10/12/2022 03:55

The U.S. truckload market is made up of many small and medium-sized carriers. These carriers are often regional or local in nature, and they compete fiercely for business.

The result is a fragmented market that can be difficult to navigate. But despite its size and complexity, the truckload market is an essential part of the U.S. economy. It allows businesses of all sizes to move goods across the country, and it plays a vital role in keeping the supply chain moving.

Owner-operators are a key component of the truckload market, and the way they fit into it both drives and responds to the rates and capacity you see out there day to day.

As independent contractors, they are both nimble and reactive to changes in the market, which can lead to higher rates when demand is high and capacity is tight. However, because they are not beholden to any one carrier or shipper, they can also quickly exit the market when rates drop, leading to further volatility.

Ultimately, the more we know about the people who make up the truckload market, the better we can make sense of its volatility.

Where do owner-operators fit into the overall truckload market?

There is over 3.5 million commercial driver's license (CDL) holders in the United States. Many of these drivers are not employed in long-haul trucking, but rather in local delivery, dispatching, heavy equipment hauling, truck driving school instruction, or bus driving.

This wide range of occupations reflects the versatility and necessity of commercial drivers in our economy.

The remaining drivers can be divided into two groups: long-haul cargo truck drivers and those who drive for long-haul purposes.

2 Main Types of Trucking Companies

Private Fleet Trucking Companies

There are 799,342 private fleets in the U.S., all of which are in-house teams of trucks that businesses use to move their own cargo. These private fleets generally use employee drivers, making them a reliable and efficient way to transport goods.

For-Hire Trucking Companies: 

There are 928,647 For-Hire carriers in the United States, these are carriers who contract with shippers to move loads. Owner-operators are within this category.

There is no precise data on the number of drivers employed by each segment of the for-hire market, but we can estimate that there are no more than a million drivers working in this market.

This is due to the extreme fragmentation of the for-hire carrier market — 97% of U.S. carriers operate fewer than 20 trucks.

What's an Employee Truck Driver?

A mere fraction of drivers at for-hire trucking companies is independent contractors. The rest are full-time employees of a motor carrier, often referred to as "employee drivers."

Core Characteristics of an Employee Driver

• The Department of Transportation (DOT) does not grant motor carrier authority to them.
• They do not own their own truck or equipment.
• The only services that can be offered are to the motor carrier that employs them.
• You shall receive your salary and full-time benefits with all due haste.
• The employer provides all loads and little autonomy is given in scheduling, however, the employer is always willing to work with you on a mutually beneficial schedule.
• You are entitled to the protections and benefits of worker's compensation.

Truckers who choose to be full-time employees do so for several reasons, the most common being the stability and benefits that come with being a full-time employee.

Though they may not own a truck and need to drive one owned by their employer, they might want the stability of a regular salary and full-time benefits like health insurance. Depending on their employer and/or seniority, they may be paid quite comfortably.

So who are owner-operators then?

"Owner-operator" is a broad term that covers different ways drivers who own their own equipment can choose to work.

Although the term "commercial motor vehicle" is quite general, the FMCSA does not choose to define it.

All owner-operators in the current trucking labor market have one thing in common: they are all independent contractors who sell their services to shippers and/or lease their equipment to a motor carrier company.

As savvy independent contractors, they are both drivers and business owners. This can mean they are a team of one, booking loads and driving their own truck with precision.

However, they also might serve as both drivers and dispatchers, working in the field themselves but also managing loads for a few other drivers who operate under their authority.

What is an owner-operator?

They are a proud truck driver who, through hard work and dedication, has earned the privilege of owning their own business and operating their own truck.

They are a cut above the rest, providing their services directly to shippers and/or leasing their equipment and services to a motor carrier company. They are true entrepreneurs, paving the way for a new generation of truck drivers.

Two Main Ways in Which an Owner-Operator Can Do Business.

1. Owner-operators can duly lease their truck and services to a motor carrier.

Motor carriers who choose this path typically do not have their own authority granted by the DOT. This means they are not able to operate fully independently from a motor carrier company.

Even though they are not technically employees of the motor carrier they lease their services to, they typically have the following characteristics:

• The independent contractor may or may not possess the means of transportation necessary for the job, and will lease from the motor carrier if they do not.
• The only services they can offer are to the motor carrier who leases them.
• As the principle receiver of load revenue, you are entitled to a cut of 65-85%.
• Receive the lion's share of load revenue.
• Paid in regular intervals, this sum may be a pittance, but it is all that is required.
• You could be eligible for health insurance coverage that could help protect you and your family.
• You may be eligible for worker's compensation, depending on your state's ABC test.

One of the main reasons that independent contractor truckers choose this path is that they may have difficulty qualifying for owner-operator insurance. If that is the case, they can be covered under a motor carrier’s policy by agreeing to drive exclusively for them.

2. Owner-operators can function as for-hire motor carriers themselves.

True independents are those who hold their own DOT motor carrier authority and operate as their own business entity. They are the business owners who answer to no one but themselves, and they are the backbone of the American economy.

The term "owner-operator" usually refers to a class of business owner who operates their own truck or small fleet. This type of business owner is usually a driver-dispatcher who is responsible for their own trucking operation.

Because they are incorporated on their own as motor carriers, these drivers:

• Own or lease their own equipment
• Can offer services to anyone
• Keep 100% of the load revenue they generate
• Pay insurance, taxes, FICA, and equipment expenses
• Source their own loads independently
• Are ineligible for worker’s compensation

The advantages of complete independence are alluring, but one must be willing to sacrifice security for those freedoms as an owner-operator.

Though these drivers are free to set their prices and choose their time and location of work, they are also burdened with the task of securing their own health insurance and paying their own business expenses.

In Conclusion

Now that you have a better idea of what is an owner-operator, it's time to connect with them. In line with that, we at Labworks USA have a vast network of owner-operator for which we offer our DOT and FMCSA compliance services. 

Feel free to connect with us today.