How FedEx Ground Drivers Are Paid

For the vast majority of FedEx Ground contractors, payroll is the largest operational expense. On average, we see payroll expenses range from 38% to as much as 52% of total Annual Revenue depending on driver demand, cost of living, and other economic factors. It’s no exaggeration that how you pay your drivers and manage your payroll expense will have a material effect on the profitability of your business as well as the productivity of your team.

Here you will find an overview of the most common ways FedEx Ground drivers are compensated for both 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 and your expenses are easier to predict and forecast as a cost associated with operating the business. 

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. It also gives drivers a sense of security, knowing that they are guaranteed a certain amount of money regardless if the volume is light one day or if they finish early.

The main downside to a fixed daily wage is that it can encourage drivers to rush and be less safe in the interest of saving time. Drivers may also be discouraged from helping another route when they are finished and may do the bare minimum on their own route if they know they are not going to make more money.

To counteract most of these challenges, it’s important to constantly emphasize safety and closely monitor driver behavior to ensure that drivers are not cutting corners and operating in an unsafe manner. It’s also a good idea to offer threshold bonuses and incentives to encourage drivers to help each other and go above and beyond. By offering these incentives, drivers know they can directly influence how much money they make above their daily rate by delivering extra stops above their threshold.

Note: 

As long as your drivers operate vehicles over 10,000 lbs in weight you do not have to pay them overtime, regardless of how many hours they are on the road. There are some states where this exemption is not applicable. Reach out to us to learn more.

If a driver operates a vehicle under 10,000 lbs in weight, you must pay them overtime even if you pay a fixed daily wage. If you need help figuring out how to calculate overtime pay on a fixed daily wage, we can help you better understand how to stay compliant.

Hourly

The second 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.

The biggest operational challenge of an hourly pay rate is that it disincentivizes drivers to be efficient. Drivers may be encouraged to take longer to deliver a set number of packages than it should take. It’s extremely important that you monitor the Daily Service Worksheets, Video Event Data Recorders, and even do ride-alongs or shadows with drivers to make sure they are making efficient use of their time and not “milking the clock.” 

By the Stop

The last, and least common, pay method we want to mention is a per stop/package pay scale. Some businesses prefer to pay P&D drivers for each completed stop and/or package delivered. 

This particular method does directly align driver pay with driver productivity. The more stops a driver delivers, the more they get paid. As a result, drivers may also be encouraged to pick up additional work. 

This pay method has major logistical downfalls, however. Paying per stop makes tracking payroll extremely complicated. Most routes are not identical. If you pay drivers per stop, drivers in dense urban areas with 200 stops will have a significant advantage over drivers in rural areas with 50 to 100 stops. To use this pay method effectively, you may have multiple different pay scales that have to be tracked separately. It can be complicated to calculate unique pay rates for each driver to account for unique routes. Additionally, if you choose to sell some routes, or even just readjust your work areas in DRO, your pay rates will have to be recalculated all over again. 

Paying per stop may also increase safety risks when drivers are rushing to complete more stops.

Needless to say, this pay method is not recommended. The complications and logistical challenges to get it right and keep your drivers happy greatly outweigh any potential benefits. You can better use your time and efforts elsewhere in the business.

How FedEx Ground Linehaul Drivers Get Paid

The pay structure for linehaul operations is much more straightforward compared to P&D.

FedEx Ground linehaul operations pay linehaul drivers per mile; this is true for both team and solo runs. The one caveat is that for team runs, the drivers split the pay. 

For example: A solo driver may get paid $0.50* per mile, whereas a team of drivers may get paid $0.60* per mile split, meaning each driver gets $0.30 per mile. While it may initially seem like solo drivers get paid much more, keep in mind that team drivers are typically traveling thousands of miles more than solo drivers.

*These values are for illustrative purposes only and are not reflective of current pay rates in the market. If you’d like to learn more about the current going rates for solo and team drivers, reach out to our team.

Linehaul pay can be tricky when it comes to unassigned runs. Unassigned runs by nature are not guaranteed every single day. The challenge, as a result, is that you are expected to pay your driver whether there is work available that day or not. Driver recruiting and retention is extremely difficult in the linehaul space. Therefore, to keep your drivers you need to offer some type of guarantee in their pay to account for those days when they don’t have any miles to travel.

For this reason, we highly advise operations to guarantee pay for a minimum number of miles per week. What we mean by this is that regardless of how many miles a driver runs in a week, they are guaranteed pay up to the threshold you set.

For example: You may choose to set a minimum of 4,000 miles per week for a team or 1,800 solo miles per week. If the team only travels 3,000 miles in a week, they are still paid as if they traveled 4,000. Similarly, if the unassigned board is light one week for the solo driver and they only do 1,000 miles, they are still guaranteed to be paid for 1,800. 

This gives income security for the drivers which they highly value, and it shows good faith and investment from you to your team to show you care about them. That alone can go a long way in retaining your drivers.

Spot Runs

Let’s take a minute to briefly discuss spot runs, because they are unique compared to anything else. Spot runs are essentially low-mileage local freight runs to deliver and pickup large shipments. 

These spot runs are typically 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. As an alternative, the driver could be paid a fixed daily rate for completing that spot run. 

Spot runs are a great opportunity for drivers to earn additional revenue before or after their other runs which increases efficiency. It essentially works as a side job or add-on that increases the utilization of your vehicle without interfering with your regular run schedule. 

Note:

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 businesses.

Benefits are not common in the FedEx Ground P&D space, and most operations are not large enough to offer benefits. If you have an operation of 50 employees or more, benefits do become a federal requirement. We encourage you to speak to an attorney in your state of operation to better understand what your legal obligations are for your business.

Retirement benefits such as a 401k can be very important to drivers, particularly linehaul drivers. Linehaul drivers are more likely than P&D drivers to view their current work as a career, and benefits are expected as part of their compensation.

Other potential benefits to consider may 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.

As we stated earlier, benefits are not at all common in this space. Much of the demographic, particularly in the P&D sector, do not value health benefits as much as other forms of compensation. Many operations simply cannot afford benefits due to the size of the organization.

If you scale your business and have the ability to offer benefits, however, on top of the standard compensation it can be a great way for you to stand out amongst other contractors in the building. There’s no question that offering benefits can encourage career drivers and increase retention, but you can be successful without them.

Want to Learn More?

Dive into the world of logistics and delivery routes with our complimentary FedEx Ground Routes 101 E-Course. This course will teach you the fundamentals of delivery routes so that you can decide if this is an industry worth pursuing further. Whether you’re interested in FedEx Ground routes, Amazon routes, Bread routes, or other logistics operations, we are here to help. Enroll now for free and take the first step towards entrepreneurship in the e-commerce space.