Are You Getting a Fair Crack? Digging into Transport Rates

Posted by Hubfleet

In Episode 14 of the Risky Business Podcast, we dived into a real hot issue that affects every single one of us in the transport: are you actually earning a sustainable rate for the work you do? It’s a prickly subject, no doubt, but one that’s absolutely vital for the future of our industry and, more importantly, the safety of everyone on our roads.

We kicked things off with a surprise call from our mate Chris Roe, who didn’t beat around the bush, asking the million-dollar question: why aren’t transport rates on the rise? This set the stage for a good discussion about the history of our industry and the 46th anniversary of the Razorback blockade. It was a real eye-opener to remember that while getting rid of road tax was a big win, the number one claim back then was for a fair and equitable rate. Forty-six years on we’re still fighting that same battle.

Chris made a point how so-called improvements, like increased gross vehicle weights over the years, haven’t necessarily translated into better pay, often just meaning we’re doing more for the same money. We also discussed how sometimes operators can undervalue their own services and the dangers of constantly chasing work at any price just to keep the wheels turning – that “race to the bottom” we’re seeing too much of.

The episode also touched on the growing impact of the gig economy in our sector and how the pressure to accept any rate can further squeeze margins. While there are some guidelines out there to help with rates, like Chapter Six in New South Wales, the Victorian Owner Drivers and Forestry Contractors Act, and the WA Owner Driver Contracts and Disputes Act 2007 with its cost calculator, they’re not always a silver bullet, and in most cases are only guidelines and not enforced.

We also had a good chat with Professor Kim Hassel, a real expert in transport economics, who shared some valuable insights into how transport costs and prices have changed over the years and highlighted the importance of knowing your own costs inside out. He pointed out the difference between rates, prices, and costs, and stressed the need for escalation clauses in contracts to protect against rising expenses. Kim also mentioned the Producer Price Index for road transport as a government resource worth looking at.

Ultimately, this isn’t just about the dollars and cents; it’s about safety. As the stats sadly show, transport remains one of Australia’s most dangerous industries. Unsustainable pay can lead to longer hours, skipped maintenance, and cutting corners, all of which have a direct impact on the well-being of our drivers and the safety of our roads.

Have a listen to the full episode to catch all the insights and the lively discussion with Chris and Kim!

You can tune into Risky Business on:

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I’ve pulled together some further thoughts and FAQs below to summarise key takeaways from the episode. We’d love to hear your opinion on this important topic—jump onto the socials and let us know what you reckon. Stay safe out there!

Keeping Your Wheels Turning: Understanding the Real Costs in the Transport Industry

Knowing the real cost of running a safe and sustainable operation is absolutely critical. As someone who’s been around the traps for a fair while and knows the pressures you face, I want to share some thoughts on this vital topic.

The simple truth is, if you’re not charging rates that cover your actual expenses and allow for a reasonable profit, then the sustainability and safety of your business are at serious risk. It’s a harsh reality, but one we can’t afford to ignore. When the income doesn’t stack up against the outgoings, those essential maintenance checks can get pushed aside, tyre replacements can be delayed, and the temptation to push through fatigue becomes a dangerous gamble.

The Trap of Unsustainable Freight Rate

The “Race to the Bottom”

Think about the constant pressure to find the cheapest freight. This “race to the bottom” mentality can leave you feeling like you have to accept any rate just to keep the truck moving. But ask yourself: does that rate truly account for the rising costs of fuel, insurance, quality parts, and proper maintenance? And what about factoring in a fair wage for yourself or your drivers, and crucially, a profit margin to reinvest and secure your future?

The Impact of Online Freight Platforms

The evolving landscape of the transport industry, including the growth of online freight platforms and the gig economy, adds another layer of complexity. While these platforms can offer flexibility, they can also contribute to a situation where operators feel forced to accept rates that simply aren’t viable in the long run. This can put immense pressure on those committed to running compliant and safe operations.

Think Beyond Immediate Costs

It’s easy to get caught up in just trying to cover immediate costs, but neglecting the bigger picture can be a costly mistake. Ignoring depreciation of your vehicles means you won’t have the funds available when it’s time for replacement. As owner-operators, it’s also vital to factor in a fair wage for your own labour. You deserve to be compensated for your time and effort, just as you would pay an employee.

Use Tools to Understand Your Operating Costs

While there’s no magic number for what constitutes a “fair” rate, there are resources out there that can provide guidance. Don’t be afraid to research the guideline rates and cost calculators available in different states, such as those offered under the WA Owner Driver Contracts and Disputes Act. These tools can give you a benchmark and help you understand the true cost of operating various types of vehicles.

Don’t Overlook Hidden Costs

Furthermore, don’t overlook the hidden costs, such as unpaid waiting times at loading docks. Time spent sitting idle is time you’re not earning, and it can have a significant impact on your profitability and your drivers’ work hours. While it can be challenging to enforce, understanding the potential for delays needs to be factored into your pricing.

The Bottom Line

The bottom line is this: a safe and sustainable transport industry relies on operators receiving rates that reflect the true cost of doing business responsibly. Know your numbers, be willing to say “no” to unsustainable offers, and always prioritise safety over chasing the cheapest freight. By understanding your costs and advocating for fair rates, you’re not just looking after your own business; you’re contributing to a healthier and safer future for the entire transport industry.

Tools like Hubfleet can make this easier by helping you track your time, manage fatigue, and better understand your operating costs. If you’re ready to take control and run a smarter, safer operation, explore what Hubfleet can do for you or sign up for a free trial.

Episode 14 FAQs: The True Cost of Transport and Sustainable Rates

The true cost of transport and whether operators are working for sustainable rates is a sensitive issue because it forces a confrontation with potentially uncomfortable realities. Many smaller operators may not fully understand their actual costs, and discussing rates openly can lead to difficult conversations about profitability, undercutting by competitors, and the overall financial viability of their businesses. There’s also a historical context, with past attempts to regulate rates being met with resistance, creating a lingering reluctance to discuss the topic directly.

The Razerback blockade was a pivotal moment where owner-drivers protested against inequitable road taxes and other issues. While they successfully achieved the removal of road tax, the number one item on their log of claims was for a “fair and equitable rate.” Forty-six years later, the industry is still grappling with how to achieve sustainable rates. The blockade also saw an increase in gross vehicle weight limits without a corresponding increase in rates, leading to a cycle of trying to compensate for low rates by carrying more, which has continued with the adoption of larger and more efficient vehicle configurations, often without a proportional increase in pay.

Several factors contribute to this issue. A “race to the bottom” mentality exists where operators undercut each other to secure work, driven by intense competition and a lack of understanding of true costs. The rise of the gig economy in freight also introduces downward pressure on rates, as does the presence of operators who may not factor in all their costs (like profit or their own labour at a proper rate) when quoting for jobs. Even during periods of high demand and shortages of drivers and trucks, this underlying pressure often prevents rates from rising to a sustainable level for many operators.

Operators need to have a clear understanding of all their costs, including:

  • Labour Costs: Drivers’ wages, on-costs, and administrative staff salaries.
  • Fuel Costs: A significant and volatile expense, especially for long-haul operations.
  • Maintenance Costs: Regular servicing, repairs, and parts.
  • Capital Costs: Loan repayments, lease costs, and depreciation of vehicles and trailers.
  • Registration and Insurance Costs: Mandatory expenses that can vary.
  • Tyre Costs: A substantial expense, particularly for multi-axle configurations.
  • Compliance Costs: Costs associated with meeting regulatory requirements.
  • Tollway Costs: An increasingly significant expense on certain routes.
  • Administration Costs: Office expenses, software, and other overheads. Critically, operators must also factor in a reasonable profit margin, which is often overlooked.

Implementing escalation clauses in contracts is crucial. These clauses should be linked to relevant cost indices, such as the Australian Bureau of Statistics’ Producer Price Index for Road Transport (though it has limitations) or potentially more targeted private indices. Avoid using the general Consumer Price Index (CPI) or even the Transport CPI as they are not representative of trucking costs. Contracts should ideally be reviewed and adjusted annually, or even quarterly for significant cost drivers like fuel.

Industry associations like the National Road Freighters Association (NRFA) and state-based bodies can provide valuable information, networking opportunities, and potentially access to fuel and tyre discounts. Government resources, such as the Western Australian Department of Transport’s “Owner Driver Contracts and Disputes Act” and its guideline rates and cost calculator, can offer a benchmark and a framework for understanding cost components, even for operators in other states. These resources can help new entrants and existing operators gain a better understanding of sustainable rate levels.

Unpaid waiting time at loading and unloading docks represents a significant hidden cost. It directly reduces a driver’s productive work hours within their regulated work diary limits, leading to lost revenue opportunities for other jobs. It also incurs indirect costs through potential truck idling. While some operators charge detention fees, they are often not paid. This lost productivity and revenue can severely impact the financial sustainability of smaller operators who rely on efficient turnaround times to make a profit.

Here are a few steps you can take:

  • Know Your Costs: Thoroughly understand all operational expenses and the required profit margin. You can use tools like Hubfleet’s EWD to track and analyse your times and costs more effectively.
  • Be Willing to Say No: Don’t accept jobs that don’t cover your costs.
  • Value Your Services: Understand your worth and price your services accordingly, resisting the urge to constantly undercut.
  • Utilise Written Contracts: Formalise agreements with customers, including clear terms on rates, payment terms, and potentially detention fees.
  • Research Market Rates: While relying solely on social media isn’t advisable, try to understand the prevailing rates for similar work, potentially using government guidelines as a starting point.
  • Build Relationships with Customers: Foster open communication and be cooperative, which can lead to better negotiation outcomes and contract renewals.
  • Consider Specialisation: Niche markets may offer opportunities for better rates if operators can effectively sell their unique value proposition.
  • Seek Professional Advice: Consult with transport-savvy accountants and consider joining industry associations for support and resources.

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