In Search of Fair Pay

Driver pay is a game for which no one seems to know the rules, or one in which the rules are set on the fly. Asked how they go about setting a pay rate for either company drivers or owner-ops, fleet owners and managers typically reply, “Good question,” followed by a pause. A long one.

Enter Cerno Research, a Toronto firm that made its mark studying compensation and benefits in Canada’s manufacturing sector. Two years ago, the company turned its attention to trucking, producing a report on the Ontario market. It expanded its survey for 2001, making it national in scope and adding more depth about how drivers and owner-operators are paid. The results-contained in four bound reports on hourly workers, drivers, administrative employees, and executives, and on a CD-ROM with additional, more customized comparisons across company size and trucking practices-give fleet managers new insight into their biggest operating cost: labor.

One of the most compelling things the study does is answer how pay rates are set for drivers. It seems that some sort of informal, almost incestuous arrangement exists among carriers within specific markets and regions. It’s not that there’s collusion, perish the thought, rather that competitive pressures have led companies to raise the ante at more or less the same pace. And arrive at more or less the same level.

Fleets that haven’t met that challenge experience driver flight. How do you think a chip hauler would fare paying his drivers $42 an hour when the competition is up at $50? Not well, but that’s a real scenario being played out in that market in the West.

It’s no more comfortable if you’re leading the pack. “We took the initiative to kick our guys up to 50 cents a mile for teams,” says Jim McConnell, “and then everyone followed. Nobody moves unless they have to.” McConnell owns BLM Group in Kitchener, Ont., a 550-truck operation doing predominantly international truckload work. He stays close to the trenches: a former driver, McConnell still spends time working the dispatch desk. “You try to do good for your people, but every time you do, somebody always runs up to the door beside you,” McConnell says. “I think everybody’s at the limit right now.”

Paul Easson of Easson’s Transport in Berwick, N.S., disagrees. There’s no limit, he says, as long as companies can extract a higher freight rate from their customers. “That’s going to be the rule. You put customers on one side of the seesaw and drivers on the other. You move the drivers up a little bit until it gets out of balance, and then you pound the customers until it gets back in balance. You keep doing that bit by bit as time goes on.”

In the case of an established family company like Easson’s, levels and methods of pay simply evolve, in this case over the last 50 years. “We’ve gone from a percentage-based pay to a fixed amount per week, to a fixed amount per week plus picks and drops, to a mileage pay, and right now we’re at mileage plus bonuses plus pickups and drops,” Easson explains. “Every company is different. The amount of miles a driver’s going to get at my company is going to be less than he’d get at, say, a full-truckload one-pickup/one-drop company.

“More than likely, my rate per mile is going to have to be higher, otherwise no one will work for me. It’s like an elastic with the number of miles pulling on one end and the rate per mile pulling on the other. The centre of the elastic has to end up at relatively the same place for each company.”

Easson believes in the value of performance-based incentives, and so should his drivers, who can readily earn an extra $300 or $400 a month. “We’ve got every little concocted scheme you can imagine,” he says. “If they do anything right at all they should get a bonus of some kind.” One incentive pays drivers for “stuffing” more revenue on the trailer, which can be lucrative with multiple-shipment loads. They also get paid extra for pickups and drops, and receive a monthly bonus if they come in under idle-time targets. Drivers can add an extra couple cents a mile if they have no more than 5% of their driving time over 59 mph. On 100,000 miles, that’s $2000 a year, though most Easson drivers do 110,000 or 115,000 miles, so it doesn’t take long for the bonuses to add up.

“We have not given any increase in pay over the last three or four years that wasn’t attached to some kind of performance,” Easson says. “I just increased the speed bonus by a cent a mile, for instance, so if the guy wants to have no more than 5% of the time over 59, he just made another $1100 a year.

“The guys who’ve been around here a long time, they never miss a month. But the new guys coming in, who have a choice, are hard to convince that they should earn that bonus,” he explains. “They think that if they go out and drive 2 or 3 mph faster they’re going to get more miles and offset the speed bonus. But it doesn’t work that way. It doesn’t matter how fast you drive, you’re still going to get the same number of miles because we have enough pickups and drops that the speed doesn’t make a difference.”

Joe Bogach, who runs Grimshaw Trucking, a unionized regional LTL carrier in Edmonton, doesn’t think pay is the central issue for attracting and retaining drivers. “It’s demographics,” he says.

Statistics Canada estimates that 13% of Canadian truck drivers are over 55 years old and only 5% of the current driving force is under 25-the highest and lowest figures respectively for any occupation in Canada. Younger people, Bogach explains, are too turned off by the travel demands of the job to be enticed by higher rates of pay.

His operation is somewhat insulated from the problem: Grimshaw drivers are rarely away from home more than 48 hours. Yet Bogach, who oversees 115 company drivers and 65 owner-operators, hedges his bets by treating his drivers well. “People want to feel they’re part of the business, that what they do makes a difference. So we listen to them. We change things if it’s beneficial. We try ideas that come from them. We really treat them as equals.”

That’s what Greg Swain likes to hear. Swain is a veteran driver and owner-operator who recently became a salaried driver at Suncor out of Toronto-with a pay package, benefits (including stock options), and working atmosphere that lead him to see it as a dream job. He’s paid for 80 hours every two weeks with a four-on/four-off shift that alternates between days and nights-with a premium paid for nights. Anything beyond that-working on statutory holidays, for instance-and Swain gets time and a half.

“Why should drivers be treated any different than the office personnel?” he asks. “But the most important thing, more so than money or respect, is a proper balance between work and life,” Swain says, echoing a refrain we hear often.

According TO Cerno studies that compare the number of truck drivers on the payroll at the beginning of the year and the number who exit and are hired throughout the year, Canadian trucking companies have an average 35.8% annual driver turnover rate. Nearly 10% of the companies surveyed experience turnover rates of more than 86.5%. That compares to an 11.8% national turnover rate among salaried employees generally. And the worst 10% of companies had salaried turnover rates above 26.2%.

One of the best rates in the country, on the other hand, is the less-than-1% company-driver turnover at SLH Transport, headquartered in Kingston, Ont. An enviable record, despite a complicated pay scheme that, jokes general manager Peter Bergin, drivers have trouble understanding. It involves “run rates,” meaning specific trips are carefully timed and measured by driver trainers and drivers working together, and then a dollar value is attached to it. And any given run, except for the shortest of them (which would be paid hourly), is computed by a combination of hourly and mileage rates. The run rate can be raised by adjusting either the hourly or the mileage portion. Owner-operators, who do international long-haul work, are paid strictly on mileage.

Aside from the fact that almost all SLH drivers are home every night, one reason for the low turnover rate is that Bergin won’t tolerate his uniformed drivers being delayed. If a given run is timed-and valued-at nine hours, for example, there will be leeway of maybe an hour on either side. Once it stretches beyond an hour, the driver knows he’ll get paid for it. But when he calls in to announce the problem, management will act.

“We phone the shipper on the spot,” Bergin explains. “Delay pay kicks in after an hour, so we’ll call ABC Co. and say, ‘Our driver’s been held up in your yard for an hour and we’re now starting to pay him. So now we want to charge you.’ The shipper might tell us to take a hike, but we do collect on a fair percentage. And we pay the driver whether we collect or not.”

Bergin isn’t in the business of collecting delay time, but he doesn’t want to be in the business of paying it, either. “We want the manager of the company to go down and talk to the dock workers,” he says. And if you throw a few $100 charges at them, Bergin adds, you’ll see someone walk down to the dock and yell a lot.

It’s one of the most telling statistics from the Cerno studies: drivers reach their maximum salary rate after just 2.59 years on average. That has implications for veterans and for their sense of value to the company, and for new hires who want to believe there’s a ladder to climb. If a rookie with just three years service can earn as much as the 23-year journeyman, there simply isn’t much of a ladder. Nor is there much in the way of bragging rights-or anything else-for the long-serving driver.

A sizeable 25.7% of Cerno’s survey respondents have no seniority increases at all, and only 10% of them have a salary cap of six years or more. There’s at least one reason for that: driver impatience.

“We had it [a salary cap] at five years several years ago,” says Paul Easson. “But what we were finding was that we’d get a new guy on, he’d stay for a year, and then he’d leave for somewhere else because other people were bumping them up quicker than we were. So now it takes about two years to get to the top of the pay scale for company drivers. And then after that the only thing that differentiates them is the amount of vacation time they get and the contributions that we make to their RRSP… After they’ve been here for five years we put 2% of their pay cheque into an RRSP, and after 10 years they get 4%.”

So how else do you reward the veteran for faithful service? Most fleets, including many with low turnover rates like SLH, offer no more than lapel pins after so many years. Vacation time too, but Cerno’s research shows it takes an awfully long time at most companies just to get to three weeks (three to five years), and it takes seven to 10 years to get four weeks at 77% of the fleets surveyed.

And of course, the seasoned driver gets to bid early for the best loads and the best routes. That’s by far the most common seniority bonus. In some cases, and we’ve heard of many in the last few years, he’ll get to spec his own premium tractor. This doesn’t appear to be a serious issue, certainly not amongst the fleet people we spoke to, but not even very much amongst drivers either.

As Greg Swain points out, most drivers wouldn’t want to be stuck in an office anyway, not unless there was a raise involved or they were just plain ready to say goodbye to the open road.

Drivers do, more or less uniformly, want more money. Beyond that, they want to be paid on time and accurately. That’s a huge and continuing issue for owner-operators, and we’re forever hearing complaints about mysterious deductions and bogus charges appearing on pay statements. “When you get your pay statement at some fleets,” one western owner-operator told us, “you must double-check every item for accuracy. And that’s one main reason why people leave some companies.”

That, every one of them would say, is a given. But, like this same fellow told us, they would also say that pay isn’t everything, that recognition and respect are also critically important.

Joe Bogach knows that well, and illustrates what he means with an anecdote. When one of his best owner-operators ran into family problems and was looking at a tough time keeping truck payments up for the next three years, he asked if Joe could help in any way. The response? Joe took the truck back, saying he didn’t want one of his people out there in a poor frame of mind while dealing with the public. Excessive generosity or common sense? The latter, we’d suggest.

“That kind of thing is real important when it comes to keeping people,” Bogach says. “The driver wanted a job working in the city, so we’ll put him there. It’s not like we’re losing him. But some companies won’t do that. They’ll say, you signed the lease, you’re stuck with it. And then they wonder why there’s a [driver] shortage.

“I just would hope that some of those other companies would start treating employees as employees and peers rather than slaves,” Bogach says. Fitting last words.