Truckload Fleets Slash Driver Pay to Trim Expenses

This story appears in the July 20 print edition of Transport Topics.

About one-third of truckload fleets have cut driver pay over the past 12 months as carriers strive to trim expenses during the extended freight recession, a new survey has reported.

The average pay reduction was about 2.6 cents a mile, or 7%, for drivers with three years’ experience when they start work at a new carrier, according to the latest National Transportation Institute survey, released July 13. The survey measured industry pay from the second quarter of 2008 to the same period this year.

“The recession is the driving factor for the reductions,” said Gordon Klemp, principal of NTI, Kansas City, Mo. “In the current freight environment, carriers have been forced to turn over every stone to save money. When you have a glut of drivers, quality drivers come knocking at your door, and these people usually are available for less.”

The quarterly survey continued a pattern of driver pay cuts that first began as early as 2007, when freight tonnage growth began to flag. Driver pay cuts since then have totaled 9.4%.

Trucking industry employment has been falling for the past 14 months, federal statistics show, and truck tonnage has dropped more than 10% since early last year, the latest time industry employment increased. Earlier this year, truckload fleet Celadon Group said it had nearly 50 applicants for each available job.

The reductions may not be over, NTI said, because more than half of the companies that haven’t yet cut pay are actively considering such a step.

In a sector analysis, Klemp said, pay cuts over the past 12 months averaged 2.7 cents a mile for van drivers, 2.3 cents a mile for refrigerated and 2.9 cents for flatbed.

The national average pay for van drivers, including both companies that cut pay and those that did not, was 35.2 cents a mile at the end of the second quarter this year, a drop of 1.9 cents a mile from a year earlier.

Average pay for drivers at refrigerated carriers declined by 1.2 cents a mile to 34.1 cents, and flatbed drivers’ pay dropped the most, to 37 cents from 38.9.

Based on driving an average of 120,000 miles a year, a driver who switched to a new carrier took a pay cut of about $3,120 but still earned more than $42,000 a year.

The cuts concentrated in the ranks of newly hired drivers, because just four of the 350 surveyed carriers reduced pay for drivers with more than three years behind the wheel, Klemp said.

NTI’s survey found that 38% of van fleets, 37% of refrigerated fleets and 28% of flatbed fleets reduced pay in the past 12 months.

“Flatbed [pay cuts] started early because of their dependence on building materials and the fact that the first wave of the downturn occurred in construction,” Klemp said.

More fleets are cutting costs, he said, by using so-called entry-level health plans that limit benefits such as coverage for pre-existing medical conditions for the first six to 12 months that a driver is employed.

Entry-level plans now are used by 16% of companies, twice the number using that approach last year and more than three times the 2007 percentage, the survey found.

Those entry-level plans also cut into driver pay, reducing it by $18 to $35 a week.

The institute has surveyed driver pay trends for the past 15 years. It includes drivers with three years of experience as a baseline indicator because their driving habits, including safety, are well-established by that time, Klemp said.