How should carriers be paid? In part, the answer to that question is based on the answer to the question of how drivers should be paid. When it comes to long haul shipments, drivers are paid mainly based on the distance they travel. Should driver pay instead based on the hours a trip takes to complete?
The Driver Shortage and Driver Pay
It is widely acknowledged that there is a driver shortage. The average age of a trucker in the U.S. is 56. The ELD and hours of service mandates have reduced the number of hours drivers can drive. Among the carriers with ELDs, a DAT survey reports that 67 percent said they drive fewer miles than they did before installing the devices. The economy is booming and there is an increased need for freight moves.
I believe there is not a driver shortage, there is a shortage of drivers willing to work for the prevailing wages. That issue can be addressed by raising driver pay. And this is happening. Wages are going up. The American Trucking Association, a trade group that represents fleet owners, said annual truck-driver salaries rose between 15 percent and 18 percent from 2013 to 2017.
Paying Drivers for the Work They Do
But you can also raise take home pay by fully paying drivers for the work they do. All of it. Some drivers are paid hourly. But in most cases, compensation is based on the miles driven.
Last year, USA Today published a series of articles documenting how “port trucking companies in California forced their drivers into debt, pressured them to work up to 20 hours a day and paid them pennies per hour.” One reason the pay was so low was that port drivers had to sit for hours waiting to get into the ports.
Drivers that do live loading and unloading, as opposed to drop and hooks, can also end up spending hours at a site waiting for warehouse personnel to do their job. The previously mentioned DAT survey reports that more than 77 percent of the carriers reported that their drivers are being detained for more than two hours on at least one out of five loads. The driver’s company can charge accessorial fees for unduly long load and unload times. But those fees often do not make their way down to the driver’s paycheck.
Finally, freight congestion is increasing. It should not surprise anyone that traffic slows near metropolitan areas. But accidents, road work, and bad weather can unexpectedly slow traffic anywhere at any time.
Historically, there were good reasons why carriers were reluctant to pay for hours driven. A driver paid hourly could say there was an accident, spend a few hours at a girlfriend’s apartment, and then get paid for hours that were not spent working.
We used to have to rely on EDI messages for visibility. EDI is not a real-time solution and can be gamed. But today, integration to smart phones or ELD/GPS devices provides robust real-time visibility. Descartes MacroPoint, 10-4 Systems, project44, and FourKites are the best-known solution providers in this area, but more and more solutions are hitting the market.
Complex Carrier Pricing Influences Driver Pay
While drivers are paid mainly based on the distance traveled, carriers’ charges are more complex. Carriers pricing can reflect the mode of transportation and type of equipment used, load weight, the density of the load (the two-dimensional or three-dimensional cube of the goods shipped), distance traveled, point of origin or destination, the types of goods shipped, and other things as well.
Even if carriers did pay drivers based on how many hours they work, they could still choose not to charge shippers based on distance traveled or other mechanisms. But it would certainly be simpler for a carrier if their charges to customers reflected the entire range of costs they are incurring.
So why aren’t carriers paying their drivers for the hours they work? According to Gregg Lanyard, the Director of Product Management at Manhattan Associates, there appears to be a trend to do just that.
ARC does an annual supplier selection guide for transportation management. I talked to Manhattan Associates about their solution. Manhattan enhanced the ability of their transportation management system to do shipment costings in their latest release. The enhancements include the ability to flexibly support a wide variety of rate structures; it allows users to condition and combine rates based on a flexible set of rules. For example, “for every eight hours of a trip, charge 75 dollars; if the shipment distance is less than 150 miles, charge X. If it is more than 150 miles, charge Y. If the shipment value is more than $1 million, add a surcharge.”
But, Mr. Lanyard says Manhattan was hearing more and more users asking for duration-based rates, a rate charged based on the elapsed time of the shipment. Duration-based fees can be broken into the total time, handling time, or drive time. “We built it” (this new functionality) “because we heard about the need for this so often. Particularly, from European prospects and fleet operators. It is becoming a wide spread requirement.”
Just because carriers want to charge for the duration of a trip, does not mean their drivers will be compensated in the same way. But I hope they are. It would certainly be fairer. And it could help to make this occupation more appealing.
