Truckload carriers are taking steps to recruit and retain drivers through increased compensation
August 14, 2014
At a time when over-the-road capacity is ostensibly as tight as it has ever been, perhaps the biggest underlying challenge for motor carriers is how to best fill its trucks seats with drivers. This is not a new problem by any stretch, but given how dire the current truck driver situation really is, it looks like some carriers are truly stepping to the plate by upping the ante when it comes to driver pay, something which has lagged considerably for years.
In recent weeks alone, many well-known carriers, including Swift Transportation, Con-way Truckload and US Xpress are making a full-on press regarding increasing driver wages in an effort to secure more capacity and keep their wheels moving, as well as to prevent driver turnover at a time when it is becoming more difficult to recruit and retain drivers.
What’s more, most of the data regarding driver turnover, due in large part to low wages, and other issues like time spent on the road away from family, a sedentary lifestyle behind the wheel resulting in poor health patterns for many drivers, among others, are some of the many challenges carriers are up against.
“Today, the industry has in the range of 30,000 to 35,000 unfilled truck driver jobs,” American Trucking Associations Chief Economist Bob Costello said. “As the industry starts to haul more because demand goes up, we’ll need to add more drivers – nearly 100,000 annually over the next decade – in order to keep pace.”
Projections from freight transportation forecasting consultancy FTR Associates estimate that this problem is likely to get worse, with the driver shortage potentially in the 250,000 range by the end of this year, which Stifel Nicolaus analyst John Larkin said is going to create a capacity shortage which will translate into “fairly sizable rate increases” that might be steeper than what has occurred during the slow growth period over the last couple of years.
Efforts being made by the aforementioned carriers are bold¬¬, but some industry stakeholders maintain they are, instead, long overdue and badly needed.
Earlier this week, US Xpress said it is rolling out an increase in base mileage pay for over-the-road solo truck drivers by an average of 13 percent, effective, August 25, while also reducing its sliding pay scale. The company said that with this increase its drivers’ base pay rate will be in the top 5-to-ten percent of the industry. And it added that the chief objective of this initiative is to enable it to continue to recruit and retain the industry’s elite and most qualified drivers.
US Xpress COO Eric Fuller said in a video posting that demand for trucking services is on the rise and that the trucking industry must do more to attract, train, and retain drivers.
“Listening to feedback over the years, we know driver pay is a very important aspect for our drivers and drivers in the industry,” he said. “At US Xpress we are taking a leadership position in this role…by announcing this pay increase for our solo over-the-road drivers. Trucking is the lifeblood of the economy, and career professional drivers are crucial to the industry and crucial to the economy. We want to attract the career-focused truck driver that is safety conscious, focused on service, and want to provide a superior product and service to our customers.”
Fuller said that many drivers entering the industry today only remain in the industry for three-to-six months, whereas his company is focused on attracting the drivers that truly want to be truck drivers and reward and retain them. The company’s biggest hope, he said, is that trucking becomes a career that people want to get into, which was the case 25-to-30 years ago. But today, he said, there are more people in the industry that don’t necessarily want to be in it and may not see it as a viable long-term career, which is something US Xpress is trying to change.
Another company set to boost driver pay is Con-way Truckload. This week, the carrier introduced an enhanced driver compensation package that increases per-mile pay, layover, and a new incentive that it said will reward drivers for both loyalty and helping to reach productivity goals.
Con-way said this takes effect on September 7, with the company’s existing compensation programs, coupled with the new pay package, raising per-mile pay for new hire experienced drivers to 42.5 cents per mile. And it added that based on reaching thresholds for continuous mileage/continuous employment, the 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. For layover pay, Con-way Truckload is increasing compensation from $60 to $75 per day.
“Our drivers are the company’s most important asset. After listening to their feedback and evaluating current market trends, this is the right time to increase our mileage rate and add new compensation programs which reward driver loyalty, productivity and safe driving performance,” said Joseph M. Dagnese, president, Con-way Truckload, in a statement. “We take pride in providing a competitive compensation package that reflects driver input and incents them to operate our equipment as safely and efficiently as possible.”
At Swift Transportation, Founder and CEO Jerry Moyes said on the company’s second quarter earnings call that the best investment at this time for the company’s future is to invest in its drivers, explaining that he wants Swift to be the carrier of choice for drivers across the industry.
“We’re in the process of rolling out something larger than we have ever done in our line-haul fleets and this was not contemplated when we gave our guidance last quarter,” Moyes said. “But we expect that this will help improve our retention, our recruiting, our utilization, as we have fewer unseated trucks. Our safety and our other customer service, as we have more tenure drivers, they should help fuel our growth and profitability into the future.”
Swift is instituting a large driver pay increase this quarter, and president and COO Richard Stocking said on the earnings call that if the current driver shortage issues continue, driver wages may continue to increase but not at the level of the one being doled out this quarter. He also pointed out that Swift’s driver schools and incentive-based compensations have contributed to Swift being able to attract and retain drivers, while also ensuring its driver pay is attractive to the market in order to meet growth expectations.
Swift would not disclose the amount of the driver pay increase for competitive reasons, but Stocking did say that driver wage increases have been limited in recent years, with the exception of increases for select dedicated fleets in various incentive programs.
Increasing driver pay is potentially the most direct way to boost recruiting efforts when looking at how pay rates have declined in recent years.
Gordon Klemp, founder and president of The National Transportation Institute, said on a Stifel Nicolaus conference call this summer that from a 2007 base, dry van drivers have lost 3.8 cents per mile¬¬––or about ten percent––to inflation.
“With unemployment, welfare, and other entitlements offering richer benefits, and with the underground economy flourishing, fewer and fewer economic incentives exist to attract drivers into the trucking industry,” Stifel said in a call summary research note. “Mr. Klemp speculated that irregular route truckload pay might have to rise from the high $40,000 to low $50,000 per year range to the $80,000 to $90,000 per year range, if the problem is to be seriously resolved. The $80,000 to $90,000 range would put irregular route carriers ahead of private fleets with respect to pay and eliminate the pay gap which currently serves as a huge disadvantage for the over-the-road for-hire truckload industry. He cautioned that a pay raise of this magnitude is unlikely given the weak state of the economy presently, the still fragmented nature of the truckload industry, and the focus (on the part of shippers) to rein in transportation costs.”
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