5 ways to reduce driver turnover with compensation analysis

For decades, the trucking industry has struggled to retain qualified employees with commercial driver's licenses (CDLs). In fact, the industry has one of the highest turnover rates—usually around 90 percent—compared with other industries. Replacing drivers comes with a steep price tag. On average, companies spend more than $8,000 replacing a single driver. Compensation is among the leading factors that influence drivers to change companies or leave the industry altogether.

Here are some ways that a compensation analysis can help reduce driver turnover. 

1. Stay aligned with market pay rates.
It’s no secret that truck driver wages have changed over the years. Today, the median annual wage for a driver is about $48,500. When adjusted for inflation, truck drivers in 1980 earned about $110,000. Addressing significant pay discrepancies through a compensation analysis could be the single most important step toward reducing driver turnover. According to research conducted by the team at Alliance, Ohio-based Inflection Poynt, 63 percent of all drivers indicated that they are looking for better pay. By making sure pay is competitive compared to the market and other similar companies, drivers are incentivized to stay.

2. Modernize benefits.
Benefits are another major factor when it comes to drivers deciding to leave their existing employers. Our research finds that 37 percent of drivers care more about benefits than they do about pay alone. These benefits include perks, health insurance, a relationship with their managers and the company’s culture.

The demographics of truck drivers may need to shift in light of an increased shortage of drivers. While the average truck driver is 55 years old, companies might need to look to younger generations to fill the gap. That means that companies need to modernize their benefits packages for these workers.

More drivers are expecting perks and benefits, such as flexible working hours, enhanced insurance and retirement plans and tuition reimbursement. Other unique benefits, such as allowing pets or family members to ride along, could help drivers feel valued and reduce turnover.

3. Provide incentive-based rewards.
A compensation analysis allows companies to look at incentive-based compensation and rewards in addition to regular wages. These often come in the form of monetary annual or sign-on bonuses. However, other types of rewards could encourage drivers to stay with a company longer.

When it comes to bonuses, many trucking companies offer bonuses for new drivers. However, we’ve found that sign-on bonuses have a modest effect on retention (with less than 50 percent stating it was a significant factor in leaving a company). Instead, companies could evaluate the concept of retention bonuses for reaching certain goals or milestones (like the number of miles driven or years of service). Companies also can look into nonmonetary incentives, such as giving tenured drivers upgraded trucks with kitchen equipment or satellite television.

4. Hire the right people the first time.
During a compensation analysis, companies also should carefully review their existing job descriptions and responsibilities to ensure they are accurate and reflect the expectations of the role. Outdated job descriptions and compensation packages could result in hiring the wrong people in the first place. Being able to set these expectations prior to hiring can reduce the number of workers who leave after a short period of time when they realize the job or company wasn’t as advertised.

5. Build trust and transparency.
Employees want to work for companies that they respect and trust. A compensation analysis can help provide better transparency into compensation practices and help drivers understand that their pay and benefits are consistently being evaluated and aligned with the market. This can send the message to drivers that the company views them as valuable assets and help reduce turnover.

The author is the CEO and founder of Inflection Poynt and can be reached mark@inflectionpoynt.com.