This story appears in the May 29 print edition of Transport Topics.
Truck driver pay was stagnant in the first quarter, marking anemic growth of a fraction of a percent, according to data from the National Transportation Institute.
For-hire fleets have been unable to offer raises because annual contract rates are flat in 2017. As a result, trucking executives don’t have additional income and must choose to either hold off on higher pay until rates improve or dip into their own profits.
Since the first quarter of 2016, the index rose less than a quarter- point in flatbed, refrigerated and dry van compared with gains of 3 to 6 points per year between 2012 and 2015.
“I’m stupefied on how to describe how flat the driver pay market is right now,” said Gordon Klemp, founder and president of the National Transportation Institute. “If this were a tabletop and you put water on it, the water wouldn’t move.”
Klemp said that the majority of the movement in the quarter was noncash incentives, such as additional paid time off.
“Until freight rates improve, there will be no meaningful changes in driver pay,” Klemp said.
Brian Kinsey, CEO of Brown Integrated Logistics, said that trucking companies sell shippers the driver’s time, and the best way to boost pay is to mandate shippers eliminate detention or pay higher penalties.
“The biggest issue is not the rate per mile but the two or three hours it takes to get loaded or unloaded. Ideally, the freight would be preloaded and drop and hook at the other end,” he said. “If the shipper cleans up his act and gets you out quicker, you can be more productive. Instead of raising driver pay, you can achieve the same goal and wash away the ELD effect, so everyone benefits.”
The Lithonia, Ga.-based dry-van carrier ranks No. 90 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
“The cost of everything is going up: Trucks are more expensive, maintenance is getting more expensive, insurance is getting more expensive. All these things are getting more expensive, and there’s only 100 cents in every dollar. So you have a range that you can pay a driver, after which you’re no longer making any money,” Kinsey said.
Raider Express, a Fort Worth, Texas-based refrigerated carrier, increased pay 2 cents this year and improved its layoff and detention pay policies. However, the company was unable to pass the costs on to the shippers this year.
“This is why you’re seeing a lot of carriers with higher operating ratios and lower profit margins this year. Nobody wants to sacrifice margins, but the driver market is so cannibalistic right now that if we don’t increase pay and take care of our drivers, we’ll be out of business,” said Michael Eggleton Jr., vice president at Raider Express. “The construction and oil industries are also doing well right now, and since we’re in Texas, we get hit doubly. So for us, the pay hike was a no-brainer or we would’ve lost a lot of drivers.”
Grand Island Express, a fleet with 130 trucks, also ate into margins to raise pay.
“The continued increases have had an impact on our bottom line, but we feel keeping the trucks seated is a top priority if we’re to be in a good position when the market does improve later this year,” said Andrew Winkler, vice president of operations for the Grand Island, Neb.-based company.
Tom Stephens, executive vice president at Paschall Truck Lines Inc., agreed that with a booming construction market, trucking companies need to keep pace with driver pay.
The Murray, Ky.-based dry-van carrier ranks No. 81 on the for-hire TT100.
“You’ve got to look for ways to reduce expenses away from drivers’ wages. You address what you can control and take some of those savings and give it to the drivers because they’re No. 1 to us. You have to make the job here as pleasant as possible to keep them in this market,” Stephens said.
Flatbed group Daseke Inc. will be rewarding drivers through grants of publicly traded shares starting in June, tying pay with the carrier’s overall success. Paschall Truck Lines also offers an employee stock-ownership plan.
Private fleets also are finding outside-the-box ways to compensate drivers, offering solutions that won’t hurt the bottom line, said consultant Beth Carroll, managing principal of the Prosperio Group. She said that private carriers are using performance-based bonuses, rewarding drivers for behavior that will increase revenue and yield.
“They are looking at things that drivers have some control over, such as a good on-time percentage and few cases of overage, shortage and damage. Some are getting into fuel-usage metrics, if you can measure it, such as avoiding hard breaking or sudden acceleration,” Carroll said. “It might not be a lot of money, maybe $4,000 per year. But if the carrier currently does $1,000, then quadrupling is a big uptick in the amount of money going to pay for performance.”