Flat Rate vs. Percentage Pay

ATeam · Sep 16, 2011

Which is better, flat-rate pay or percentage of the load pay? It is a common question, increasingly so since large expedite carrier FedEx Custom Critical now offers both options.

Below is a simplified table that compares two trucks. Note the word simplified. Over-simplified may be the better term since many realities are not addressed. Nevertheless, this table can be used as a starting point for comparing the two compensation methods.

The table lists two hypothetical straight trucks, each run by an owner-operator at an identical cost per mile.

Truck A is a flat-rate truck that has deadhead miles paid and gets dispatched ahead of other trucks as part of its compensation arrangement. It runs a lot and the only miles that are unpaid are personal miles.

Truck B is a percentage paid truck that does not run as many miles but earns a higher rate when it does. It also deadheads more and deadhead miles are not paid.

Additional notes are below the table. This is my first try at comparing the two compensation types and I have not put deep thought into it. My question to readers is, what am I missing? What did I get wrong? What needs to be added or changed?

EDIT: The table has been modified further down in this thread. See this post for the modified table.

Pay per Mile: Truck A is flat rate plus fuel surcharge. Truck B is average revenue per loaded mile including fuel surcharge.

Monthly Paid Miles: It is assumed that the flat-rate truck gets more miles than the percentage truck. Numbers shown can be whatever you think is reasonable.

Monthly Unpaid Miles: For the flat rate truck a small number of personal miles is assumed (going to truck stops between loads, shopping trips, etc.) For the percentage truck, personal miles and a large number of deadhead miles are included in the unpaid miles figure.

TeamCaffee · Sep 16, 2011

I do not know many surface trucks who average $1.80 a mile and I do not know of many White Gloves trucks interested in the Flat Rate programs.

usafk9 · Sep 16, 2011

Exactly. Way too many variables to make that comparison. While I'm sure the intent was noble, I believe that spreadsheet muddies the water even further for a new team. And Linda has it right. Not many surface teams averaging $1.80/mile.

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Hyperdrive · Sep 16, 2011

The big difference is ALL miles and LOADED miles. This is where most confusion in rates occur. Some people quote rates at the miles from shipper to cosignee or loaded miles. Others quote rates received from where dispatched or sitting from to cosignee or all miles. Then the FSC comes in. Is that used for all miles or for loaded miles?

I would like to see hub or speedometer miles for the month divided by total revenue, quoted. That is your per mile rate. Your per run rate should be figured by the total miles run, from sitting to sitting,to the total revenue for the run.

tenntrucker · Sep 16, 2011

What is the percentage rate are you using?

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davekc · Sep 16, 2011

The 1.80 could be considered with Phil's numbers because some DH is paid is it not on percentage trucks? I am aware he isn't factoring that. Where we are at it is all paid but many carriers pay something after the first 50 or 100 while others it is nothing. Just a thought to ponder if they indeed pay something for the percentage trucks. 2000 miles on the provided example might still represent some additional revenues not listed.
Still many things to factor to really know which is better, but using Phil's numbers, the nod would obviously have to go to the percentage trucks.

Steady Eddie · Sep 16, 2011

I would move over to Land Star Express America, and put FECC behind me.

Hyperdrive · Sep 16, 2011

Flat rate at the Fed is all dipatched miles, deadhead and run.
Example:
Deadhead 150 miles
Run 400 miles
Total 540 miles

Flat Rate 1.00 per mile
Current FSC .30
Total 1.30

540x 1.30 = $702

FlyingVan · Sep 16, 2011

Hyperdrive said:
Flat rate at the Fed is all dipatched miles, deadhead and run.
Example:
Deadhead 150 miles
Run 400 miles
Total 540 miles

Flat Rate 1.00 per mile
Current FSC .30
Total 1.30

540x 1.30 = $702

Are the miles from the delivery to the authorized layover place also paid, or not?

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Hyperdrive · Sep 16, 2011

Yes but I understand they usually have flat rate trucks go to nearest truckstop for their authorized layover.

FlyingVan · Sep 16, 2011

Hyperdrive said:
Yes but I understand they usually have flat rate trucks go to nearest truckstop for their authorized layover.

It makes sense to do it that way.
Thanks.

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davekc · Sep 16, 2011

Wouldn't a percentage truck go to the same place?

jjoerger · Sep 16, 2011

Who's paying $1.80 for a surface expedited dry van?

Panther is at $1.49 loaded.
Express 1 is at $1.41 loaded.

jjoerger · Sep 16, 2011

davekc said:
Wouldn't a percentage truck go to the same place?

No. A percentage truck would go to an express center that dispatches a lot of freight.
This morning we delivered in LaGrange, GA and went to the Pilot 3 miles away. We were in the Columbus express center. Our dispatcher will deadhead us (at full pay) to the freight.
Had we been a percentage truck we would have gone to the Petro in Atlanta 60 miles away.

tenntrucker · Sep 16, 2011

davekc said:
Wouldn't a percentage truck go to the same place?

I do, some trucks are mileage with my company, but i'm on percentage, dispatch doesn't know which is which they just dispatch the loads.

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davekc · Sep 16, 2011

jjoerger said:
No. A percentage truck would go to an express center that dispatches a lot of freight.
This morning we delivered in LaGrange, GA and went to the Pilot 3 miles away. We were in the Columbus express center. Our dispatcher will deadhead us (at full pay) to the freight.
Had we been a percentage truck we would have gone to the Petro in Atlanta 60 miles away.

Must be just how they operate. We would have just waited in LaGrange. Outside of that, 1.49 for Panther must be for new ones?
I can say we don't run at that rate. Could be for the flat raters. I think they get 1.10 plus the fsc but not sure. That is for all miles.

jjoerger · Sep 16, 2011

Panther is currently advertising $1.49 per loaded mile including fsc, plus fuel from dispatch location to pick up.

greg334 · Sep 16, 2011

I think what is being missed is the idea that you will have to sit and wait for a load and then make a decision based on a lot of internal factors whether to take the load or not under the percentage system. This may offset the difference between the fr and pr to the fr's advantage - in other words, if the time spent is used to figure out all kinds of variables to leverage the truck going forward based on the offered rate, the time saved doing the actual work pays off in the long run.

Given the numbers are only examples, the OP I think is trying to quantify a fr program without trying it out to see how it applies to their overall business model.

Now with that said, about 2 years ago I asked this question (or something like it) - would you work under a flat rate system where the loads are assigned to you and you are kept busy? Overwhelmingly it was clear that no one would ever consider that idea but ...

jjoerger · Sep 16, 2011

What works for us on flat rate may not work for others.
We hate to sit. Our goal is to run our miles to make the income we desire and spend our time sitting at home enjoying the other side of our lives.

BillChaffey · Sep 16, 2011

I'm sure more then one of you can answer this so even I can understand it.

When using the $1.00 per mile cost for both trucks, is this a general figure?. It would seem to me the way a person drives, maintains and particularly when one may be paying a fair sized payment and the other home free. What is apparently being assumed to make them equal?. The truck is paid for?.