In our experience, the salaries and wages (payroll) in a FedEx Ground route business cost between 40 and 50% of total business revenue. This is the largest line item expense in your profit and loss (P&L) statement. It’s no wonder then that many prospective business owners want more details about how drivers get paid.
Here you will find a brief overview of the most common ways for a FedEx Ground route business to structure compensation for P&D and linehaul drivers.
How FedEx Ground P&D Drivers Get Paid
FedEx Ground businesses with P&D routes typically pay their drivers in one of three ways:
Fixed Daily Wage
The most common way for businesses to pay P&D drivers is with a fixed daily wage. The benefit of this approach is that it is easy to calculate based on driver attendance. Further, it benefits the business because this expense is easier to predict and forecast as a cost associated with operating the route.
A fixed daily wage incentivizes drivers to be as efficient as possible and get back to the terminal early, when possible. It gives drivers a sense of control over their work day.
The downside to a fixed daily wage is that some drivers make fewer stops in a day than they are capable of because they do not feel incentivized to do more. Additionally, drivers paid by the day are not motivated to help other drivers with overflow.
If you ask drivers paid a daily wage to work more than normal (overtime) it can be difficult to calculate overtime pay.
By the Stop
Some businesses prefer to pay each P&D driver per completed stop. This approach incentivizes drivers to deliver more and increase their individual efficiency. It also encourages drivers to pick up additional work per day.
Paying by the stop, however, makes tracking and payroll more complicated for business managers/owners. It’s particularly complicated if you have routes with diverse geographical profiles. Drivers with rural routes cannot physically complete as many stops per day as drivers with suburban or urban routes; drivers on your team will expect you to compensate them fairly and account for these differences (further increasing your tracking difficulties).
Paying per stop may also increase safety risks when drivers are rushing to complete more stops.
Paid By the Hour
The third most common way for a business to pay P&D drivers is by the hour. Paying drivers by the hour makes tracking and paying overtime easier.
However, hourly pay increases the risk of fraud. Business owners paying by the hour need to have the ability to geotag the time stamps when drivers clock in and out of work. This allows owners/managers to better audit the hours and prevent fraud.
Similar to a daily wage, paying by the hour also fails to incentivize drivers to increase their individual efficiency.
How FedEx Ground Linehaul Drivers Get Paid
Assigned and Unassigned Runs
FedEx Ground linehaul operations almost always pay linehaul drivers per mile; this is true for both assigned and unassigned runs.
Paying linehaul drivers per mile is great for business owners because (most often) you only pay out when there is also revenue coming in from the completed run. However, if your run is cancelled because of severe weather or another crisis (“acts of God”), most linehaul drivers expect to still be paid. And with the severe driver shortage in the US, drivers have other options for employment if they are not paid. In these instances, businesses will have to cover the gap.
Paying linehaul drivers per mile requires complex tracking and payroll calculations.
Paying drivers for unassigned runs can also be difficult as the revenue on the unassigned runs may vary. It is very difficult to retain drivers if you pay per mile without any guarantees. For this reason we highly advise operations to guarantee a minimum number of miles per week; for example, a minimum of 4,000 miles per week for a team or 1,800 solo miles per week.
Because FedEx Ground linehaul spot runs are low mileage runs, linehaul spot runs are paid either by the day or based on the earnings of the spot run. For example, a business may pay the linehaul driver 30% of the total spot revenue.
Businesses may be able to ask drivers to complete spot runs before or after their other runs which increases efficiency. Note, you will need to be sure drivers do not run over their daily or weekly hour limits (14 hours per day or 70 hours per week).
Benefits for FedEx Ground Drivers
As the race to retain quality drivers becomes more competitive, a range of employment benefits are becoming more common with FedEx Ground route businesses.
While still not frequently offered, medical benefits are increasingly popular. We note a particular increase in desire among P&D drivers who are older than 26 years of age (and no longer eligible to share insurance with their parents), but are still not married (and unable to obtain health benefits through a spouse’s place of work).
Retirement benefits such as a 401k are very important to drivers, particularly linehaul drivers, in recent years. Linehaul drivers are more likely than P&D drivers to view their current work as a career and they expect retirement plans/options.
Other benefits FedEx Ground route businesses may offer their drivers include paid time off (PTO), service and safety bonuses, attendance bonuses, truck driving competitions, and continued or advanced training. These benefits are more common as strategies for recruitment and driver retention.
Still have questions?
Our team manages a fleet of over 275 trucks and a staff of over 200 employees. We consult with other FedEx Ground businesses and prospective owners to help model expenses, increase efficiency, and improve employee retention. Connect with our team for more details.