Which costs more for a company to employ, O/O or company driver?

Cost less to put on O/Os,, no payroll taxes, no SS matching,,they don't have to buy trucks and letting them sit cost nothing,,An other benefit is they give the O/Os the crummy money losing loads,

 

add in no required health insurance costs, no disability costs, no unemployment costs, for the company to use O/O.

 

Which means these companies can make more money leasing trucks to drivers than hiring them as employees. That is why they push these " flease " programs so much. Not to be good for the driver, but to improve the company's bottom line.

 

Beside all of what was said, the thing about contracting the work out is that it is all directly taken off of their tax bill.

The other major thing is that there is a limit to the liabilities for the company. an O/O has a liability burden that a company driver shares with the company. In the long run the O/O benefits the company financially by having lower insurance and operating costs.

Who says that costs them more?

It is a competitive thing, if you were going to make an offer to someone who was another business (you need to think that an O/O is another business to do a service) then you wouldn't just tell them "I'll pay you 30 cents a mile to haul this" but look at what the norm is and offer them a percentage of your take to get the job done. remember this isn't about just making money but in many cases producing repeat business from a customer.

Nothing appears as it really is. An in-house driver may be cheaper if there is a need to have one but least operators or service providers (in some cases the company will go to another company to get something moved) may be something that will benefit the company in the long run. Too many people think the short term (by the load) but not the long term and this is where they get into trouble by chasing every high paying load.

ALSO as I said something before, many times in this industry there is something called "capacity on demand" services which many companies actually practice. If say Landstar has customer X which is hauling five loads out of Detroit a day and they are down for say a plant change over, LS won't have idle drivers taking up revenue and don't have to catch up on their books to balance it out when work starts coming in. So LS will wait, idle the O/O and that costs them nothing. The customer will be taken care of even if that O/O goes away,

Make sense?

I'm trying to figure out this one, there is a cost related to these leases on how they manage the lease fleet, so I can't see how this would help the bottom line if they have a turn over of drivers with trucks that have to be taken as losses in the end (and many times put up at auction).

 

I'm trying to figure out this one, there is a cost related to these leases on how they manage the lease fleet, so I can't see how this would help the bottom line if they have a turn over of drivers with trucks that have to be taken as losses in the end (and many times put up at auction).

Then why do thye push leases so hard to the new drivers ? As stated above, so many costs are transferred from the company to the O/O.

 

Leases save companies money... driver pays for maintenance, driver pays for fuel, driver pays most of the CPM back as a lease payment... the carrier gets to count the entire amount paid to the drivers as a cost, with NO assets attached.

A lease or lease to purchase makes you an O/O in the IRS's and the business eyes...

And when the driver defaults on the lease, more often that not, the company has collected all those payments, and gets the asset back. the driver gets nothing.

 

Some are getting equipment leases (renting/buying your truck from the carrier) confused with a carrier lease (operating your equipment under a carrier's authority). I think the OP is asking about the latter.

The tax benefits go both ways. Sure, the o/o has to pick up the "employer" part of SSI and Medicare. Fact is, an employer may tender that payment, but the employee is really making the payment via reduced wages. So that's a BS argument in my opinion. That cost doesn't magically vanish because someone else is paying it. It's a cost that the o/o gains control of. About the only real savings to the carrier is worker's comp, which also can be considered part of employment compensation to a degree. That is, money not paid to the employee that could have been if the cost didn't exist.

What's really happening in a carrier lease is: you, the o/o, take on greater risk since you're paying the bills on the truck. A struggling o/o will just say that's the company stuffing their costs onto the driver. A successful o/o will see it as an opportunity to manage costs better than the carrier could with a company truck and take that to the bank. It can go either way.

From a carrier perspective, it's lower risk because the o/o has an ownership stake in their business. They aren't going to abuse the equipment because that's a cost coming out of their own pocket. Likewise on fuel. No surprise that people who pay for their own fuel are a little more sensitive about idling and driving fast. As a carrier leasing on an o/o those operating costs aren't my problem any more. My carrier percentage only needs to cover my administrative costs and insurance (veh liability and cargo). No more variables with someone that has a heavy foot or likes to drive up on curbs a lot. To the o/o they represent an opportunity to be more profitable by applying best practices. When the o/o applies those best practices, they tend to have fewer breakdowns and are more reliable. To the carrier that means better service delivery and fewer headaches with breakdowns and possibly a stranded load.

What you really need to consider when thinking about buying a truck and taking on a new business is: Are you looking for a bigger paycheck? Or are you looking for an opportunity to make more money. There's a difference. If you don't see it, you're not ready.

 

I like that