Economic conditions impacting the trucking industry have been turbulent in recent years. As the world ground to a halt in 2020 due to the COVID-19 pandemic, the supply chain was severely disrupted. Despite many industries rebounding, the trucking industry continues to struggle with finding enough high-quality CDL drivers to operate their fleets.
In addition to driver shortages, significant rises in inflation (which has risen over 9% in the last year) is driving up the cost of living, resulting in wage inflation. As drivers look to companies that offer salaries that align with the new industry wages, companies that fail to recognize or respond to this change could experience increased turnover and driver retention issues. For this reason, trucking companies need a process to evaluate and maintain their competitiveness in terms of compensation packages.
Benefits of Performing a Quarterly Compensation Analysis
Trucking and logistic companies that want to remain competitive need to ensure that their compensation packages are attracting the highest quality drivers. Without competitive compensation, the company will struggle to retain the talent they need to meet its strategic business objectives.
Unfortunately, changing economic conditions and other variables can cause even top employers to lose their competitive edge. For this reason, HR and staffing experts recommend that trucking companies perform a compensation market analysis once a quarter. While this effort will take time and resources to complete, there are numerous benefits to the company.
- Reduced Turnover – It’s estimated that the turnover rate for companies with large fleets is approximately 90 percent. In such a competitive market, truck drivers are constantly on the hunt for better opportunities within the industry, including companies that have more competitive salaries. A competitive wage analysis can help ensure that your compensation packages are in line with what other companies in your area are offering. Compensation is an important part of your overall retention strategy.
- Attracting New Talent – The American Trucking Association (ATA) estimates that the shortage of qualified truck drivers could reach 160,000 by the year 2030. Companies that build a reputation for having the best compensation packages will attract the most talent as it becomes more difficult to fill these roles.
- Financial Strategic Planning – According to the American Transportation Research Institute, a driver’s wages and benefits are the single largest expense for trucking companies. Wages and benefits alone make up 42 percent of the cost to operate a single truck. Major swings in inflation or sudden increases to the local cost of living can make it difficult for companies to prepare for budgetary impacts. A compensation analysis for CDL drivers can help ensure the long-term financial health of the business.
- Cost Reductions – While wages do tend to increase over time, companies that don’t have a good understanding of the appropriate salary ranges for their drivers could be spending money unnecessarily. In some cases, it could be possible that your company is paying wages that are too high. For example, while your pay may be in line with other companies, you might inadvertently be paying junior drivers wages that are more appropriate for seasoned drivers.
- Competition Benchmarking – It’s quite common for companies to evaluate their competitors’ services, business model, and customer bases. Since driver wages are such a significant operating cost, performing a salary market analysis gives your team the ability to compare your company with your closest competitors and establish important benchmarks.
Best Practices When Performing a Compensation Analysis
There are numerous ways to evaluate your company’s compensation packages and ensure they are appropriate for your area and specific industry niche. Generally speaking, there are several best practices that can help improve the quality and effectiveness of your compensation analysis.
1. Access High-Quality Data Sources
Your compensation analysis will only be as good as the data that you can access and use. It’s important to try and gather trustworthy data sources that are specific to your location and industry whenever possible. Sources including government databases, historical statistics, industry research, industry experts, and job boards are a great place to start.
Make sure that you also consider the location-specific cost of living index for your operating territory. This is especially critical if you have a team of drivers that are dispersed across the country or a large region.
2. Compare Yourself to Similar Companies
The trucking industry is very diverse. This can dilute the information required to perform a proper compensation analysis. You want to make sure that you are conducting an apples-to-apples comparison. Long haul providers will have very different wages than short-haul delivery companies. Major shipping conglomerates might vary significantly from mom-and-pop logistic firms.
3. Examine Job Descriptions
Many professionals make the mistake of assuming the roles between companies are always equal. In some cases, a salary misalignment could be a result of having additional job responsibilities that are not required by other employers. Even if two companies have equal pay, one may have a competitive advantage by offering a position that has less stress and responsibility.
Take time to thoroughly examine the job descriptions posted by other companies. You can also talk to your employees about what responsibilities they have. This feedback could be especially helpful if the drivers have experience working for other companies.
4. Set Salary Ranges
Not every employee will make the same amount for the same position. Pay ranges can vary depending on the driver’s experience, special training, or other backgrounds. However, it’s wise to establish ranges for each type of position at your company. This will give your managers guidelines to follow and ensure that there are no discriminatory pay discrepancies as a result of age, gender, or race (which can lead to costly lawsuits).
Some companies may choose to make these ranges visible to employees. Companies that are transparent about salaries can build trust with their employees and demonstrate that they are dedicated to trying to keep pay ranges updated and aligned with industry standards.
5. Look Beyond Drivers
While it’s important to make sure your CDL drivers are paid appropriately, your compensation analysis should examine roles beyond your fleet. Compensation for management, administrative, and operational staff should also be included since they are a part of your overall operating expenses.
6. Explore Other Forms of Compensation
Driver wages will likely be a focus during a compensation analysis. However, it’s also important to examine the benefits that make up the employee’s compensation package, including sign-on bonuses, incentives, paid time off, health and life insurance, and other perks.
Leverage Industry-Leading Compensation Analytics
At Inflection Poynt, our team of experts is here to help trucking companies understand market dynamics that influence their ability to attract and retain great CDL drivers. Our market analytic tool leverages key metrics to analyze industry data and provide compensation recommendations based on current pay conditions, costs of living, and job market competition. Contact us today to see how your organization can benefit from our innovative compensation analysis platform.
