Determining the appropriate rate per mile pay for CDL drivers is a crucial step for any trucking company looking to stay competitive and attract and retain qualified drivers. There are several factors that trucking companies need to consider when setting rates to ensure that they are competitive, fair, and profitable. To do this, there are 2 approaches: A. starting at what’s competitive in the industry and then building your rates around that, or B. looking at your total revenue that can be brought in and working backwards to calculate what the max amount you can afford to pay. For either of these approaches, it’s important to take into consideration the following points:
- Understanding Industry Rates: The first step in determining appropriate rates per mile pay is to understand industry rates. Research industry standards and compare your rates with other companies in your region or niche. This information can help you determine if your rates are competitive and if there are any areas where you can improve. One easy way to access this data is to ask around or search on indeed or other popular job sites for similar roles in your same area.
- Considering Overhead Costs: It is essential to consider overhead costs when setting rates per mile pay for drivers. Overhead costs include fuel, maintenance, insurance, and other operating expenses. These costs vary depending on the type of trucking company and the distance traveled.
- Determining Driver Experience: Driver experience is an important factor when setting rates per mile pay. More experienced drivers tend to be more productive and require less training, which can increase profitability for your company. Consider the experience level of your drivers when setting pay rates.
- Calculating Your Margins: To determine a profitable rate per mile pay for your drivers, you need to calculate your profit margins. Calculate the cost of the trip, including fuel, maintenance, and other expenses, and subtract it from the total revenue earned. This calculation will help you understand how much profit you are making per mile and how much of that profit you can allocate to pay your drivers.
- Considering Market Demand: The market demand for truck drivers can also affect pay rates. If the demand for drivers is high, companies may need to pay more to attract and retain drivers. Consider the current job market and the competition in your region when setting pay rates. Again, you can look at sites like indeed.com or monster.com to get an understanding of just how many offers there are in your area as well as what you can do to differentiate yourself.
- Evaluating Driver Performance: Evaluating driver performance can help you determine if they are meeting or exceeding expectations. Drivers who meet or exceed performance expectations may be eligible for a pay increase, while those who consistently underperform may need additional training or coaching.
Below is a highly simplified example calculation of one approach you could use:
Let’s say you charge $1.50/mi to customers and have a fleet of 2 trucks running 10k mi/mo.
Revenue: $1.50/mi x 2 trucks x 10k mi/mo = $30,000 per mo
Then you will add up and subtract your monthly costs like insurance, gas, maintenance, business expenses, etc. In this case, let’s assume all our costs (excluding driver pay) add up to $7,000 per mo total.
Per month:
Expenses: $7,000 + Driver Pay
Profit = Revenue – Expenses
Let’s say as a business owner you are hoping to take home a pay of $8k/mo. In simplified terms, that would be your profit (without factoring interest, taxes, amortization):
$8,000 = $30,000 – ($7,000 + Driver Pay)
$8,000 = $23,000 – Driver Pay
To calculate total driver pay per month,
Driver Pay = $23,000 – $8,000
Driver Pay = $15,000 total
Per Driver = $15,000/ 2 = $7,500
If each driver is doing 10k mi per month, that equates to $0.75/mi to get you to your desired company profitability of $8k/mo with the given average rate/mi you’re selling at and your total expenses as noted .
Remember to review and adjust pay rates regularly to ensure that they remain competitive and aligned with industry standards.
