Regulations, Market Changes Require Fleets to Review How They Pay Drivers

December 8, 2017 7:10 pm Published by Leave your thoughts

With all of the changes in engine technology, telematics and state and federal regulations, having a fleet management program that keeps up can be critical for successful fleet management. Now, there is another mix in the equation—the impact of electronic logging devices (ELDs), which will be mandated this month.  “While many of our customers already utilize ELDs in their operations, the overall impact to the industry is what now comes into play,” said Jerry Robertson, the chief technology officer and co-founder of Bolt System, a Nashville, Tennessee-based provider of cloud-based fleet management software.

“There is already a well-documented driver shortage in our industry, and ATA predicts that shortage to increase by 89,000 drivers per year over the next 10 years,” Robertson said. “Now factor in the impact of ELDs. There will certainly be a fall out with some owner-operators and small carriers hanging up their keys. This only escalates the driver shortage problem.”

While fewer drivers will be a reality, so too will there be fewer logged miles. And don’t forget the ever-increasing problem with traffic congestion and our infrastructure. It all adds to the crux of the problem for trucking. “You’re not making money if your trucks aren’t moving—drivers aren’t either,” said Robertson. “So, you’re both looking at a pay cut unless new efficiencies (less non-paid detention time from shippers for example) come to the forefront to offset lost miles. And with a driver shortage, drivers can’t afford the legacy ‘pay-by-mile’ if they’re running fewer clicks. So the question begs: how do fleets, and therefore drivers, increase revenue?”

One trend Robertson is seeing is activity-based pay, especially with dedicated carriers (for-hire is slowly catching on). “We saw this starting in 2007 with a few progressive customers,” he said. “Last year alone, the number of accounts that implemented activity-based pay doubled, and we expect that to only increase until it’s the norm, not the exception. It’s the fairest way to get paid, and the fairest way to pay drivers.”

So, what exactly is activity-based pay? “Literally dozens of activities can easily be implemented and set up for tracking in a fleet management system that can identify and track this pay structure,” Robertson explained. “As just one example, we have a customer whose regional operation delivers up to 200 different types of products from its mills to its customers. With a lot of moving parts in its operation, our customer pays its drivers in ‘segments,’ with information determining the pay type. The company accomplished this by utilizing geo-fencing at mills, allowing it to breakout pay per mile, on longer trips for example, or to assign a flat load rate to shorter segments. Plus, the company assigns a pay structure for loading, including a self-load fee at the mill. The company’s fleet management system tracks deliveries by time of day so that when a shipment leaves after midnight on a Friday, a multiplier can kick in to assign additional value. Creative, effective and the drivers love it. They feel they’re earning their money, and their pay is accurate.”

“We have another customer who bills and breaks out pay by ‘peddle miles’ (shorter routes with multiple deliveries),” Robertson continued. “Translated, that means for runs under 30 miles, for example, mileage pay is 20% higher than if the driver was going on a longer trip. The point is: your costs and your pay to drivers differ depending upon the delivery route. One-size-fits-all pay doesn’t cut it anymore.”

If a fleet operates in California, it already knows about activity-based pay. In late 2015, California changed how workers are compensated for non-productive time, redefining piece-rate compensation. In the trucking industry, this would be the time drivers spend waiting to be loaded or unloaded at a dock, filling out driver logs, conducting pre- and post-trip inspections or taking rest breaks. This rule requires trucking companies to compensate drivers for the time they spend on these activities and others. It also determines the amount of compensation for each hour of non-driving time. Other than for rest and recovery periods, compensation must be calculated at an hourly rate of no less than the applicable minimum wage. A more sophisticated method must be used to calculate the compensation rate for a rest or recovery period.

“Another reason fleets should look at activity-based pay is the ever-increasing need for just-in-time parts deliveries at assembly plants and the prevalence of online shopping—a.k.a. the advent of free one-day or two-day shipping though services like Amazon Prime,” said Robertson. “Now, major shippers find themselves under enormous pressure to fulfill orders and complete shipments.”

In response, Robertson said carriers need greater visibility than ever into their fleet operations to ensure they’re doing everything they can to get products delivered as quickly as possible. “They need to know how long drivers must wait to get loaded or unloaded at distribution centers (and work with shippers to bill for that time accordingly). If they don’t, fleets could leave a fair amount of potential revenue from detention pay on the table,” he said.

“The bottom line is that you and your drivers need to be compensated for all of your work,” Robertson concluded. “By looking into activity-based pay, and adopting a fleet management system that allows you to identify and track different pay structures, you can obtain compensation that’s fair for your company, your drivers and your shippers.”

This article was contributed by SiefkesPetit Communications on behalf of Bolt System.

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This post was written by Telematics Talk Staff

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