Owner operators are paid a percentage of the load and for them it’s important for the loads to have good rates($$), to have a full weekly schedule for loads and to have low deadhead miles (the miles driven from the point of unloading to the point where the new load is ready for pickup). As independent contractors they can choose the loads and the areas they are assigned, meaning it is “not a forced dispatch”. (used in a trucking “slang”)
Owner operators can be:
- Owner operators with their own truck – They already have a truck (they can have their own trailer as well) or a small fleet of trucks and drive for the company as independent contractors
- Owner operators on lease purchase -They are leasing/buying the truck as they drive for the company as independent contractors
The most important things that drivers are asking and have to think about are the following:
- Payment and deductions (how many percent % they will get from every load they haul , the weekly gross revenue and how much will they pay for deductions)
- Maintenance program (if any for repairs and maintenance for the truck and trailer)
- Routes and loads (where will they run and what type of loads)
- Fuel (fuel discounts and rebates, IFTA program)
- Hometime (how often and how many days for hometime)
Payment
Owner Operators are paid weekly or bi-weekly by receiving a settlement and getting their net income money in their bank account (direct deposit) or as a paycheck.
On the settlement they receive the gross pay (money the truck has made) and they can see all the deductions they have for the working week. The most important thing for owner operators is weekly gross revenue that gets calculated with miles so the owner will have a rate per mile and weekly takeaway home money.
Deductions
Deductions are all the expenses that are being paid from the gross income.
For example, if the Owner Operator doesn’t have a trailer, he rents the trailer so he has a weekly deduction for that rental.
There are fixed deductions (same amount for every week) – trailer rental, elog, occ.insurance, physical insurance, registration plates etc.
and variable deductions (the amount varies every week) – for example if there is maintenance, cargo and liability etc.
Owner Operators also have a fixed deduction for the first weeks as Escrow – meaning they are paying a set amount of money that serves as a fund for activating the insurance in case any damage is done. If there is no damage, the Owner receives the escrow money back when he leaves the carrier company (ends the working contract).
Below are examples of settlements that owners can receive:
Example Settlement pictures:
Note: Every company has their own deductions according to the program they offer.
Maintenance
As Owners they take care of their equipment by having physical damage insurance that covers repairs or damage from things such as collision, fire, theft, hail, windstorm, earthquake, flood, mischief, or vandalism to his truck.
For all the regular maintenance like changing tires, oil and other regular needs, some companies have a maintenance fund that is used for the regular maintenance needs making the costs lower for the owner operators.
Routes
Drivers want to know where they will run most of the time (what states and what regions) and what types of freight they will haul. It’s important to know the terminology to explain this to them.
Dedicated customer freight – When a carrier company works for a client for longer periods carrying consistent loads to their terminals. This is usually the case for large customers like Walmart, Nestle, Amazon etc.
Spot Freight – When a client wants to transport a freight he collects multiple quotes from logistics service providers (LSP) as a solution for transporting goods from point A to B. The carrier that has the best offer takes the freight.
Dedicated lanes – A dedicated route is when a trucking company services the same client or location regularly. More often than not a truck driver will pick up a load at a regular location and then deliver it to a dedicated customer.
Consistent lanes/steady freight – Consistent lanes means the drivers run the same routes often. A lot of what they do goes back and forth on those highways. It’s great if the driver lives along a consistent lane.
Drop and hook – Meaning the trailer with the freight is dropped at delivery and hooked to a new loaded trailer, minimising the time for unloading and loading.
No touch freight – Meaning the freight loaded or unloaded by someone else, the driver is only driving not touching the freight he carries.
Scheduled loads (pick up and delivery) – There is a scheduled time to pick up the load and deliver the load (usually for refrigerated freight)
First come first served – The picking up of the load and the delivery of the load is done as soon as possible when the driver arrives (usually for dry van freight) so if he arrives earlier he can get back on the road earlier.
Fuel – Fuel is an important regular cost for the Owner Operator and it can have a significant impact on his earnings. Therefore there are fuel rebates and discounts that lower the cost for the Owner Operator. Trucking companies have fuel cards for discounts from truck stop and gas station chains that provide discounts for each fuel purchase.
https://www.expertmarket.com/fleet-cards/best-fuel-cards-for-truckers
IFTA program (fuel tax) – The International Fuel Tax Agreement (or IFTA) is an agreement between the lower 48 states of the United States and the Canadian Provinces, to simplify the reporting of fuel use by motor carriers that operate in more than one State. Simply stated, IFTA works as a “pay now or pay later” system. As commercial motor vehicles buy fuel, any fuel taxes paid are credited to that licensee’s account. At the end of the fiscal quarter, the licensee completes their fuel tax report, listing all miles traveled in all participating jurisdictions and lists all gallons purchased. Then the average fuel mileage is applied to the miles traveled to determine the tax liability to each jurisdiction.
Most carrier companies make the IFTA program for the Owner Operators (they calculate the fuel used and miles driven within states) so they can pay the fuel taxes.
Toll passes – In order for drivers to not lose time on toll stations they use electronic toll payment (transponder attached on the truck) for passing through without stopping and paying electronically. In some States they can even bypass weigh stations making the transponder very helpful in time saving.
Hometime
As an industry standard OTR drivers are at least 2 weeks on the road in order to have consistency in the work and have the desired pay. However, Owner Operators have the freedom to decide how long they will stay on the road and how often they will go home, therefore it’s important to ask about their hometime preferences and explain what is needed for the job.
Lease Purchase
Lease Purchase is a contract for leasing-to own a truck and be an owner operator. Usually drivers that worked as company drivers for a few years want to go into a lease purchase program so they can earn more after they payout their truck and have a more flexible schedule as independent contractors.
Lease purchase payments can be anywhere from $300 to more than $1000 per week and can last from 1 year to more than 5 years, it all depends on the truck that is leased – a used truck or a brand new truck and what kind of equipment it has.
What is important for drivers about the lease purchase program?
- An important aspect for driver’s decision making is will he be able to make consistent revenue until he pays off the truck since the lease programs can last several years.
- Some lease purchase programs require a credit check – a screening of all past financial loans and payments to determine if the candidate has a good reputation for paying on time any due payments.
- Is there any down payment before starting with the lease program (paying a certain amount at the start of the lease)?
- Will they have additional costs to buy out the truck after the lease is finished (balloon payment) or there are no additional costs (no balloon payment)?
- They also want to know if it is a walk away lease meaning that if they can’t keep up with the payments they can cancel the lease (the truck goes back to the lease provider with no money back)
- Trucks, like any piece of equipment, can break down and will require repairs, but now the costs are their responsibility. Truck repair costs can be up to $17,000 annually for an average OTR truck driver logging 100,000 miles. With this in mind, drivers ask for the warranty of the truck and what it covers, as well as a maintenance program that will enable them to fix and keep their truck in shape.
- Governed Speed Trucks that are leased can be with governed speeds until the lease is paid off, meaning they can not get higher speeds than the governed one. For example if the truck is governed at 65 miles per hour, it means that the maximum speed the truck can get is 65 miles per hour.
Since they are working as Owner operators the basic things that are important are the same (with the deduction of truck payment as a plus)
- Payment and deductions (how many percent % they will get from every load they haul, the weekly gross revenue and how much will they pay for deductions)
- Maintenance program (if any for repairs and maintenance for the truck and trailer)
- Routes and loads (where will they run and what type of loads)
- Fuel (fuel discounts and rebates)
- Hometime (how often and how many days for hometime but as owners they can decide for that)
Example Settlement pictures:
Note: Every company has their own deductions according to the program they offer.