Flat Rate vs. Percentage Pay

[Bruno]

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

It's 550 miles X 1.30= $715.00 at FedEx.

At Panther I'm getting 1.78 a loaded mile plus all deadhead miles paid at .40 to .50 a mile but for this I will use the lower of the two for the same load.


Total loaded miles 400 x1.78 =$712.00
Total deadhead miles 150 X.40= $ 60.00
Total miles and Pay 550 $ 772.00

Rate per mile for all miles $1.40 which is .10 more than FedEx, at Panther you would be putting more money in your pocket.

 

[Moot]

My question to readers is, what am I missing? What did I get wrong? What needs to be added or changed?

In my opinion the whole thing went south with this:

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.

To me that makes any comparison between the two invalid.

 

[greg334]

Moot, I saw that and didn't exactly say what you did but I will say this - until Phil tries this first hand, asking about it may not give him the picture he is looking for.

 

[Moot]

The preferred dispatch thing makes it impossible to compare flat rate vs. percentage pay. It's like trying to compare a basket of apples to a basket of oranges with one basket containing a large turd.

Is it possible the percentage pay O/O may get offered more discount loads while the flat rate O/O gets offered the higher paying loads there by benefiting the carrier and it's bottom line?

 

[Moot]

- until Phil tries this first hand, asking about it may not give him the picture he is looking for.

Unless of course the picture he is looking for is as clear, well defined and understandable as a Jason Pollock painting.

 

[ATeam]

Responses to various comments:

1. The distinction between WG and surface is not relevant here. This is a comparison of flat rate to percentage, regardless of the division within FedEx and regardless of carrier. Hypothetical Truck A runs on a flat rate. Hypothetical Truck B runs on a percentage of the load. There is nothing more to it than that.

2. Regarding the rates shown, Truck A approximates the flat rate pay stated by FDCC contractors here in the Open Forum. Truck B's $1.80 per mile is a number I made up, but I know of many straight trucks making that money or better with various carriers.

$1.80 a mile seemed reasonable to me for this discussion. If it does not seem reasonable to you, simply substitute a number that does. Below is the same table with a third column added entitled "Your Truck." It is blank so you can fill in whatever pay per mile you wish.

3. Regarding "way too many variables," I agree. I said as much in the original post when I described this table as an over-simplified item. However, with the third column added, ALL variables can be fully accounted for on a case by case basis. Simply fill in the numbers for your truck, accounting for all variables.

4. Regarding deadhead paid in various amounts on various loads for part or all of the deadhead miles; those are variables. Work your deadhead pay into the table in whatever way makes sense to you. You might treat all deadhead miles as unpaid and add your deadhead money to your paid miles. That might bump your $1.80 per mile to $1.83. It is not precise but it will work in this over-simplified table, enabling you to account for deadhead money. You could treat revenue for accessorials the same way if it is not already included in the $1.80.

5. Regarding Panther's currently advertised $1.49 per mile (or any rate offered by any carrier), you can change various numbers in the Truck B column (pay per mile, number of paid miles, number of deadhead miles, number of personal miles) to make Truck B's profits equal Truck A's. To make the profits of the two trucks equal by changing only the pay per mile, change Truck B's pay per mile to $1.664.

6. I put a copy of the live spreadsheet up on the web for anyone who wishes to download a copy to experiment with. Don't worry about screwing it up. If you screw it up, simply delete your file and download a fresh copy. Click here to view and download the spreadsheet.

7. The $1.00 per mile cost for each truck is a general figure. Some trucks cost more to operate, some cost less. The number is the same for both trucks because it is assumed that both trucks and their drivers are identical in every respect, except in the number of miles driven and how they are paid.

8. I present this table not as an example of the numbers a given truck will have, and not to suggest that one compensation method is better than another. I present this table as a suggested approach to objectively compare one compensation method to another.

9. Finally, notice how jjoerger injects a subjective consideration that cannot be objectively built into a numerical table (miles and money can be objectively counted, "hates sitting" cannot). In his case, the choice of compensation method is not just about the money, it's about an emotional response to sitting too.

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.

 

[Moot]

One artist's interpretation of the flat rate vs. percentage pay comparison. Note how the "preferred dispatch" plays on the "man's inhumanity toward man" theme represented by the varying shades of green. Another major theme, "carrier profits", can be seen in the background as shades of gray and black. Although this thread and painting does not deal directly with cargo vans, cargo vans as a minor theme is shown being represented by the small red dots with tails. Or maybe those are sperm and by extension the cargo van is the seed that spawned the expedited freight industry.
.
.

 

[davekc]

Nice picture there Moot. Does kind of some up the world of expediting.
As for the variable of "flat raters getting loaded ahead of percentage trucks" is a tough one. Not knowing the frequency and to what degree they get longer loads has to be considered.
Only experience or sitting in dispatch with a honest dispatcher is going to answer that. It does indicate a drop in rates and quality runs which others have already reported.

 

[jjoerger]

It's 550 miles X 1.30= $715.00 at FedEx.

At Panther I'm getting 1.78 a loaded mile plus all deadhead miles paid at .40 to .50 a mile but for this I will use the lower of the two for the same load.


Total loaded miles 400 x1.78 =$712.00
Total deadhead miles 150 X.40= $ 60.00
Total miles and Pay 550 $ 772.00

Rate per mile for all miles $1.40 which is .10 more than FedEx, at Panther you would be putting more money in your pocket.

But DAve, you have a higher rate than Panther is offering to new contractors. At $1.49 per loaded mile (the current offered rate) the total pay would only be $656. Which would only be $1.19 all miles.

 

[Bruno]

But DAve, you have a higher rate than Panther is offering to new contractors. At $1.49 per loaded mile (the current offered rate) the total pay would only be $656. Which would only be $1.19 all miles.

That may be true, that is the base rate also. You get more for Haz Mat teams, Lift gates, going to Canada, reefer units, and government teams. Over all the set up that Panther has you as true owner operator. Do I miss FedEx Custom Critical? Yea, sometimes as I was a contractor there for many years. But the money and the growth our fleet has done at Panther has been GREAT. I'm very happy with Panther Expedited Services. If we ever left Panther our choice would be Load1 as John Elliott is a great CEO and takes care of his contractors. I talked to John yesterday and he was having a cookout for all of his Contractors.

 

[jjoerger]

That may be true, that is the base rate also. You get more for Haz Mat teams, Lift gates, going to Canada, reefer units, and government teams. Over all the set up that Panther has you as true owner operator. Do I miss FedEx Custom Critical? Yea, sometimes as I was a contractor there for many years. But the money and the growth our fleet has done at Panther has been GREAT. I'm very happy with Panther Expedited Services. If we ever left Panther our choice would be Load1 as John Elliott is a great CEO and takes care of his contractors. I talked to John yesterday and he was having a cookout for all of his Contractors.

The flat rate at FedEx is for a basic surface expedite truck. We get more for pallet jack, lift gate, HAZMAT, IAC, driver protective service, WG, DoD, etc.
There are no WG trucks running flat rate (as far as I know) so a comparison can not be made to your trucks running Elite.
Since going on the flat rate we have averaged $1.29 all odometer miles.

 

[ATeam]

I should have mentioned this in the original post. The monthly figures presume that the trucks are in service most if not all of the month. While that often happens, it never happens for 12 months in a row. In the first tables, out of service time is not accounted for in the one-year and three-year numbers. It is in the table below.

The table below is the same as those above except an one-year gross revenue line has been added to provide perspective and a section has been added to show trucks that are in service 75 percent of the time.

The live spreadsheet has been similarly modified.

 

[iceroadtrucker]

I should have mentioned this in the original post. The monthly figures presume that the trucks are in service most if not all of the month. While that often happens, it never happens for 12 months in a row. In the first tables, out of service time is not accounted for in the one-year and three-year numbers. It is in the table below.

The table below is the same as those above except an one-year gross revenue line has been added to provide perspective and a section has been added to show trucks that are in service 75 percent of the time.

The live spreadsheet has been similarly modified.

Phil you using the above figures you plugged in if you were to pay a team on the above.
Do you pay your teams 20% a person making a total of 40% to the team. If so how much would each person for that truck make in a years time. Using your above formula.
Just wondering. Thanks.

 

[Bruno]

The flat rate at FedEx is for a basic surface expedite truck. We get more for pallet jack, lift gate, HAZMAT, IAC, driver protective service, WG, DoD, etc.
There are no WG trucks running flat rate (as far as I know) so a comparison can not be made to your trucks running Elite.
Since going on the flat rate we have averaged $1.29 all odometer miles.

Not all my trucks run Elite. To be in Elite both drivers have to have Haz mat. The truck stats I gave was a dry box truck with a lift-gate that is not in Elite. If it was, it would be doing better than the stats given. If $1.29 all miles and that makes you happy then so be it. It don't matter what I or anyone else thinks. If your happy with it that's all that matters.

 

[ATeam]

Phil you using the above figures you plugged in if you were to pay a team on the above.
Do you pay your teams 20% a person making a total of 40% to the team. If so how much would each person for that truck make in a years time. Using your above formula.
Just wondering. Thanks.

You are correct. The tables above show revenue paid to the trucks, and it is assumed that the trucks are team driven by same-household owner-operators.

If you want to turn the trucks into fleet-owner trucks and put a team in each truck that is not same-household (two people, each of whom has his or her own place they call home), and pay the team under a 40/60 contract where the fleet owner gets 60% of the revenue, 100% of the fuel surcharge and pays all fuel and expenses, and the team splits equally the 40%, make the following calculations:

Multiply the monthly total revenue by 0.40 to get the team's 40 percent. That gives you:

Truck A: $8,320
Truck B: $7,200

Then multiply those numbers by 0.50 to get each team member's half of the pay. That gives you:

Truck A: $4,160
Truck B: $3,600

Finally, adjust the above numbers (multiply by 0.75) to have the truck in service 75 percent of the time over a year. That gives you:

Truck A: $3,120
Truck B: $2,700

To annualize those numbers, multiply them by 12 to show each team member's one-year pay before taxes and expenses. That gives you:

Truck A: $37,440
Truck B: $32,400

To carry this one step further and look at it from the fleet owner's point of view, simply subtract the 40 percent the fleet owner pays to the drivers from the truck's one-year gross profit number. That gives the fleet owner:

Truck A: $ 4,320 per year
Truck B: $21,600 per year

If any prospective fleet owners are reading this, it is important to note that this is a pristine, hypothetical, pencil and paper exercise. Real-world realities are different.

As I write this, there is a fleet owner making an unscheduled trip from Ohio to South Carolina to retrieve one of his trucks and he is not sure it will be there when it arrives.

He is getting out of the business and has called his two remaining trucks to Ohio. One truck came back filthy inside. The other was driven to South Carolina and presumably abandoned by the driver. The fleet owner has no extra key and has no idea what condition the truck will be in when he finds it, if it is still there when he gets there. (The police are involved but not particularly helpful beyond reporting where the truck was last seen.)

Forward looking spreadsheets are nice but they don't include columns labeled "Expense of hiring a loser" and "Expense of not keeping a truck key for me."

Every daydream has its offsetting nightmare. Be you a prospective driver, owner-operator or fleet owner, the key to success is to move beyond the dream and treat the business like a business.