Percentage Pay for Drivers

I start at 25% and go up based on performance and time with me. Right now have two at 26% and one that I just bumped to 30%. 2014 he cleared over 50k after taxes. 2015s been rough looks like around 40k after taxes. The fsc is added in to the rate and is part of the percent the drivers get. My drivers are home most weekends it's more up to them. They can take off about anytime they want.

We pay our drivers 25% of the truck gross. 99% of what we do is bid without a fuel surcharge. If there is a fuel surcharge the driver gets 25% of that as it part of the truck gross. As has been posted in another thread work comp continues to go up each year. We had a driver that was involved in a accident that left him off work for the better part of two years. While we had to fight with the work comp many times to make sure he was recieving his pay and medical bills was being paid, he was glad that we had work comp and to be covered. His medical bills was well north of 200,000. I know that I wouldn't have wanted to pay that amount out of my pocket if I had been hurt and I wouldn't expect an employee to want to either. Had he been being 1099 instead of being a true employee he would have been the one paying the doctor and trying to figure out how to live off of no income. While the work comp pay check is nothing to brag about it is a lot better than nothing. The cost of paying work comp and uneployment is figured into our operating cost and is part of our rates.

Thank you all for your comments. My thought is, if I went to a W2, would be to start at 23% and scale up to 25% over time after the driver meets certain criteria. I believe the 1099 can really benefit the driver if they know how to use it for deductions, but not all drivers are the best money managers. It's been a challenge hiring new drivers this year as they all seem turned off by the 1099. However, W2 employees are expensive and the taxes are ridiculous.

I normally just read these forums because responding and showing my thoughts in general don't really accomplish anything other than wasting my time. For the last several years i have heard alot of complaining on this forum about brokers and rates and blaming everything except the small business owner that makes the decision to haul the load. Here we have a conversation about paying drivers on a percentage scale as an employee then saying your giving them a 1099 at the end of the year. 1099 my rear end. Here is the guy who is scooping up cheap frieght because he is operating at a huge advantage over legal motor carriers paying Workers comp, Unemployment insurance, Social security and medicare which alone that are about 7.5% of payroll. I really dont care how you run your business there is always going to be people in this industry taking short cuts and bringing the rates down. My issue is that all you people who whine about brokers and cheap customers should be all over this guy and how he runs his business. I have conversations with customers on a daily basis telling me my rates are too high and they tell me other guys are doing it for less money on a regular basis. This is how you haul cheap freight.

I would stop the 1099 in a heartbeat if I were you. It is against the law to 1099 a driver cause they are actually your employee in your truck not theirs. They are not contract carries. If the right agency finds out you could be out of business. It happened to a local guy I know. Just saying.

I don't blame the drivers that don't want to be 1099'd. Your pushing your half of the income taxes back onto the driver plus the workers comp they will not be covered by.

Do you pay work comp, unemployment, and social security on you employees that you 1099? If you don't then you are able to operate at a cheaper cost because that is less overhead than the man that does. If you don't provide these to you drivers what do you do when one gets hurt?

Ryan, I did not reply to this post in order to start an arguement however the very fact that you actually believe you have a choice in whether you provide a 1099 or a W2 to a driver is absolutley ridiculous. I would almost be willing to accept you found some lawyer to give you bad advice except your statements made in this forum make it completely transparent that what you have is employees not INDEPENDANT CONTRACTORS. Undoubtably there are many questionable ways that large carriers get away with basically the same thing however even it that is the case it always involves a lease or lease purchase of equipment. SInce your stated clearly you pay 25-27% to your 1099 drivers that is clearly not how you operate. Also it makes no difference how a driver tells you he wants to be paid the minute he steps off that truck and twists his ankle the state will own you. Furthurmore assuming you do hire a w2 driver aka employee who has the same job as the 1099 driver you will be proving the governments case for them in court. As far as my statement that you are one of the guys hauling cheap frieght I am not so sure i would take that as an insult. If i could find a way to run my trucks on water i would drop my rates my at least $2 per mile and be the Walmart of trucking and i wouldn't feel guilty in the least. What i am saying is that clearly your operating costs are much lower than mine therefore your ability to haul freight much cheaper and still be profitable is simply a fact. Now let me answer your question using my current rates

L&I $4.9393 per hour based on 520 hours per qtr full time OTR driver in Wa state = 2568.44 per driver
UI/EAF Wa state your rates adjusted based on experience 3.53% of payroll.
SSI/MEDICARE 7.5% of payroll.

$240,000 gross @ 25% = $60,000
Workers Comp $10273.76
Unemployment $2118.00
ssi medicare employer $4500.00

Total additional cost =$16,891.76 which is about 7% of your 240,000 gross.

So let me ask you can you afford to pay your 1099 drivers 32% of gross?

Alfred,

You are correct about each state having slight differences in whom they consider an independant contractor. However they are all extremely simple to understand including the IRS. The driver better have an ownership interest in at least the power unit and he must have the ability to work for other customers not just your company. Which is why the larger companies sign the lease O/O i imagine the way they can justify saying you have the ability to work for other customers is simply with an open ended pay off clause in the lease purchase. Simply being a driver with a toolbox and a pair of gloves wont cut it anywhere. It is possible that in this case there is some sort of lease agreement but when the percentage amount of gross mentioned is 25-27% it just doesn't add up. We can simply agree to disagree on this but my main point is when you subracting these large percentage costs you start seeing how some companies can pick up cheap frieght and stay in business.

I have had my program reviewed by both the IRS and my attorney, it checks out 100%. I would not want to get into a pissing contest with the government over such an issue. The reason I went 1099 all the way is because I grew weary of the attitudes that employee's tend to have. An employee tends to not have pride in their work ethic, their appearance, the way they take care of the equipment. Once again we rent the equipment, along with a business package, they choose the payment plan that they desire, they choose where and when they want to fuel, they choose where they like to run, and if they want to haul their own freight under out authority that is fine as long as the customer has the credit and pays. I run an owner operator school and am not into having drivers I prefer operators (just a little different mentality there). I actually help our graduates get their own authority when they feel they are ready. How many others out there do the same? If my state told me that I had to go back to W-2 employee's so they could keep the unemployment taxes, along with others, well I would just have to sell my house, and business in Missouri and find another state to do business in. I believe in treating those that work with me like partners, that is the way I like to be treated when I work for or with others, to include our shipper partners, our broker partners, and our operator partners. I don't want to be Lord and Master over those that work with me, I just want to be the King of my little piece of the pie. By the way I gave you a like for your statement that we agree to disagree. Amen brother.

You have a happy New Year as well. As a matter of fact all of us have a happy New Year!!!!!

I have real good attorneys. They have kept us out of trouble many a time, like insurance a necessary evil, like brokers, LOL. Don't get too tipsy, I got to go pick my wife up from the airport she is coming in from Vegas, we are heading to San Antoino in the morning to see the Spurs play at the Texas shootout this weekend. I hope none of those drunk bassturds run me off the road on the way. LOL

Doing what you do is different than paying a person as a driver and then 1099 him.

I have a friend who does this and it is working quite well.He owns the truck by the way

say the truck grosses 4000 a week,and fuel runs , for example 1000
that leaves 3000,take 25 % of that for truck expenses etc,and split the rest with the driver
2250 divided by 2 equals 1125 to the driver for the week
fuel surcharge should go to the truck owner,not the driver
unless he owns the truck

I wouldn`t say you have been doing it wrong.That works for my friend,who carries a lot of responsibility since the trucks and authority is in his name.He derserves to make a profit qnd not have to spend it on truck taxes,repairs etc

also,any detention,layovers,tonu ,he shares with the driver

no,my friend pays for all that,the driver don`t pay for anything
but the owner takes the fuel plus 25% for expenses and splits the rest with the driver..(except fuel surcharge)

people can do it anyway they want if everyone`s happy