Driver Compensation – The Devil is in the Details

Over the past few years, one of the defining challenges in the freight transportation industry has been a shortage of qualified drivers. In April of this year, I posted a blog (https://www.dantranscon.com/index.php/blog/entry/what-are-trucking-companies-doing-to-solve-the-driver-shortage ) that examined the range of compensation tools and benefits that are being offered to recruit and retain drivers. In another blog (https://www.dantranscon.com/index.php/blog/entry/trying-to-solve-the-driver-shortage-try-paying-them-a-salary ), I suggested that some trucking companies should consider paying, at least some of their drivers, an hourly rate or salary. The following are some additional compensation schemes that carriers are employing and a few thoughts on the effectiveness of these programs.

Multiple Pay Increases in the same year

To stay competitive, some carriers are providing their drivers with multiple pay increases to ensure they stay on par with the competition.

Payment for Practical Miles

Some carriers are paying drivers on practical route miles. The PC*Miler practical miles pay program compensates drivers according to the driving routes and distances they are most likely to take. PC*Miler practical route miles tend to be 8% higher than household goods miles.

Monthly Mileage Bonuses

Another compensation approach is to pay drivers a monthly mileage bonus of 1 cent per mile for every mile over a designated number of miles (i.e. 11,000 miles).

Fuel Performance Bonus

Carriers are paying a semiannual fuel/performance bonus of .5 cents per mile based on their energy optimization.

Safety Bonus

Drivers with a strong safety record can earn an annual bonus (i.e. .5 cent per mile) at the end of the year.

Student Driver Compensation Plan

Bringing new entrants into the driving profession is critical to the trucking industry. New driver compensation is essential to recruitment and retention. Pay raises for student drivers and pay for experience progression keeps good performers on a positive compensation trajectory.

Points Programs

In one company, drivers could enter a sweepstakes by either swiping their rewards card at Love’s in September, or by visiting a Love’s location with a touchscreen and following the steps on the 1 Million My Love Rewards points giveaway section. At the end of the month, all card swipes and touchscreen completions from Sept. 1-30 counted as individual entries. Thousands of professional drivers were eligible to win 10,000 My Love Reward points ($100 retail value), and one driver could win 1 million points ($10,000 retail value), from Love’s Travel Stops as part of a company’s National Truck Driver Appreciation Week celebration.

Stock Ownership

Some companies offer an Employee Stock Ownership Plan (ESOP). After 1 year, employees are eligible to be vested in the program.

Teaming Bonuses

Some truckload carriers have introduced teaming bonuses. In one case, a $40,000 Teaming Bonus is structured to pay $2,000 in bonus money to each driving team that eclipses 60,000 paid miles together, until the team reaches a total $40,000 in bonus money. Another truckload carrier offers a similar program, but the bonus level is $50,000, an attempt to make their program slightly more attractive.

Some thoughts on the various Driver Compensation Programs

While these incentive programs sound appealing, the devil is in the details. If you dig into the details of the teaming program, you find out that it will take five years to achieve the full value of the bonus, if the drivers are willing to stay with the company long enough to reach the threshold. Like many driver incentive programs in the industry, it requires drivers to make an extraordinary effort to achieve them.

A spokesperson for a major truckload carrier noted that the average team driver drives 210,000 miles annually. To achieve the full bonus, they would need to stay in the seat for 70 months. Even more challenging is the fact that the two members of the driver team must stay together throughout the bonus period. This may work for married couples, but not necessarily for other pairings. The fact is these bonuses are unlikely to be paid out.

Other sign-on and incentive bonuses are of questionable value and often ineffective when it comes to driver retention and turnover. They may not attract the quality driver that companies are looking for. Drivers that are attracted by a sign-on bonus are most likely to jump to the next sign-on bonus once the first one is fulfilled. Drivers trying to make good career decisions need to do their due diligence, speak with drivers in other companies, evaluate how the companies are run, and find out if the incentive programs are attainable. Carriers seeking to hire good drivers should think through how their drivers are being managed and carefully and objectively assess the value of their compensation programs. If they are not attracting and retaining quality people and reducing turnover, it is probably time for a change.

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