PrivateFleets.com

Recently, I interviewed some private fleets about what I consider to be a very interesting topic: activity-based pay for drivers. In the truckload world, paying by the mile is the standard. Private fleets typically have dedicated schedules and runs, and therefore hourly pay is more common. Among private fleets, activity-based pay for drivers is becoming more common. The definition of activity-based pay varies, but one of the ways fleets are using activity-based pay is to pay drivers according to time standards for an activity.

One of the advantages of this approach is that fleets can establish driver pay according to the time an activity should require, not how long it actually does require. A mild version of this approach is to deduct time from drivers’ paychecks when certain activities recorded on their logbooks take longer than they should.

For Mattingly Foods–a distributor of dry, frozen and refrigerated goods to major restaurant chains in the Midwest–one of its productivity indicators is “cases per hour.” Management doesn’t want drivers to focus on the metric, as the drivers job is to service the customer–not to offload his freight as quickly as possible. Mattingly pays drivers by the hour, but it adjusts its drivers’ hours if certain activities exceed its time standards, such as for pre- and post-trip inspections, scheduled breaks or unplanned stops.

The company developed an automated payroll system using an onboard computing platform from Qualcomm that catches exceptions to its business rules. Its computer systems automatically adjust driver pay each payroll period, according to the data captured by the onboard computers.

“All data is collected, easily reported, measured and managed,” says Brandon Hess, executive vice president. “It has made a driver more productive by being managed better than before.”

With this type of activity-based payroll system, I imagine it would not be that difficult to incorporate third-party backhaul into activity-based pay. Fleets with fixed routes, such as Mattingly Foods, would just continue to pay drivers by the hour and determine and evaluate their rates based on time.

According to the results from the Private Fleet Backhaul study I am doing (see previous article), 31% of fleets pay drivers by the hour for transporting third-party backhauls. The same percentage said they pay drivers the same way for backhauls as they pay them for hauling company freight.

Interestingly, 25 percent of fleets said they pay drivers with activity-based pay. I didn’t break this question down further to see what fleets actually mean by activity-based pay. My intuition tells me that they might be doing something close to the following.

I spoke with a food distribution fleet today that pays its drivers not by the mile or by the hour. They pay drivers by the trip. The company hauls most of its outbound freight and about 60 percent of its inbound freight with a small amount of third party backhaul. As its business volume changes, so does its routes/trips. Management therefore has to adjust its driver routes to keep their pay the same, including adding new backhaul freight where they can, I assume, to keep drivers whole.

Under this activity (trip) pay program, the incentive for drivers is to do the same amount of work more efficiently to earn more free time at home with thier families. On the other hand, this approach does not seem to give the fleet, or the driver, much flexibility or incentive to add more work (i.e. backhauls) to drivers’ schedules. Therefore, adding some incentives might be required such as a flat fee for making an extra pickup or drop. In the survey, 6.3 percent of fleets said they offered drivers a flat fee.

To find out more about how private fleets are compensating drivers through activity-based pay, I plan to speak with a consulting company called TZA in Chicago, Ill., that has helped several fleets implement activity-based pay programs. I’ll be back soon to report on what I find out.