Switch from flat rate to percentage pay

[pok]

Hey guys,

I'm considering switching from a flat rate pay carrier to a percentage pay based carrier.
What are some of the things to keep in mind or look out for when accepting load offers if you are percentage pay? Is there transparency on what the carrier/broker makes on the load?

Thanks


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[RoadTime]

Transparency depends on the carrier, but not really an issue with reputable ones.
Watch out for dead head miles (especially if they don't chip in) that can destroy a good sounding rate sometimes.
Overall, I still prefer percentage to flat rate.

 

[NorthernBill]

I think learning the rates your carrier can get in the various lanes will be important.

 

[Worn Out Manager]

Does it really matter? I trust my carrier but in general you never really know what you are getting a percentage of? That is, your 75% is $750 and you assume the carrier got $1000, but do you really know?

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[FlyingVan]

I have been doing this for a while, both percentage and flat rate. I made the most money with the percentage companies. I am right now with one of the few companies that pays percentage and 100% fuel surcharge. Yeah, that is another pet peeve of mine, since the company doesn't use any fuel, why would they keep a portion of the fuel surcharge? 100% of what is charged to the customer should go to the driver because they use the fuel.

If you don't know that you are getting your fair share of money, you can go by the office and request to see the rate. They are required to show it to you.

I never asked, but I can, and I trust that they do what they say. Most reputable companies will pay the right percentage. They will not do anything illegal, they will instead find ways to cheat legally. LOL. Like running the load through another division of the same company.

Let's say that there is a company called xxx and they have a division called xxx expedite. Company xxx charges a customer, let's say, $1000 to move a load. They in turn turn it over to xxx expedite for $500, and you will get a percentage of the $500, because in this case xxx is the customer of xxx expedite.

But like I said, whether they cheat or not, I make more money on percentage that on flat rate.


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[TeamCaffee]

We have always run under percentage pay and cannot imagine running flat rate. There are exciting loads and there are ho hum loads and remember you will not hit a home run with every load. Take the good with the bad and it will average out in the long run. If going into a bad area make sure the load pays enough to get you back out of there.

 

[BIGTRAIN]

Does it really matter? I trust my carrier but in general you never really know what you are getting a percentage of? That is, your 75% is $750 and you assume the carrier got $1000, but do you really know?

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Exactly .

 

[Dynamite 1]

Most % based carriers dont pay deadhead so just figure the all miles rate on every load. After that average your rates from load to load to keep them where you need them to be.

 

[davekc]

Just depends on the carriers. Www have done both and they work out to be about the same.

 

[LDB]

The FSC was the biggest complaint on percentage. As FlyingVan said, why should the carrier get even one penny of that money. Now if they want to start paying xx% of the monthly fuel bill then by all means but until then stop stealing money that belongs to the truck. And as Dave said, paraphrasing, if you stay at it for an extended time they are going to come out fairly even in the end.

 

[davekc]

True. What we noticed is you might do a touch better on percentage doing the short loads but the long hauls usually worked out better doing mileage. Always a exception, but this is looking at different companies over our different trucks over a pretty good stretch of time. I can't honestly say I wouldn't promote one over the other.

 

[Tobster317]

I think that for true transparency. The O/O should get the choice % or mile whichever is better to the O/O. But.....

 

[davekc]

With regards to the FSC, that often times turns into "the customer didn't want to pay it" or it was low because it was broke out of a flat rate load. So in that case, the carrier would take a percentage because the percentage is based on the total load. This would be just for percentage loads. Really from a operator stand point, it is "what is the load really paying"?
We had a period of running straight truck loads at van rates and that is a slow death if you aren't careful. In those cases, have to make the necessary adjustments.

 

[davekc]

I think that for true transparency. The O/O should get the choice % or mile whichever is better to the O/O. But.....

Only in a perfect world. lol

 

[LDB]

Bottom line, it's the bottom line. With one carrier the FSC varied significantly from load to load. Some with the highest FSC were offered at C unit rate not D which was a dime a mile higher. Some guys automatically said no immediately because it paid a dime less. I took some and declined some based on the FSC. When it was a quarter a mile or more above the norm I'd take a dime cut on rate any day. It still added up to $1.63 a mile. I'd have run the load for a penny a mile, as long as the FSC was $1.62 a mile. Who cares what they call it as long as they pay it.

 

[OntarioVanMan]

Bottom line, it's the bottom line. With one carrier the FSC varied significantly from load to load. Some with the highest FSC were offered at C unit rate not D which was a dime a mile higher. Some guys automatically said no immediately because it paid a dime less. I took some and declined some based on the FSC. When it was a quarter a mile or more above the norm I'd take a dime cut on rate any day. It still added up to $1.63 a mile. I'd have run the load for a penny a mile, as long as the FSC was $1.62 a mile. Who cares what they call it as long as they pay it.

that is what is confusing people....15 years ago we were doing .70 - .80 loads but the FSC was like .40.=$1.20 for a CV
now fuel has dropped it like .05 and everyone think rates have dropped "greatly"

if there was a GAS FSC there would not even be the .05 there is now....

 

[jelliott]

We pay 100% of the FSC out. But in complete fairness I could see the rationale for a carrier to keep say 1 or 2%. They pay the FSC out right away but they have to bill it, carry the cost of the money and collect it. So their is a small cost to it for a company. But again...I wouldn't think it would be worth doing.

I like percentage and think long term it is the better choice for a truck. But it is a long term move. Too many trucks love the high paying loads and then want to negotiate the lower paying ones. While I understand that....does the carrier negotiate down on the high loads???

The only thing I like about per mile from a company stand point.... Operationally it is easier to know the trucks will take the loads and it is easier and faster to confirm and book freight with a customer. Customers are not a huge fan of...let me call the truck and see if they will take it and I will call you back.

Both systems have their pluses and their minuses. But if you are going to go percentage you really have to take a more long view approach. I believe demand is going to rise this year and rates will go with it. Rates are beat up right now but I think that will shift as the year goes on and be a benefit to percentage paid trucks.

Just my view from the other side of the glass.

 

[LDB]

John, well said and I think if companies presented it as you did almost everyone would be fine with getting ~98% of the FSC. It's when the company gets 28% that it becomes a negative factor.

 

[jelliott]

Totally agree.

 

[OntarioVanMan]

I don't agree... on % that 30% the carrier gets or whatever the negotiated rate, should include the cost of doing ALL business ... a 1% charge of say $100 is just another nickel and dime example of carriers clawing back money.