Mileage Pay vs Percentage Pay

Discussion in 'Storage Trailer' started by jalogging, Apr 22, 2006.

  1. jalogging

    jalogging Bobtail Member

    Apr 11, 2006
    im getting my own trk soon and going otr my ? is which would be better in flatbed operation getting paid on mileage or % i know both have advantages but would do you do better with in todays markets

    thanks in advance.
  2. Burky

    Burky Road Train Member

    The real question is more involved than just which is better. Before you can answer that, you need to have the most detailed info that you can get about the operation you are going to work for. If you drive on miles, then the question becomes one of how many miles, how much per mile, detention pay, do they pay loaded and empty miles, how many miles are loaded/unloaded, how the miles are calculated, and does the entire fuel surcharge pass through to the truck? At a minimum, you need the answer to all of those items to make any kind of evaluation of a cpm deal.

    As for percentage, you need to know what they are getting paid, gross, what percentage of the gross do you get paid, what % loaded miles, how far to the next load, fuel surcharge arrangements, and all the issues that make up the rate. Remember, on percentage, you pay for all the empty miles, so you have to make enough on the loaded miles to make the trip worthwhile.

    It isn't as simple as saying one form of operation is bad and the other good. There are a lot of things that have to be looked at and balanced out to make this type of a deal work. They say figures lie, and liars figure, but you absolutely need the hard numbers in front of you to make this type of decision.

    Some of it rests on the type of freight that the company hauls. If it is cheap freight, then you are usually going to be better off with a deal on mileage. The rate that the truck gets is not tied to the amount charged for the movement of the friegh. It also allows the company owner to give you just enough to be covered, but not be in a position to share any windfalls with you.

    If they are hauling higher value freight and getting a good rate for it, then percentage works out well. The boss also profits, but as his income goes up so does yours. As long as the loaded miles stays high, and the freight rate is high, then percentage is a good deal for the truck owner.

    You need to get the numbers and see which option fits your needs best. I wish I could give you a simple one or the other answer, but it just doesn't work that way.
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  3. TurboTrucker

    TurboTrucker Road Train Member

    Feb 23, 2005
    Rossville, Georgia
    This issue seems to be coming up alot here lately, and Burky has offered some very good insight on the subject, and I only desire to add a few thoughts of my own, as I have operated under both scenarios at different times over the years.

    Both systems have their advantages and disadvantages. Personally, I have gravitated to liking mileage pay the best, because it offers the LEAST opportunity for fraud, and it doesn't require the monitoring that percentage pay does to keep things in check. Let me explain why...

    My first job, which lasted for many years, was with a small carrier that paid both it's company and contractors on a percentage basis. I made some good money working for them. The one thing that always stood out in my mind was the fact that they only paid one way. You sat down with the payroll clerk when you wanted to be paid for what you had done at ANY time, and it was all done right there in front of you. I realize that this is not done by many, if any companies these days, but I never had reason to suspect that I was ever being cheated back then, because it was handled that way.

    When you are paid percentage, you are supposedly paid a percentage of what the loads gross, unless otherwise stated in the lease, and deadheading miles are not covered in any way on paper. You "eat" those miles. Some people do not deal well with that reality. It is a common complaint, and why most companies have moved away from offering percentage pay. Even though it is simple enough to lump them in with your loaded miles to discover whether or not it all irons out to a decent rate, deadheading just doesn't sit well with people.

    Another downside to percentage pay is the temptation by some companies to skim off the top of the gross amount, if they feel it is "excessive" in their view, and think they can get away with it. A dishonest company will use several means in which to do this. In all instances where I was paid percentage, I was provided copies of the freight bills as proof of the rates charged. Unfortunately, one company that I contracted to, had an simple way of cheating their drivers, and upon discovery of this fact, I found out the hard way that not all carriers are created equal.

    This particular company had brokerage authority, and did broker some of it's freight to outside carriers. What I discovered one day while roaming the office, was that they brokered every load to themselves as well. Not some, but ALL of them. It was perfectly legal too. I was not being paid a true percentage of the gross. I was being paid on an average of 85% of the gross. The only requirement at the time, was that the fax machines could not be in the same ROOM, but could be in the same building. Part 371 of the FMCSR's have done a little to stem this practice, but I have no doubt that it still goes on.

    This same company went to great lengths to create new freight bills, which were absolutely not representative of the true arrangement, because the appearance was that they billed the actual customer, and not the "Broker", which was how it was done in reality.

    I was young, dumb, and simply quit when I discovered this, and never told a soul about it. I wouldn't be so quiet these days.

    When done honestly, percentage pay can actually be quite profitable, but when one signs on with a new company, how can he or she determine if things are done honestly and without skimming? You really cannot, unless they demonstrate a willingness to convince you that no games are being played.

    Truth in leasing regulations state that anyone paid under a percentage contract:

    49CFR 37612(g)

    Copies of freight bill or other form of freight documentation.

    When a lessor's revenue is based on a percentage of the gross revenue for a shipment, the lease must specify that the authorized carrier will give the lessor, before or at the time of settlement, a copy of the rated freight bill or a computer-generated document containing the same information, or, in the case of contract carriers, any other form of documentation actually used for a shipment containing the same information that would appear on a rated freight bill.

    When a computer-generated document is provided, the lease will permit lessor to view, during normal business hours, a copy of any actual document underlying the computer-generated document. Regardless of the method of compensation, the lease must permit lessor to examine copies of the carrier's tariff or, in the case of contract carriers, other documents from which rates and charges are computed, provided that where rates and charges are computed from a contract of a contract carrier, only those portions of the contract containing the same information that would appear on a rated freight bill need be disclosed.

    The authorized carrier may delete the names of shippers and consignees shown on the freight bill or other form of documentation.

    It's not easy to discover the truth in some of these arrangements, so knowing the terms, the figures involved, to discover whether or not the rates are conducive with industry averages, is essential before entering into that kind of agreement. People who have not had experience with percentage pay, or are not up to speed in what current freight rates consist of, are ripe for a screwing and just that quickly.

    When you are paid mileage, the room for playing with numbers is substantially reduced. Knowing the system that is used to calculate distances between points, and obtaining the same program for verification is easy to do. Of course, there is always the controversy over short miles versus the driven mileage, but trimming mileage just can't be done in the same manner that it can be done with percentage pay.
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  4. Burky

    Burky Road Train Member

    Turbo's points are well taken. A company that is unscrupulous, can always maneuver and finagle the system to their advantage. It takes a while with a new company to develop the trust needed to succeed there, and that includes their trust in you and your trust in them. Once you find that type of a place, it works out well.

    Miles are the simplest way to work. There is no easier system to track than mileage, and though the miles almost always differ from the miles the tires rolled, at least both parties are using a set standard that they both agree on and can check. And there are ways with miles for a company to rake in extra without sharing any with the driver. Pay the driver HHG and set up the customer shipping agreement using a different format with longer miles.

    Any company that wants to can easily put the screws to you as a driver. What you have to do is evaluate where you want to work, get a feel for them and their honesty, and use that "gut feeling" as part of the information you use to decide on a carrier and a pay system. It's not easy, because what works for me may not work for you at all. And despite the efforts of people on here to give you good advice, no one can make the final call but you. Gather as much info as you can get your hands on, and then you get to make the call. If the call wasn't the right one, then you may have to bite the bullet and repeat the process.
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