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Highlights from Our Trucking Owners Business Roundtable - Part I

Posted 8:24 PM by

Recently Katz, Sapper & Miller, LLP (KSM), KSM Transport Advisors, LLC, and Scopelitis, Garvin, Light, Hanson & Feary, P.C. hosted our semi-annual Trucking Owners Business Roundtable.

Gordon Klemp, managing partner of the National Transportation Institute, discussed driver supply and demand, company driver pay and contractor pay, and average mileage rate trends and expectations. Troy Hogan and Mark Flinchum of KSM spoke on the potential for savings by implementing per diem plans and provided an income tax update. And Jim Spolyar and Chris Eckhart of Scopelitis provided a legal update on wage and hour issues, class action and collective actions, driver application do’s and don’ts, and tips on using restrictive covenants. Below is the first of three messages summarizing the roundtable.

Highlights from Gordon Klemp’s presentation include:

  1. Driver supply/demand:
    1. Currently there is an industry shortage of 20,000 – 30,000 drivers.
    2. Approximately 1/3 of the drivers on the road in 2003 will have retired by the end of 2013.
    3. No new drivers were brought into the industry between April 2007 and September 2013 and a significant portion of displaced drivers during that time have chosen not to return to trucking.
    4. The majority of drivers are within the 35-54 age range.
    5. Driver supply will not likely improve in the near future due to CSA regulations; and mandatory EOBR use may negatively affect the number of employable drivers and driver productivity.
    6. Proposed hours of service (HOS) could reduce productivity by 6-8 percent. 
    7. A significant number of drivers will have to make dramatic lifestyle changes to remain “fit to drive” based on the current driver population demographic.
    8. Hair follicle testing is being adopted by carriers because it provides a longer time horizon. Carriers using the program report disqualification rates of more than 10 percent when they implement the program, dropping to 3-5 percent as the candidates learn the carrier uses hair follicle testing.
    9. The industry has not been successful in attracting enough high quality entry level candidates to cover existing driver retirements, and targeting nontraditional demographic groups has not been very successful.
  2. Driver pay averages are staying the same or increasing. Current average company driver rates are dry van - $.365, refrigerated – $.347, flatbed - $.387.
  3. Based on percentiles (25th percentile vs. 75th percentile), dry van rates are between $.88 and $.97, refrigerated rates are between $.85 and $.90, and flatbed rates are between $.91 and $.96.
  4. Over the last 18 months, sign on bonuses have become increasingly popular (from 11 percent of carriers to 47 percent of carriers). Bonuses for individuals range from $250 - $2,500 with a median rate of $1,000. Team bonuses range from $2,000 - $12,000.
  5. The outlook for the next 24 months indicates that company driver pay will increase by $.03 to $.05 per mile, owner operators will increase by $.04 to $.06 per mile, sign on bonuses will continue to grow, driver pay will become regionalized, productivity pay schemes will continue to grow, and carriers will begin to find ways to reach drivers from nontraditional demographic groups.

Click here to view or download Gordon’s presentation.

About the Author
Daniel Larson is a manager in Katz, Sapper & Miller’s Business Advisory Group. Daniel provides financial, tax and consulting services, aids clients in the management of their businesses, and prepares and reviews client financial statements and tax returns.

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