Pace of Driver Raises Slows

The pace of truckload driver pay increases is slowing, driven by a weaker economy and the feverish pace of raises at this time last year, an industry expert said.

Only about 9% of fleets adjusted pay in the third quarter, far below the record 42% that announced increases in the same quarter of last year, Gordon Klemp, principal at the National Transportation Institute told Transport Topics on Nov. 10.

The pace also slowed from the second quarter of 2015, when about twice as many fleets raised pay than the just-completed quarter.

“There are two factors at work,” said Klemp, whose firm surveys compensation trends at more than 300 carriers. “We saw some softening in the economy that caused some people to put pay increase plans on hold until they see what happens in the freight market. Also, we are more than 12 months into the pay cycle that included the record pace in last year’s third quarter,” he said.

Driver pay increases spiked in last year’s third quarter after U.S. Xpress Enterprises announced a 13.3% wage increase in August. That spurred widespread increases as other carriers were forced to follow suit amid strong freight growth and tight capacity.

U.S. Xpress ranks No. 18 on Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.

Although the freight and pay increase paces are slowing, there are still some notable increases, Klemp said.

No. 16 Werner Enterprises recently raised pay for some owner-operators by 8 cents per mile. In total, the gross revenue for drivers receiving increases is increasing by about $10,000 annually, a company statement said.

“As we aim to grow certain aspects of our fleet, we continue to examine and adjust payment packages where it makes sense for both retention and expansion,” said Derek Leathers, Werner’s president and chief operating officer. “Professional drivers are vital to our business and our nation’s economy, so it’s important that we compensate them accordingly.”

Werner also is seeking to attract more owner-operators for dedicated runs and made pay adjustments for owner-operators on regional routes. Owner-operators represent about 10% of Werner’s driver corps.

Another early fourth-quarter pay increase was made at No. 31 Knight Transportation’s Barr Nunn business. Klemp said that increase, covering parts of the South and Midwest, was the third this year.

Other publicly traded fleets, such as No. 6 Swift Transportation,

No. 50 USA Truck and No. 46 Covenant Transportation Group, have made continued pay increases this year.

Klemp stressed that driver pay increases run in cycles.

Even though the pace of raises has slowed, Klemp said, the 9% of fleets that raised pay in the third quarter are still a larger group than the long-term average of 7.5% of fleets making adjustments in the third quarter.

Also, there has been a smaller variation in the amount of increases, he said.

The average increase in pay this year is about 8.4%, he said, compared with about 10% last year. He is forecasting raises of about 7.5% next year.

He said rate increases will continue for a single, overriding reason — the driver shortage.

“No one is backing off their recruiting plans,” he said. “They still have a real concern that drivers are going to be in short supply.”

Klemp also believes fleets’ driver-staffing approaches continue to stress retention as costs of hiring new drivers have been estimated at $5,000, or more.

Evidence of that approach is the fact that pay increases for drivers with five or more years of experience are increasing faster than raises for drivers with one or three years on the road.

“There is also a basic change in the way fleets are looking at the markets,” Klemp said.

Carriers are segmenting their business and increases, based on both the type of trip, such as local, regional or over-the-road, as well as the geographic markets where those runs are being made.

Fleets previously have concentrated on changing the components of compensation, such as mileage pay, retirement pay or safety bonuses. As a result, some carriers, have found themselves offering more than 200 pay packages.

One other change in the driver market doesn’t directly involve pay, Klemp added.

“Some fleets in California are de-emphasizing owner-operators and are moving to hire company drivers,” he said, without naming them. “They are making the change to stay out of court and to avoid administrative hassles.”

There have been hundreds of reports about wage complaints by owner-operators in the state, including some drivers working at Southern California ports.

One facet of the pay picture that isn’t changing, Klemp said, was that small and mid-size fleets’ increases have kept pace with their larger counterparts, though larger fleets can have more additional benefits, such as 401(k) plans.