freight and logistics company implemented its largest-ever rate increase for leased capacity providers in March.
“As evidenced by this being our fifth rate action in four years, we are constantly evaluating the environment around us and ensuring we continue to provide our fleet partners both the operational excellence they deserve, but also the opportunity to continue to exceed those around us from an annual revenue perspective,” Chief People Officer Kyle Mitchin told Transport Topics.
The rate increases are broken into three main tiers split between team and solo owner-operators. Team owner-operators going to a destination in the A Band can expect an additional 25 cents per mile. Those going to B Band destinations will get an additional 15 cents. C Band destinations will bring them 5 cents more.
Solo owner-operators going to A Band destinations will get an additional 12.5 cents. Those going to B Band destinations will get an additional 7.5 cents, and solo owner-operators going to C Band destinations will get an additional 2.5 cents.
The Northeast, for instance, is where the company hears about a number of challenges in terms of fleet partners trying to maintain levels of acceptable profitability. This is due to congestion, crowded fuel stops, higher cost of supplies and maintenance, limited parking and frequent road construction.
Because of that, a lot of Northeast destinations are A Band.
“What makes this destination-based compensation different is that we went into this evaluation merely days after announcing our largest ever increase to our fleet,” Vice President of Talent Ryan Gilliam told TT. “Not as a result of the carrier environment around us, but as an analysis of something we truly knew was an industrywide issue that our fleet partners would benefit greatly from us solving.
“I think you see a lot of smoke and mirrors in today’s fleet attraction environment. This simply isn’t one of those — its real.”
Gilliam added the company has at least 50 team runs a week from Los Angeles to the Northeast. Anywhere from 10 to 15 of those teams go 2,822 miles one way from Los Angeles International Airport to John F. Kennedy International in New York City. The destination-based compensation means they would be getting an additional $705 for that load alone.
“We are excited to make this adjustment, as it helps level-set supply and demand,” Tim Parker, senior vice president of linehaul logistics, said in a statement. “Some areas of the country are less attractive for drivers due to factors such as urban road congestion, crowded fuel stops, limited parking or frequent road construction. These factors can lead to reduced utilization and higher equipment maintenance costs. The destination-based compensation increase will help offset those additional costs.”
Conversion Interactive Agency is a recruiting firm that has long been advising carriers to deploy innovative ways to recruit and retain drivers. The agency has conducted numerous surveys over the past year that showed that while standard pay increases help, more needs to be done.
“It isn’t surprising that fleets are incentivizing drivers with customized compensation packages for specific divisions,” Priscilla Peters, Conversion Interactive vice president of marketing and training, told TT. “I think we’re going to see more and more of this as carriers get creative with the offerings they’re providing drivers. Fleets are recognizing that they’re having to adjust their business models to fit driver needs.”
Peters added these changes don’t just come into play when it comes to compensation. She expects more shifts in how fleets schedule home time, changes their culture and how they package their company benefits.
“I think this is a smart move on Forward Air’s part as it gives them an opportunity to say they have raised pay again in a very competitive market, especially for owner-operators,” Scott Dismuke, director of operations for The Professional Driver Agency, told TT. “While it’s not entirely a new concept to pay drivers to go to certain areas, particularly the Northeast, I do think this model compensates drivers for lost time and earnings potential due to crowded roads and longer transit times. When it comes to compensation, the trucking industry as a whole is thinking outside of the box, which is a good thing.”
Forward Air ranks No. 29 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 1 on the Air/Expedited sector list.
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