Driver pay increase set to take effect in January at Con-way Freight

Transportation and logistics services provider Con-way Inc. said this week that it is augmenting its pay package and structure for drivers at its less-than-truckload (LTL) unit Con-way Freight.

Company officials said that these planned changes, which will take effect on January 4, 2015, will provide for increases in current pay rates and reduce the time it takes for its nearly 15,000 drivers to reach top pay scale.

While financial specifics on the pay increase for drivers were not disclosed by Con-way, Stifel Nicolaus analyst David Ross commented in a research note that this initiative will cost Con-way roughly $60 million in 2015.

Con-way said these changes will increase driver “system wide while aligning all locations across the network to pay rates competitive for each geographic market.” And it added that in regards to the change in progression at the top scale, each of its locations will be aligned to a common schedule in which drivers will reach top scale at three years from date of hire, with all eligible drivers to be adjusted to the applicable new pay rate commensurate with service time, effective January 4.

This pay increase follows a similar effort undertaken by Con-way’s corporate sibling, Con-way Truckload, which took effect on September 7, with the company’s existing compensation programs, coupled with its new pay package, raising per-mile pay for new hire experienced drivers to 42.5 cents per mile. And based on reaching thresholds for continuous mileage/continuous employment, the Con-way Truckload program provides the opportunity to gain additional earnings through an annual bonus, with drivers able to receive an annual bonus between 1.5 cents and 3 cents per mile, on miles driven over the previous 12 months from their anniversary date.

Con-way President and CEO Doug Stotlar said in a statement that in recent years Con-way has been evaluating and implementing phased changes for driver compensation to reflect “evolving market conditions and ensure competitive pay structures for drivers,” adding that with the company’s multi-year realignment process complete, it has subsequently focused on boosting its efforts towards attracting and retaining drivers.

“This wage realignment represents our response to a highly competitive market for drivers, as well as our own ongoing efforts to simplify and streamline legacy pay structures,” Con-way Director of Corporate Communications Gary Frantz told LM. “We’re in the midst of the most pronounced driver shortage we’ve ever seen. Without drivers we can’t service our customers. These actions are focused on providing market-competitive compensation that improves our ability to attract and retain qualified drivers.”

The wage adjustment, said Frantz, represents a final step in a multi-phase, multi-year wage realignment process designed to ensure that Con-way is market competitive and responds to the current market conditions that have created an acute driver shortage. 

“Since the first of the year, it has become increasingly apparent that the industry-wide driver shortage was only going to get worse, which it has,” he explained. “We also needed to finish addressing inequities in driver pay programs that were creating retention issues. That’s what drove these actions.”

What’s more, driver recruiting and retention challenges have intensified, which Frantz said has increased competitive pay levels in many markets.

“Historically we had some facilities that were at market and some that were not,” he noted. “The two key changes were increasing the rate per hour and reducing the time it takes to move up the scale.  There’s not one increase across the board. It varies by geographic zone and the employee’s current position in the progression structure.  Our drivers are now very near or at market in terms of both wage and progression time. With respect to progression time to top scale, previously it was 3 to 5 years to get to top scale, depending on location. We’ve now standardized that to three years.”

Con-way Freight was previously structured as three regional carriers, each with their own legacy pay structures and policies.  Increasingly over time, Frantz said these became unwieldy and overly complex, and in some cases put Con-way at a competitive disadvantage. 

“Over several years we have been working to merge and realign these into a more simplified, flexible and streamlined structure,” he said. “This common framework, which now applies to all locations across the country, allows us to respond and adjust faster and more effectively to market changes to ensure our driver compensation remains competitive.”

As for its publicly-traded LTL counterparts, Stifel’s Ross said it is unlikely that union carriers ABF and YRC will do so, due to their contracts not changing, and Old Dominion and Saia are already planning on giving normal annual wage increases.

“Truckload carriers should continue to see much more significant driver pay pressure, in our opinion, than the LTL market, as absolute wage levels are significantly lower,” wrote Ross. “If the LTL tonnage remains as strong as it is presently, we believe any driver wage increases should be covered by higher rates in 2015, including at Con-way Freight.”