How fleets can keep truck driver wages competitive while managing costs

The market remains turbulent. Rates continue to fluctuate. And fleets still need to seat their trucks.

So, even amid the downward momentum in freight rates, fleets still are seeing a lot of movement when it comes to driver compensation, according to Leah Shaver, president and CEO of The National Transportation Institute.

“With freight rates that are changing and costs continuing to rise, motor carriers are looking at the bottom-line results,” Shaver said during a recent webinar hosted by Jeremy Reymer, founder and CEO of DriverReach. "So, how do we rein in our costs, and how do we make sure that we are managing expenses as we ride out this wave?”

Carriers are still waiting for calmer waters, but there have been signs of some stability. Data from Truckstop.com and FTR Transportation Intelligence for the week ending April 21 show a continued softening of broker-posted spot rates in dry van and refrigerated. However, the rate decreases in the van segments were much smaller than they had been during the previous week, when rates had fallen by most since January in both segments. Total spot market rates were up from the prior week on the strength of flatbed, which is seeing higher rates than the van segments and posted stronger volume growth in the latest week.

That said, based on seasonal trends, van rates might be approaching a bottom over the next few weeks, according to Truckstop.

One reassuring sign is that DAT Freight & Analytics’ Truckload Volume Index increased for van, refrigerated, and flatbed for the first time since last July. However, national average spot van and refrigerated rates did plunge to two-and-half-year lows in March.

Despite higher freight volumes, low rates in March capped a challenging first quarter of 2023 for most truckload carriers and freight brokers, according to DAT. Flatbed freight was an exception: pricing and demand on the spot market have been steady since the start of the year.

“While shippers are taking advantage of the current situation to stabilize their carrier base and bring their contract rates back in line, the spread between spot and contract rates was historically large—59 cents a mile for van freight, 57 cents for reefers, and 66 cents for flatbed freight,” noted Ken Adamo, DAT’s chief of analytics. “We expect spot rates to remain at ‘touch-bottom’ levels until retailers start replenishing inventory for the end-of-the-year holidays.”

Benchmarking amid market pressures

Various pressures—record low unemployment and fierce competition for industrial workers, constraints on driver supply from the federal Drug & Alcohol Clearinghouse, drivers aging out of the industry, inconsistency of pay and schedules, etc.—are continuing to impact trucking operations.

In a volatile market, fleets are struggling to keep expenses low while still trying to get their drivers higher-paying loads and keep service expectations with shippers intact.

Shaver’s team at NTI, which specializes in looking at nearly 200 attributes of driver compensation, works with private fleets, dedicated fleets, for-hire trucking companies, and owner-operators, and looks at wages for professional drivers and technicians in nearly 700 markets.

And when it comes to pay, benchmarking regularly is key, Shaver stressed.

“Many fleets are saying they are not thinking of changing pay,” she said. “You may not think you are, but there are certainly market pressures that tell us we need to make adjustments.”

Additionally, the fleets facing some of the biggest challenges with recruiting and retention are those offering just one job type and hiring one type of driver profile, Shaver indicated.

“Most motor carriers and private fleets will accept a driver with two years of experience, but the hiring competition is especially fierce at that point,” she explained. “If your requirements are to keep drivers within two years and beyond, you’re going to continue to see a lot of pressure in the labor market. Frankly, folks really want and expect a better work-life balance, better job turnaround, and better pay.

“Large fleets that I work with a lot have mentioned recently that ultimately drivers want dedicated, they want to be in a position to have flexibility within their schedule and to have great pay, and they want what we have been offering them in the last three years,” she added.

Tips to manage headcount and costs

Shaver shared some of NTI’s most discussed strategies that fleets are using to make their compensation decisions today.

First off, she said, although base pay might not be considered a trending topic in trucking, NTI sees perpetual momentum in driver incentives, bonuses, and guaranteed pay. And as fleets price new business, NTI advises against allowing compensation momentum to decline.

“It is very important that teams look at: ‘How many drivers do we need to fulfill this business? What is the actual cost of labor in this market to do business? What is it going to take for us to fill the seats,’” Shaver noted. “There is a lot of business out for bid right now. It is very important for our key stakeholders to price accordingly and [determine] if they can afford to continue to do the work if the rates drop.”

“Shippers are absolutely very concerned about what’s happening with driver pay and they want to stay abreast of what happens—not necessarily today, but tomorrow,” she added. “They don’t want to be in the situation they were in in 2021 and 2022 when pay skyrocketed as rates were going up and we just didn’t have enough drivers to do the job.”

Another topic that comes up among fleets is looking at total compensation packages and how effectively management communicates the details of those pay plans and incentives with drivers.

“You want to make sure that the conversation is effective in terms of attracting folks and what exactly is relative to each driver,” Shaver explained. “The folks that tell you it’s not all about pay probably don’t pay that well, or they don’t want you to focus on being paid well. Drivers do need to be paid well.”

Driver pay is that handshake that starts the conversation and keeps that relationship going,” she stressed.

Shaver added that benchmarking can help fleets market their offerings effectively—not only internally to their drivers but also to resell themselves to potential new recruits. Shaver also urges the fleets she works with to make sure that internal processes are in place so drivers can “consistently and persistently” communicate why they chose that fleet, why they continue to stay with that company, and why they would recommend that company to others.

“One of the greatest mistakes that we see every day is when folks source a driver, they seat the driver, and the courtship ends at that point,” Shaver said. “It’s really important right now that we can drown out the noise of competitors and remind drivers why the compensation plan works for them, why you are the best-in-class employer, why they chose you, and why they need to stay with you.”

Fleets also should be considering overtime pay, incentive-based pay, guaranteed pay, and upskilling and cross-training drivers and recruiters to become subject matter experts and ambassadors for the company, Shaver pointed out.

“The market will cycle back,” she said. “Ultimately, you want the opportunity to respond, to react, and to make changes to support your company’s goals.”