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Counting Your Blessings

by Jim Park
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The Yanks have just foisted a new and very confusing hours-of-service plan on us, and your pay cheque could soon become much more of an issue than ever before. Chances are good that you'll see a reduction in earning potential because of the new rules, and soon the need to adjust your pay scheme will become obvious.

Back in December, several large American carriers announced pay hikes for drivers and owner-ops of three to five cents per mile, and more. Many announced increases in non-driving pay, such as loading and unloading fees, and even border-crossing surcharges. Contract Freighters Inc. of Joplin, Mo. announced a three-cent per mile across the board increase for owner-operators as well as drivers with at least one-year's experience.

Interesting Times

How are the new American hours-of-service rules going to affect your pay cheque? Every situation will be different and dependent on the potential for delay while en route. The long-haulers may see a slight advantage in the one-hour per day increase in driving time, but drivers who make multiple pick-ups and drops, or who experience delays at borders might be singing a different tune.

Here's what may happen in a hypothetical trip from Oshawa, Ont. to Joliet, Ill. It's 554 miles:

The driver begins work in Oshawa at 3:00 a.m. with a hook-up and pre-trip. There's a short nap at West Lorne, Ont., then a three-hour stop at customs in Detroit. The first drop occurs at Jackson, Mich. at 12:45, and takes 1.25 hours. The driver stops for a 30-minute dinner break at Gary, In. at 5:00, then resumes driving at 5:30, arriving at Joliet at 6:30. Although he logged 9.25 hours driving and 2.25 hours on duty, not driving, the cumulative length of the workday (log-on to log-off) is 16.50 hours.

Now take the same trip as above, but under the new rules. Note: 14 hours after beginning work (3:00 a.m.), the driver can no longer drive. As of 5:00 p.m., he would be forced to bunk down at Gary, In. for 10 hours, and could not resume the trip until 3:00 a.m. the following day.

Once the driver logs on to make the delivery at Joliet, the clock is ticking. The next move, a repositioning move to reload, will need to happen almost immediately after emptying out. If there are no delays finding a load, traveling to the pick-up point, and reloading, the driver could make it back to Canada before 5:00 p.m. when the clock runs out. Otherwise, he'll be forced into the bunk again, 14 hours after coming on duty to make the delivery in Joliet.

"This unprecedented pay increase is one way CFI intends to ensure that its drivers are financially protected from the impact of the ...new hours-of-service regulations that become effective Jan. 4, 2004," said CFI's chairman and CEO, Glenn Brown. "This is the most aggressive driver pay increase in CFI's 52-year history and we believe it will ensure that CFI will continue to retain and attract the safest and most professional drivers in the trucking industry."

So, what might you need in terms of an increase to level the playing field, and how will you make sense of it all at the job interview? Here's a guide to help sort the pie-in-the-sky claims from real money-in-the-bank pay packages.

Sorting out and comparing carrier pay packages has never been easy. It's quite amazing how fast 32 cents a mile can turn into 52 cents a mile - and vice versa. When you see a recruiting ad offering 42 cents, can you take it at face value? How about an ad that offers 35 cents plus bonuses? What will it all add up to at the end of the week? Which is really the better deal? You'll need to do a bit of digging to find out, but the extra work can pay off on payday.

Forgetting the new rules for just a moment, let's look at the base pay portion of a package. The ad might offer 45 cents a mile, but ask the recruiter what the base pay is. Usually the base will be lower, and often based on experience and type of equipment. For the sake of argument, let's start with a base of 35 cents a mile.

In a 2500-mile week you'll earn $875, before taxes and deductions. Now find out what sort of non-driving pay is offered, such as pick-ups and drops, waiting time, border crossing, trip and roadside inspection fees, trailer drop fees, etc.

Richard Cripps, a Toronto-based company driver at XTL Transport, says his compensation package can be a bit difficult to figure out, but it all adds up at week's end. He says his base rate is 32 cents, but he's paid $10 every time the truck stops; $10/hour to wait on top of the $10 stop fee; $25 for border crossing; $25 for DOT inspections; or $50 plus a meal voucher for DOT inspections he passes. He's paid $10 for every trailer he drops at a customer's door, and he gets bonuses of between two and four cents for mileage over 2500 per week or 10,000 per month.

"When you divide my gross pay by the miles I run, it usually works out to between 47¢ and 53 a mile," he says. "And I can make 40 bucks an hour just shunting trailers around. The only catch is that I have to log all the time properly."

And with the money in place to do it, logging properly actually pays off in Cripps' case.

It pays to know what the carrier's business is before you sign-on: don't expect drop pay from a carrier that runs pin-to-pin.

Ask the recruiter what kind of work the carrier does, and what you can expect in terms of drops, border crossings, delay time, etc., and ask what other drivers at the carrier earn for their work. You may find the carrier pays only for the second and subsequent pick-up or delivery, and if most of the loads are single-pick and single-drop, you won't see any great advantage there.

Even if you only make two paid drops per week at a rate of $25 per, you'll gross an extra $2500 per year, or about 2.5 cents a mile.

Creativity Pays
Many carriers offer incentives and bonuses for good fuel mileage, high weekly or monthly mileage, or safety and compliance performance. Ask yourself if they're achievable. Can you make the mileage bonuses while running legally, or making all the picks and drops? Must you sleep with the truck shut off in winter, or when stopped at a traffic light to make the fuel bonus? If you scratch a fender is the safety bonus forfeited? What are the thresholds of tolerance on compliance issues? There are times when 'adjustments' often need to be made. If so, will making those adjustments compromise the bonus?

Other non-driving extras could include a personal benefit plan, telephone calling cards, a power wash at the terminal for owner-ops' truck washes, parts and fuel at discount prices, etc. Any extra products or services that can be translated into a cash equivalent should be quantified as part of the pay package.

If, for example, you claim $2000 in prescription drugs, dental services, or vision care from the benefit plan, that could be said to be worth about 2 cents a mile.

Some fleets offer year-end profit-sharing plans which, depending on the financial success of the operation, could be worth several cents per mile as well.

Amidst the recent round of driver wage increases recently announced in the U.S. was this little gem offered by Little Rock, Ark.-based flatbed carrier Maverick Transportation. In addition to a few cents per mile more to cover the HOS-related stress, they plan to offer a per-diem pay option of 8 cents a mile, which would amount to $40 on a 500-mile day. It could be read as a meal allowance, or a daily tax-free allowance for routine travel expenses. Driver pay would be adjusted downward, and the per diem offered in lieu of the higher mileage rate. Maverick's VP-finance, Debbie Mitchell, says "The option will reduce the driver's taxable wage base so they ultimately pay less in taxes."

Defining the eight-cent payment as a per diem rather than as mileage pay changes the tax implications for the carrier and the driver (see 'Working the Tax Angles', highwaySTAR, May 2001, or read the story on our website: www.highwaystarmagazine. Look under the 'Meal Tax' banner).

Here's how some of the various paid extras can add up to a mitt full of dough, if you play your cards right. Assume annual mileage of 110,000 miles:

Base mileage rate: 0.35 = $38,500
Picks and drops: 4/week @ $25 X 50 weeks = $5000
Two-cent safety bonus: $2200
Two-cent fuel bonus: $2200
Waiting time: $10/hr X 10 hrs/wk = $5000
Layover: $100/day x 10 days = $1000
Trailer spotting: 20 @ $10 per = $2000

Paid extras total = $17,400
Yearly earnings = $73,300, or 66 cents/mile!

You won't often see that kind of money all in one place, but you can see how fast the extras add up. When talking to a recruiter, ask about all the value-added pay schemes and do your own math. You'll soon be able to make a better carrier-to-carrier comparison as you're making your phone calls. Don't just hang-up after you hear the mileage rate, give the recruiter time to explain the fine print.

The New Order
Because the new American HOS rules don't allow a driver to log waiting and non-driving time as off-duty, some fleet managers are bracing for what may be the most critical recruiting and retention hurdle it has ever faced.

Scott Arves, president of the transport sector of Schneider National, says the new HOS rule represents "the biggest change since deregulation. It will have ramifications on driver productivity, driver work life, how we pay drivers, how we price freight, and lastly, shipper/consignee behavior."

And layered on top of the challenges arising from adapting to the new HOS rules, J. Kirk Thompson, president and CEO of J.B. Hunt Transportation, says the driver shortage will continue to plague the industry. "While driver wage increases are necessary they will just maintain the status quo. [Carriers] who fall behind in pay will likely fall behind in driver supply. A significant increase in pay, say to [US] $55-$65 thousand, will be required to attract new drivers into the industry."

Or, as Barry Montague, vice-president of the Ontario Trucking Association, put it to a group of shippers at a recent gathering of the Canadian Industrial Transportation Association (CITA), "They're truck drivers, not truck waiters. They want to be paid to drive, and now they're going to want to be paid for the driving they don't do," he said. "This issue can't be resolved on drivers' backs. We [carriers] will certainly feel upward wage pressure, possibly as high as 25% over the next three years."

While it might take weeks or even months to assess the real impact of the new rules on carrier and driver earnings, there are two things almost everyone is sure of: it will cost money, and the shippers are going to have to pay.

Regaining Lost Ground
Will increases along the lines the American carriers are proposing be enough to offset the losses? During a December on-line chat session about HOS, hosted by Transport Topics magazine, Schneider's Scott Arves noted that shippers seem to be aware that a rate increase is in the wind, but so far few carriers, including Schneider, have been able pin it down precisely.

"Our detailed modeling varies widely [from customer to customer] due to their freight characteristics and their ability to deploy best practices," he said. "We have seen cost increases [in the modeling] as low as 2% and as high as 19%."

Certainly a few cents per mile will help, but fleets and drivers will need to look for ways to seek compensation for lost productivity, either though higher rates, more pay for non-driving activities, or an overhaul of the way freight is picked up, transported, and delivered. That could mean fewer live-loading situations, more flexible appointment times, less driver handling of the freight, and more attention to loading area inefficiencies; all intended to get the driver back on the road as quickly as possible.

In Montague's presentation to the CITA, he stressed that drivers could even become the mitigating factor in a carrier's willingness to haul certain freight.

"Shippers who have bad reputations won't be able to get drivers," he said. "The drivers are going to migrate to carriers who don't have trouble with their shippers."

Teamwork
Carriers are just as concerned with productivity as drivers, faced with the onslaught of the new rules. Increasing the use of team drivers is another possibility that's being discussed, but team drivers are getting scarce too. According to Scott Johnston, president of Saskatoon-based Yanke Group, the pool of new team drivers just doesn't exist. Johnston knows a thing or two about teams: his company employs 125 of them and presently has openings for 40 more.

"We can't find one qualified guy to drive a single truck, let alone two," he says. "There are fewer teams today than there were even five years ago. If anyone feels there are a substantial [number] of drivers prepared to team up, they're definitely fooled," he says.

Johnston predicts the industry is about to see many drivers heading for the doors, mostly because they're getting older and rapidly approaching retirement. But he warns that increased regulatory activity and the probable decline in earnings could hasten the exodus.

His solution: pay drivers a salary or otherwise compensate them for waiting time, and pass the cost on to the customer.

"Nobody in the trucking industry is going to be able to cross-subsidize or absorb these costs alone and survive," he says. "Even the little guy who isn't disciplined enough or doesn't have the capacity to take on that approach will lose his operators to other industries or to carriers that [will] pay the waiting time."

The next few weeks and months will be a struggle as trucking, manufacturers, drivers, enforcement, and everyone else come to terms with a set of rules that could be the most dramatic thing to happen since deregulation. Drivers can play a role in determining the solution, but it'll take patience and understanding in the interim. Drivers who keep an accurate log will be doing themselves a favor in the long run by revealing the impact of the changes. When the real picture becomes evident, real solutions can be arrived at.

It'll require co-operation - a little give and take - but managed properly, there are substantial gains to be had. Driver pay should, at the very least, stay the same on a weekly basis. How we achieve those gains against a backdrop of lessened productivity remains to be seen.

The words of an old Chinese proverb ring particularly true today, "May you live in interesting times." Well, we do.