Developing better compensation packages for retention and improving insurance

  (Photo: Shutterstock)

(Photo: Shutterstock)

Ashley Hammonds, SVP of sales for Reliance Partners says that for some fleets—big or small—you won’t even get a quote if you have ridiculous driver churn. “If you can, keep that below 5-10%. They love that,” he says.

“A lot of companies run on familiar lanes. They’re used to running the same routes. These drivers are going to the same places and doing the same things, they have less issues, and this is what insurance companies want.”

Insurance companies also want drivers that have more than two years experience. “You might not get a credit or a smaller premium, but you will get a quote. You’ll open yourself to more markets that’ll quote you. You’ll get your box bigger. If you open yourself up to more markets, you open yourself up to more aggressive rates,” says Hammonds.

“Basically, you keep safety in check, keep your drivers clean, and keep your drivers without lots of turnover, and you’ll get the most aggressive rates that way. That’s how you really save your money.”

So, as FreightWaves continues to track ways that carriers large and small can help increase their driver retention, we turned to a source with deep knowledge on the subject. Damon Langley of TMW has observed these trends closely for a decade. He’s also as a 27-year veteran of transportation and logistics, working as an analyst for carriers, as well as having 3PL responsibilities returning value to customers.

One of his specific points of focus for improving driving retention has to do with compensation packages. Compensation packages have become more sophisticated in recent years, but there is room for improvement. “Mileage pay and sign-on bonuses are generally touted in most driver pay marketing, and while they are key components, other types of pay are needed to round out the package,” says Langley.

This includes, but is not limited to, sign-on bonuses, hourly pay, minimum weekly pay, detention and layover pay, TONU pay, load/unload pay, per diem, stock grants, safety bonuses, utilization bonuses, MPG bonuses, tenure increases and bonuses, and holiday/vacation pay.

Sign-on bonuses have been around for a long time. This is considered best-practice by many, though the amount varies wildly from $2,000 for less experienced drivers to $10,000+ for “quality drivers,” defined by safe miles driven, tenure, etc., with some exceptions hitting $20,000 to $40,000 for teams or specialty needs.

These bonuses generally range depending on the market. Right now, they are growing. A good portion of this is generally paid out within 90 days, as it is intended to keep the driver whole while they go through orientation, training, etc., before they are earning enough mileage pay. “It is important to keep this one simple, and not have excessive qualifications such that many drivers do not qualify for the bonus,” says Langley.

“I always recommend that any bonuses paid to recruiters be paid out at 30-, 90- and 180-day increments, just like sign-on bonuses. However, on this side of the coin, I prefer to pay out most of the bonus at the 180-day mark. This helps prevent recruiters from churning drivers, intentionally or otherwise, through the system and being incentivized to do it. Hiring your own problems simply exacerbates and muddies the turnover issue. This payout structure brings new focus to the recruiter to look for those long-term hires,” he says.

Minimum weekly pay and hourly pay are meant to bring some consistency to driver pay, which is another reason for turnover. For instance, what if you need drivers to do some local work where they spend much of their day waiting at a customer where there is not necessarily any detention. The driver is still spending his HOS that is not earning him or her their expected rate of pay. So there must be pay designed to compensate the driver when he or she does this type of work, or when the driver is available to work and you have no work for them to do.

Detention, layover and TONU pay are specifically in place to address time when the driver is available to work, but is not moving, and is unable to earn mileage pay.

Load/unload pay covers physical labor performed by the driver, such as counting, tailgating, or moving product to the dock. This has become rarer, and lumpers are largely used in lieu of drivers doing this work. “An injured driver is not worth saving a few bucks paid to a lumper service,” says Langley.

Per diem is a way to remunerate a driver in a preferred manner to give them larger checks while also reducing their gross income and tax liability, as it does not technically count as income, but a reimbursement. You can increase driver compensation and benefit both the driver and the company in this way. Otherwise, the driver must take the “standard meal deduction” on their tax returns. The added soft benefit is that you simplify their life, and give them the money now, rather than them getting a refund at the end of the year. In 2017, Per Diem was $63/day, which at $.50/mi and 60 MPH would equate to two hours of drive time. That is not insignificant. It’s roughly $16k/year, at $63/day x 260 days per year.

Utilization bonuses are intended to keep drivers on the road, and not relying on minimum weekly pay to get by. By and large, Langley says, “drivers want to drive.” Nevertheless, there are some who will look for all the loopholes, just like any other job.

MPG bonuses are aimed at driver behavior. Structured properly, you almost don’t need to set an MPG to achieve. Simply address the behaviors that affect MPG. “For my part,” says Langley, “compliance to my fueling instructions, including where to buy and how much to buy at a given location, would be part of this bonus.”

Safety bonuses are aimed at rewarding the right driver behavior. Because many of these behaviors affect MPG, sometimes this component is part of the safety bonus. Sometimes the safety bonus is all encompassing, though Langley suggests this is not the most effective way to do it. Allowing Drivers to qualify for specific bonuses generally allows them to earn more, however having an all-in-one bonus is often difficult to explain, and manage. It can be done with a weighted scorecard, but separate bonuses generally prove more effective.

Identify the top issues, and focus on them. The most common and costly collisions are stopping distance/rear-ending, backing, lane changes and too-fast-for-conditions (rollovers, etc). Of the cases where the Driver was the main cause of the accident, 87% were due to driver fatigue, 10% were due to equipment failure, and 3% were due to environmental conditions.

More sophisticated packages for drivers keeps you in the driver’s seat for having less churn, a better safety record, and therefore more markets open to you to give you the best rates available.

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.