Over-the-Road Driver Agreements: A look at the options in the industry

Over-the-Road Driver Agreements: A look at the options in the industry

Whether you’re just researching trucking school or are an experienced driver, it can be overwhelming to identify the best form of compensation for you. From company drivers to 1099-contractors to owner-operators, we’re taking a look at the options out there once you’ve earned your CDL. The information shared here constitutes our opinions about driver/fleet owner relationships in over-the-road trucking, formed over many years in the industry. We want to help you make an informed choice as you select the best situation for your own needs and goals. We are not—and never will be—legal or tax advisors, so get that information from the pros!

The most important piece to consider is your unique situation—your background, experience level, personal finances, and level of comfort with risk. Certain arrangements will appear to offer greater compensation, but that generally comes at the cost of something else.

Company Drivers in a Large Fleet

We use the term company driver to mean a driver who is an employee of the fleet owner and receives a W-2 form for tax purposes. Taxes will be withheld from each paycheck, and your ability to write off expenses may be limited. While this arrangement does exist with smaller fleet owners, it’s more common with the large carriers. You will operate the company’s equipment and may have dedicated accounts that you are running regularly. Your contact with dispatch will generally run through a large call-center operation and you must run the loads that are assigned to you. As is the case with most large corporations, you are less likely to have personal relationships with your dispatchers and the people you’re working for. The company will have set policies for their driver pool that are unlikely to bend/change to accommodate your needs. The equipment will be at the fleet’s specification level and maintained as such.

Experience Level

Ideal for newer drivers/first job out of trucking school. Orientation and ongoing safety/driver education is common.

Compensation

Low rate per mile, less likely that you’ll receive accessorial pay (detention, layover, etc.). More likely to receive employer-sponsored benefits (heath, retirement, etc.). Some fleets provide college tuition credits for family members after so many years on the job. The fleet will provide insurance to cover medical costs in the event of an on-the-job injury.

Home Time

Generally strict guidelines—you must drive a certain number of days in order to earn one day off. You will likely leave the truck at a depot and be responsible for your own transportation home from there.

Risk Level

Low; the fleet will absorb rate fluctuations and cover any equipment maintenance/repair costs, as well as fuel and tolls. If your truck goes down, you can generally move into another truck instead of waiting for repairs, which reduces your down time.

Independent Contractors in a Small Fleet

Independent contractor drivers receive a 1099 form for tax purposes and are responsible for paying all income taxes—nothing is withheld from your paycheck by the fleet owner. You are essentially running your own small business, so you will need to set aside funds to pay taxes and keep track of business-related expenses that can be deducted on your tax return (e.g. per diem). In this case, however, you don’t own or lease the equipment. As an independent contractor, you can expect more responsibility in the truck. You can refuse loads, navigate your own routes, plan where you fuel, etc. A smaller fleet will give you greater likelihood of building relationships with management, who may have the ability to be more flexible for special situations. Note that some small fleets will employ company drivers.

All Tempus Transport drivers are independent contractors.

Experience Level

Some over-the-road experience is recommended as you will need to make smart decisions about loads and time management. If the contractor position is your first job out of trucking school, you’ll want to make sure that the fleet will pair you with a more experienced driver and/or provide more dispatch support to help you in your early days.

Compensation

Generally higher rate per mile than a company driver and more likely that you’ll receive accessorial pay (detention, layover, etc.). Contractors are not eligible for employer-sponsored benefits, but some fleets have discount programs to help you purchase health insurance. The IRS requires you to cover the cost of your own Occupational Accident Insurance; you may participate through the fleet’s program. In some fleets, you may also be responsible for the cost of fuel, tolls, and other operating expenses (usually a 60/40 revenue split; in Tempus Transport’s case, we cover the operating costs).

Home Time

You will manage your own home time as a contractor, so you must consider how much you need to earn in a given month or quarter and balance your home time accordingly. We recommend our drivers stay out for a minimum of two weeks before taking home time; our most profitable drivers stay out for six to eight weeks at a time. A smaller fleet owner is more likely to let you take your truck home or provide other travel accommodations.

Risk Level

Medium-low; the fleet will absorb rate fluctuations and cover any equipment maintenance/repair costs, as well as fuel and tolls. If your truck goes down, you can generally move into another truck instead of waiting for repairs, which reduces your down time. You may be subject to seasonal fluctuations in freight, which requires good annual planning (e.g. don’t take home time in the fall/early winter when freight tends to be strong, but take more home time in January/February when freight is soft). You must also take responsibility for setting aside money for your taxes since nothing is withheld from your paycheck.

Owner/Operator

An owner/operator is similar to a contractor and receives a 1099 form for tax purposes, but in this case you own your truck. You may lease it to a fleet owner or carrier, or you may dispatch your own freight using load boards, brokers, or personal business connections. While owner/operators have the greatest autonomy, they also have the greatest risk. When you purchase a truck, you must be prepared to make a significant down payment, and also have a sizable savings built up for maintenance, repairs, and other operating costs. If your truck goes down, you’re hit in three ways: the cost of the repair, the cost of your housing while the truck is in the shop, and your lost revenue from not running loads as long as the truck is down.

Experience Level

Very high. You should have an absolute minimum of two years of over-the-road experience before even considering becoming an owner/operator. Three to five years is a better learning period. There’s no training or learning support available. You should also have a basic understanding of diesel mechanics and the ability to create the safety standards you’ll hold yourself to.

Compensation

Gross revenue will be the highest, but remember that you are responsible for all of the truck’s costs. You must make your truck payments on time, cover fuel and tolls, pay for maintenance and repairs, and set aside money for taxes. You also have to consider insurance, government regulations, health coverage, and your retirement savings. If you are a company driver or contractor driving another fleet owner’s truck, we recommend comparing your pay statements to what you would earn and what you would spend as an owner/operator. In many cases, you’ll find that the contractor driving a company truck has the highest net earnings.

Home Time

As an owner/operator, you manage your own home time. The most important consideration is whether you can continue to make timely truck payments while on home time. It’s another expense that will draw down your cash reserves and must be carefully planned.

Risk Level

Very high. You are running your own business, so there’s no safety net if you make a mistake. You will have a significant amount of money invested in your truck, and if you can’t keep up with payments, you risk losing everything.

A note about Lease/Purchase agreements

Many of the larger carriers offer lease/purchase programs, which ostensibly allow company drivers to become owner/operators. Run away from any lease/purchase program! We have never encountered one that has the driver’s best interests in mind. While a zero down payment and no credit check can sound appealing, they’re missing a critical part of succeeding as an owner/operator: the financial wherewithal to manage your own business as a driver. You’ll still have to make truck payments, cover repairs and maintenance, etc., but you are at the mercy of the carrier you’re leasing from to get you enough freight to cover all those costs. Lease/purchase programs have an extremely high failure rate.

In closing

Please remember that these are our opinions formed over years in this industry, and we are not tax advisors. You must choose the right type of arrangement for your situation, and we encourage you to consider your unique situation carefully. If a small fleet contractor sounds like the right arrangement for you, get in touch with us! Driving a truck can be a very lucrative career for those who are willing to work hard and don’t get in over their heads financially. Above all, stay safe out there!

3 Replies to “Over-the-Road Driver Agreements: A look at the options in the industry”

  1. Hello my name is Yvonne Grant. I’ve been driving since 2005. Do u have to be a team to drive for you? I would like to drive a straight truck. Can u get back with as soon as you can. Thanks. 803 457 6181 anytime. By the way I live in Cloumbia S.C

  2. Hi my name is Yvonne Grant. I want to know if you have to be a team to drive for you? I’ve had my CLD since 2005 Class A. Can u please get back with me as soon as you can. I live in Cloumbia S.C. 803 457 6181 thanks

    1. Yvonne,

      Our tractor drivers are able to run as solos. One of our recruiters will reach out to you this morning. You can also reach us at 844-836-7878.

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