Rethinking Truck Driver Compensation Plans

trucker compensation

According to the U.S. Bureau of Labor Statistics, the median annual pay for tractor-trailer truck drivers is about $47,000. These wages may be paid based on a variety of compensation structures, though. Some companies pay truckers by the hour, and others pay based on mileage. This inconsistency means that wages can be difficult to predict, leading some truckers to advocate for new compensation plans. Improved compensation structures may also aid trucking companies’ recruitment and retention efforts, which is a pressing matter as the national trucker shortage continues to worsen. Companies that are exploring new options for payment should research different wage structures, consult with their drivers, and review the following tips for effective truck driver compensation.

Traditional Compensation Options

Although each trucking company has its own unique payment system, there are a few standard types of truck driver compensation. These options offer pay based on a driver’s work hours logged, the mileage of a trip, or less frequently, an annual salary.

Pay Based on Mileage

Wages based on mileage are the most common form of payment for truck drivers, with most being paid 20 to 60 cents per mile (CPM). Like any other kind of job, more experienced drivers will typically earn higher pay, as will jobs that are more difficult. There are still many different ways that a driver may be paid per mile, though, including the following:

  • Practical mileage: If a trucker’s CPM wage is paid based on practical mileage, it will be calculated based on the miles logged by the driver’s electronic logging device (ELD).
  • Sliding scale mileage: CPM that’s based on sliding scale mileage typically pays drivers a higher wage for shorter trips.
  • Hub mileage: CPM that’s calculated by hub mileage is typically the most accurate and simplest method of payment. It is calculated based on odometer readings.

These options are the most common trucking payment methods, but many drivers agree that they may not be the best.

Pay by the Hour

It’s less common for truckers to be paid by the hour, but it’s not unheard of. The average hourly wage varies depending on a trucker’s geographical area and experience level, but it can be anywhere between $19.00 and $26.00. Many truck drivers prefer a set hourly wage to a CPM structure. CPM wages can result in earnings that are below minimum wage due to circumstances outside of a trucker’s control. If inclement weather strands a driver, for example, a CPM wage is disadvantageous. Hourly wages can offer greater predictability and consistency to truckers, though in some cases, they may amount to less than CPM wages.

Pay by Annual Salary

In recent years, some trucking companies have overhauled their payment options completely to offer truckers a set annual salary. This can be difficult given the fluctuations in a driver’s schedule, but salaried pay may be based on a 40-hour work week, and truckers would be classified as exempt employees — meaning that they are not eligible for overtime pay. This is due to the Motor Carrier Exemption contained in Section 13(b)(1) of the Fair Labor Standards Act.

Envisioning New Pay Possibilities

Given the dearth of truckers and the struggle to find new recruits, it’s unsurprising that many companies are envisioning new payment options. There are several innovative new payment ideas that may revolutionize the industry.

Guaranteed Payment Plans

There are so many factors that can impact a driver’s pay when it’s based on mileage or hours logged, so some trucking companies have developed a new wage structure that’s based on a guaranteed minimum. This payment plan promises truck drivers a set amount — typically per week — and pays that amount, regardless of miles or hours. Drivers who perform above the minimum hours or mileage can receive additional pay beyond the guaranteed wage. This ensures that drivers have a predictable wage to count on while still incentivizing performance.

Better Benefits for Drivers

New wage structures are a promising improvement to trucker compensation, but benefits are an important component of the equation, too. Some trucking companies have realized that wages aren’t enough to attract qualified drivers. Truckers need health insurance and retirement options, too. Hopefully more companies will begin to offer competitive benefits like these.

Transitioning to a New Wage Structure

If your trucking company is considering implementing a new compensation plan, it’s important to do so carefully. You want to ensure that the change is an improvement over your previous plan.

Consider Your Budget

One of the first considerations of a new payment plan is its impact on your company’s budget. A new wage structure will likely increase operating costs, and you must calculate these costs in addition to other expenses such as maintenance, gas, and truck insurance. Remember that all of these costs fluctuate, too, so it’s always best to overbudget. Truck insurance costs are likely to rise if you happen to file claims, so the potential for a higher premium should be considered.

Create a Rollout Plan

With a comprehensive budget in hand, you’re ready to roll out your new compensation plan. Doing so is a major change, though, so it’s important to be thorough in the transition. To do so, you should follow these steps:

  • Give all truckers ample notice of the upcoming change
  • Outline how the change will affect the pay period
  • Make note of any staff members who may be exempted
  • Set clear expectations with truckers regarding change

Following these steps will help your company implement a new wage structure seamlessly — and with better payment options, recruitment efforts should improve, too.

About Western Truck Insurance Services

Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates, and coverage changes. Contact us today at (800) 937-8785 to learn more!