Questioning 60/40 split for contractors

[Suds43]

I've always been curious, maybe someone can shed some light on the subject.
I just can't understand why someone would "contract" with an owner to drive their truck and pay for the fuel themselves? I know you have to figure in the fuel surcharge, but how much does that really offset the fuel costs? Also, then your responsible for fuel taxes, which no owner I've talked with has ever mentioned.
Personally, I won't drive for an owner that insists on the driver paying for the fuel.
Tell a "company" driver that they have to pay for their own fuel and watch them laugh........
I just don't get it..........now before someone goes off on a long sermon about the owner afraid of the driver just wasting fuel, idling all the time and not watching fuel mileage, fuel prices, etc. I understand that. But if you can't trust a guy that he will be responsible with the truck and fuel, why hire him in the first place?

 

[arkjarhead]

What everyone has always told me is the party drawing 60% makes more. You know what? That smells like bs to me. Why would you make truck payments and pay maintence only to make less?

 

[ATeam]

Suds, I think you answered your own question with reference to the sermon you do not want to hear. Also, with every fleet owner we contracted with and we paid for fuel, the fleet owner paid the fuel tax.

We had a fleet owner change the deal on us midstream from 60/40 with us paying fuel to 40/60 with him paying fuel. We did better under the original deal and only tolerated the change because our own truck was not far off. Changing fleet owners would have been more costly than sticking it out with the present one.

There are many more things to think about regarding a fleet owner relationship than who pays the fuel.

 

[tallcal101]

These days nobody really wins.Fuel sur charge only applies to some runs,fuel will hit and stay at $3.00 soon,and the repair bills for owners are approaching unaffordable.Not to mention discounted freight.The model was a 6 truck fleet with teams in each truck.But that model was based on an economy that could suport the 60/40 split with the owner paying fuel and repairs(and workmans comp in some cases)Fuel was $1.45 per gallon and the rates were decent to excellent.Now,many fleet owners are having to settle for single drivers just to keep the trucks on the road.There's no way a single driver can make enough money for a fleet owner to make the deal worthwhile.Once again,is paying the bills the same as making money?I don't think so.You can split the pie any number of different ways,believe me I have done it.It really comes down to the cost to operate each truck per mile.No two trucks are the same,and the driver makes the difference.If drivers think they can get away with dead heading for a load and not keeping the owner in the loop,they will,and it kills the profit.As we all know,the carrier cares not a tinkers d***,and will talk a driver into it they think they can.Drivers sometimes don't consult the owner.If the dispacther calls the owner they know the answer,normally no unless they pay big.
The best drivers make mistakes in judgement around the time the rent is due.We all know it.And we forgive them becuse they are like gold these days.The 60/40 "who pays what" is what makes the expedite world go around.In some cases it's what makes the best owwer/driver relationships go around and around,and around etc.

 

[LDB]

Why? Well, I can only speak for myself. The reasons I pay my teams 60% plus fsc are, in no specific order, I want them to be aware of routing choices and idling choices. When the fuel money comes out of their pocket they pay more attention to that. I want my equipment to last longer and go farther without overhauls. Idling for long periods is probably harder on the equipment than anything else. When the fuel money comes out of their pocket they pay more attention to that. I want teams that aren't so poor they can't even afford to pay attention, as the old country joke goes.

I've run the numbers up, down and sideways. The side getting 60% plus fsc gets more than the 40% side, provided they don't idle it all away or burn it all up with foolish deadhead and unpaid empty moves. With reasonable deadhead and limited idling that side can make an extra 3-6cpm. The last reason is it provides a larger built in escrow because the fsc comes in the paychecks not at POD. If they abandoned my truck or trashed it I'd have more available for recovery.

No, it isn't bs and it isn't the wrong side to be on, unless you want to make less money. If you want to make less money then 60% plus fsc is wrong for you.

Oh, and if you learn about fuel taxes and buy intelligently you can make money on the fuel tax side too. One of my teams earned an extra $159 last quarter from fuel tax surplus. I pass that along to them also because they are paying for the fuel. If they bought foolishly and owed more fuel tax I'd expect them to pay it but mine buy smart and get refunds.

Leo Bricker, 73's K5LDB
OOIDA Life Member 677319, JOIN NOW
Owner, Panther trucks 5508, 5509, 5641
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

 

[davekc]

Couple issues that I have addressed before with Leo covering most of them. Because of the nature of the business, you really don't see "employees" in expediting unless they do dedicated. There may be a few exceptions, but not many.
So once again, lets look at those numbers for the benefit of the new or uninformed.
Using a 1.20 carrier average with a .25 cent surcharge on a 3,000 mile week average. One can plug their own numbers in accordingly.
At the 60/40 rate plus fuel surcharge, this team would make $3600 (.60% is 2160 plus 750 for a total of $2910
At 40 percent your total pay would be 1440.
A difference of $1470
Subtract fuel at $3.00 per gallon @ 9 mpg.
On 3,000 miles, that is 333 gallons or a cost of $999
That is a difference of $471 per week not counting DH.
Add that amount for DH pay or any other pay to that savings.
On can factor their DH pay and empty move pay revenue accordingly.
Factoring at a month, if you are spending $1884 per month for DHing, you are in the wrong business. Simple as that.
Some things may vary a little as I am only providing a average. Fuel taxes should be minimal if one understands where and when to buy fuel. Even with not paying attention, fuel tax is probably $50 per month.
No need to complicate the simple.

If one wants to calculate average DH, I will use a average that Phil mentioned of 20 percent. Again, adjust accordingly.

On 3000 miles, 20 percent is 600 miles. At 9 mpg and fuel at $3.00,
that is $200 (471 minus 200)
That difference is 271 plus any pay for DH and empty moves.
Subtract
With a ballpark average of 300 assuming you get something for DH etc, that is roughly 1200 a month or $14400 a year.
Since you don't run every week, the realistic savings is $10,000 a year at a minumum.
If you dh 50 percent of the time, then thats your break even point.












Davekc
owner
23 years
PantherII
EO moderator

 

[ATeam]

Nice info. Very informative. Would it be fair to say that 20% deadhead is a a reasonable expectation?

 

[Suds43]

Leo, I see your point, but, if you feel questionable hiring someone not trusting them with idling, wasted fuel, abandoning the truck somewhere, why hire them in the first place????
When we were driving for our owners, we took care of the truck as if it was our own......and he took very good care of us. Gave us the best equipment.....newer KW's, and Pete's......we had a great working relationship and he trusted us to take care of the equipment...we never made a move, relocated, etc. without consulting him first. If we were offered a load that was in the least bit questionable with DH/loaded miles, we always called and we made the decision together. We'd still be with him except he decided to sell his fleet of straight trucks and go strictly TT.............
BTW.......thanks everyone for the info.......))

 

[dabluzman1]

Hi everyone,
I posted a similar response to another driver asking
a like question, I think it is in the Newbies forum.
40/60 or 60/40.
Imagine a $1000.00 offer total miles 532 with 180 of the
miles deadhead, leaving 352 run miles.
I am with Fedex so we get .20 FSC.
deadhead miles: 180 x .20 = 36.00

run miles: 352 x .20 = 70.40

total FSC 106.40

On a 40/60 your pay would be,

1000.00 - 106.40 = 893.60 x .40 = 357.44
357.44 x 97.25(disability) = 347.61 net


Now the 60/40.

1000.00 - 106.40 = 893.60 x .60 = 536.16 + 106.40 (FSC) = 642.56

My D unit averages 9.5 mpg.

532/9.5= 56 x 3.25/ gall= 182.00

642.56 - 182.00 (fuel) = 460.56



I will get paid on my next settlement
460.56 x 97.25(disability) = 447.89 net

After paying for fuel and paying my disability insurance
my net of the entire job is 447.89 / 1000.00 = 44% +.

I'm not sure on the actual % to use on disability I think it may
be a little less than .0275 and I havent yet paid 3.25 for a
gallon of fuel, so I actually net more than shown above.

For Linda and me 60/40 works and these are actual pay numbers.


Dave aka Dabluzman
D6847
Fedex CC WG

 

[FAMILYEXPDT]

how far did you go after delivery to reposition? everyone always leaves that part out. your case works better in some instances....but not most.....you idle your truck while waiting for a load? how much fuel? bottom line is whatever you feel comfortable with....we do 40/60 because we feel like our drivers should not carry the onus for our investment. I have heard stories of drivers shutting trucks down in 20 degree weather because they could not afford fuel, 90 degree weather.....I have several teams clearing 70 grand this year TO THEM...without any expenses and taking 1 week a month off......as long as they are happy...I am so I will keep doing 40/60 as long as they want it. My other 12 trucks can pay for a 700 mile empty move for one truck....if that driver bought the fuel he does not have 12 other trucks to pull that money from. To each their own.



-charlotte

 

[arkjarhead]

The last owner I ran for would let his drivers do either 40/60 or 60/40. Some owners won't do that. I wouldn't not take a job with an owner I thought was going to work out well over who was or wasn't going to pay for fuel.

 

[dabluzman1]

Hi Charlotte.
The numbers on the job example are always going to be true.
Do we idle or use an apu, do we park in idleaire, do we
run home after every third week or travel 100 miles to a
favorite layover spot are all examples of daily costs.
Everyone has them.
While they impact the bottom line, and a smart expediter will
learn to recognize and controll them, please dont confuse
operating expenses with the net money earned to pay for them.
Dave
D6847
Fedex CC WG

 

[LDB]

I don't expect my teams to trash or abandon the trucks. I'm 99.97% certain that isn't going to happen. I have no crystal ball so I can't be 100% positive. I just included that to try to illustrate all the possible reasons a fleet owner might go with a 40% split as well as why the driver should want the 60% side.

Leo Bricker, 73's K5LDB
OOIDA Life Member 677319, JOIN NOW
Owner, Panther trucks 5508, 5509, 5641
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

 

[davekc]

I agree with you Leo. I added the 20 percent DH factor that some were concerned about in my above post. Break even is at roughly 50 percent DH. If your doing that, then it is a wash.
In my case, don't have anyone DHing at that percentage. The 20 percent Phil mentioned is probably close to a industry average.






Davekc
owner
23 years
PantherII
EO moderator

 

[whitey1]

I must question the fleet owner paying the fuel concept on both perspectives.
As a driver/contractor, do I want to be obligated to call the F/O every time I have to make a decision? Isn't this crossing over into employee territory?
As F/O (I am not, but think about it alot), I don't think I would want a driver calling me 24/7 for advise.
I feel alot of the appeal of this business(for a solo driver) is to be your own boss.
Good luck with that on 40/60.
I really doubt if it will ever happen driving someone else's truck no matter the pay plan.

 

[davekc]

I agree. I wonder also on these 40/60 splits. who pays the fuel when the driver wants to go home? What perameters does one use? If the driver wants to travel 1,000 miles home for a personal reason, who pays that? Especially using the Colonel post about someone needing to be home to race a car or something.










Davekc
owner
23 years
PantherII
EO moderator

 

[arkjarhead]

I ran into that situation once where I had a family emergency and told the owner what was going on. He said don't worry about waiting on a load just get a good nights rest since it was about 9 pm and leave out in the morning. I offered him money for fuel since I was deadheading from Millwalkie,WI to England,AR. He said don't worry about. I had been with him for awhile. Then when I got home and needed to take off he said you can have up to a month off if you need it. Needless to say he's one of those guys you just don't forget, and thank God for allowing you to be working for them at that time.

 

[lisalewis]

My husband and I drive for Charlotte and Terri and the 40/60 split works well for us. Our previous owner had us pay for the fuel (but we only received 52% + fuel surcharge) and some weeks went so badly that we went into the negative! Sure, we made some poor choices...we were new to the business and did everything that we were taught in good ol' orientation...ya know, take EVERY load...EVERY empty move. When we got stuck out west and called our owner for advice he said, "start dead-heading east until you get a load", so all the money we earned for the previous load all went to fuel (and then some). But, what did he care? HE still made money. He only cared about us staying at 100% acceptance...not our paycheck. Now we can honestly say we have a partnership with our owner. Yes, if we are unsure of a load we call...but not always. If we want to go home we are given a free 100 miles a month to get there...(anything over 100 miles we pay .45 per mile). Do we make more or less then other drivers who pay for the fuel but receive a bigger percentage is debatable. I do feel that our owners are more pro-active (than our last owner) in keeping us moving because they do pay for the fuel. Plus we get added perks like free truck washes and toll reimbursement.
*ps...rumor has it that our old owner now pays his drivers 60%*

 

[davekc]

Most of my drivers wind up driving over 100 miles to get home. At .45 cents per mile, you are paying fuel in some instances. That would add to the savings in my example depending on how often you go home.
I think it is just a matter of convenience and what one wants to pay for it.
I do agree that 52 percent of the gross is too low. That owner likely changed because he/she couldn't hang on to drivers. Probably hired new drivers with the plan of robbing them as long as they could.










Davekc
owner
23 years
PantherII
EO moderator

 

[FAMILYEXPDT]

I got to tell ya....out of 12 teams 8 drove for other owners that made them pay for fuel.....and part of the reason they run for us is we pay fuel, tolls, truckwashes, ANYTHING that has to do with running of truck. As far as "permission" our drivers can go ANYWHERE they want to.....they usually ask us the best place to reposition and we look at all trucks and let them know where freight is at....They know they have our help if they get stuck someplace that we thought they would get out of.....and if they go someplace that we wouldn't, they know they are on their own till I cannot stand it anymore They do not have to call about loads.....we teach them how to figure out a good load based on parameters that work for us...at the same time I have drivers call because "good load but fsc is too low" and I tell them that they are correct, if they were running their own truck or buying fuel MAYBE they would reconsider that load BUT with a fleet of trucks we do not base decisions on loads on fsc. It all works in the end.


-charlotte