Standardizing Driver Compensation: Improving Carrier Cost Management and Benchmarking

KSM Transport Advisors’ (KSMTA) newest article series explores key aspects of FreightMarks^™, our benchmarking service designed to help carriers gain clearer financial insights and improve decision-making. Each article will spotlight a category from our Data Standardization Guide, which offers a structured approach to revenue and expense categorization for internal management and industry benchmarking. This series offers practical guidance to enhance performance and drive success.

---

Driver compensation is the largest expense in trucking – and one of the toughest to manage effectively. In a volatile market, standardized financial data is essential for both internal cost control and industry benchmarking. That process starts with clear definitions of the key driver compensation subcategories, continues with KSMTA’s standardization framework, and includes actionable steps to improve general ledger (GL) alignment for stronger financial clarity and smarter decision-making.

Why Standardized Driver Compensation Data Matters

Finance professionals rely on accurate, categorized compensation data for two purposes: internal management and external benchmarking. Internally, it enables clearer insight into what’s being spent on wages, benefits, taxes, and bonuses. Externally, it allows meaningful comparisons through benchmarking platforms like FreightMarks, where standardized data ensures that metrics such as cost per mile or percent of revenue are truly comparable across carriers.

Driver Wages: Base Pay and Accessorials

Driver wages include all direct compensation for company drivers. Key pay types include:

• Per-mile pay (common for long-haul operations)
• Percentage-of-revenue pay
• Hourly pay (often used for local or regional drivers)
• Salaried pay (for certain dedicated or specialized fleets)
• Accessorial pay: detention, layover, tarping, extra stops, etc.
• Per diem: meal/lodging reimbursements, often tax-exempt

These payments should be consolidated into a single “Driver Wages” category for visibility and benchmarking. FreightMarks shows typical wage expenses range from $0.42 to $0.91 per mile, or 23% to 42% of revenue, depending on geographic and operational factors.

Driver Benefits, Payroll Taxes, and Bonuses

This second major category includes:

• Health, dental, vision, life, and disability insurance
• Employer retirement contributions (401(k), RRSPs, pensions)
• Payroll taxes (FICA, FUTA, SUTA, EI, CPP, etc.)
• Workers’ compensation insurance
• Bonuses (safety, referral, performance, sign-on, etc.)

These indirect costs can add $0.06 to $0.18 per mile, or 2% to 17% of total revenue. To manage these effectively, it’s critical to separate driver-related expenses from those of office or shop staff. For example, workers’ comp should ideally have separate GL accounts for drivers and non-drivers. If that’s not possible, a 90/10 split (90% to drivers) is a commonly used allocation based on risk exposure.

Bonuses, often inconsistently recorded, must also be included under driver compensation to fully burden labor costs and benchmark accurately.

Aligning the General Ledger With FreightMarks Standards

To standardize driver compensation, companies should map their existing GL structure to FreightMarks’ categories:

1. Map GL Accounts: Use a tool like KSMTA’s GL Mapper to align all relevant accounts to categories 2.0 (Driver Wages) and 2.1 (Benefits/Taxes/Bonuses). For example:
   • Driver Mileage Pay, Hourly Wages, and Unload Pay become Driver Wages
   • Driver Health Insurance, 401(k) Match – Drivers, Driver Bonus become Driver Benefits
2. Segment by Capacity Type: Distinguish Company Fleet, Owner-Operator, Lease Purchase, and Brokerage costs. Driver compensation applies only to Company Fleet; payments to contractors fall under Purchased Transportation.
3. Use Ratio-Based Allocation: For mixed accounts, allocate costs based on operational metrics like mileage, tractor count, or driver headcount. For instance, if 70% of miles are driven by company trucks, then 70% of a shared cost could be allocated to company driver wages.
4. Apply Percentage Allocation When Needed: If data isn’t available, fall back to a fixed percentage (e.g., the 90/10 split for workers’ comp). This should be clearly documented and updated as needed.
5. Maintain Consistency and Review Regularly: Ensure consistent coding across months. Train accounting staff on the FreightMarks definitions. Update mappings when operational changes occur.

Key Takeaways and Implementation Checklist

• Understand Definitions: Know what qualifies as Driver Wages versus Benefits/Taxes/Bonuses.
• Map Your GL Accounts: Align accounts to standard categories. Create sub-accounts if needed.
• Track by Business Segment: Separate company driver costs from those of contractors.
• Use Operational Metrics for Allocations: Apply mileage or tractor count to divide mixed costs.
• Fall Back to Fixed Percentages When Necessary: Use logic-based estimates (e.g., 90/10).
• Benchmark Frequently: Compare your metrics (e.g., driver wages per mile) to industry peers.
• Refine Over Time: Revisit allocations and mappings regularly to improve accuracy.

By aligning to the FreightMarks standard, carriers gain more precise insight into one of their largest cost centers. The result is improved financial transparency, more actionable benchmarking, and better-informed strategic decisions. In an environment where every penny matters, standardized driver compensation data is more than an accounting exercise – it’s a path to sustainable profitability.

Use Compensation Data To Gain a Competitive Advantage

Want to bring more structure and clarity to your largest cost center? FreightMarks helps carriers standardize driver compensation data, improve general ledger alignment, and benchmark with confidence. To learn more or start your FreightMath^™ journey, please contact a KSMTA advisor via the form below.