As a FedEx Contractor, How Are My Employees Paid?

If you have never owned your own business but are thinking about becoming a FedEx Independent Service Provider (ISP), there will likely be a learning curve as you navigate the complex landscape of business ownership—and one of the most important things you will need to determine is how you will pay your employees (i.e., your drivers).

Keep in mind that as a FedEx ISP, it will be your responsibility to not only hire and train a team of drivers but also to provide their wages (or salary), along with any benefits you choose to offer, such as health insurance and retirement plans.

Most FedEx route businesses employ, on average, about seven employees (as of late 2019).

If you do not have experience hiring, managing, and paying a staff of workers, it may help to first reach out to other FedEx route owners or small business owners you know to get some pointers about how they operate.

After the initial expense of purchasing your routes, paying your drivers will typically be your largest business expense, so it is important to make sure you do it in a way that benefits both you and your employees. Because payment methods will differ slightly based on whether you own pickup and delivery (P&D) routes or linehaul routes, we have broken it down for you below.

Paying your P&D drivers

There are three main ways you can pay your P&D drivers—by the day (called a fixed daily wage), by the hour, or by the stop—and each has its own pros and cons.

The majority of FedEx ISPs pay their drivers by the day, the pros being that it makes for simpler payroll calculations and allows for easy year-to-year cost predictions. It also gives drivers more control over their work day and encourages them to be more efficient with their deliveries.

However, a fixed daily wage can also have the reverse effect; drivers may make fewer deliveries and be less inclined to help their fellow drivers with overflow. It can also be harder to calculate overtime when drivers are paid by the day.

Paying by the hour is by far the simplest option, provided you have the ability to keep tabs on your drivers during the day (via geotagging and monitoring clock-in/out times) to ensure they are using their time efficiently. Overtime pay is also easier with this method.

Finally, you can choose to pay drivers based on the number of stops they complete each day. With this method, drivers have the most incentive to complete as many deliveries as possible (and even take on overflow from other drivers), which could keep efficiency levels high—provided road safety is not sacrificed to make more stops.

However, tracking and payroll could prove more difficult when you pay by the stop since you need to take into account the differences between rural routes (fewer stops, longer drive times) and urban routes (more stops, shorter drive times).

Paying your linehaul drivers

Linehaul drivers are typically paid per mile for both assigned runs (those with designated start and stop points, usually always the same) and unassigned runs (those with a designated start point but with varying end points), and it is recommended that route businesses guarantee a minimum number of miles per week to retain quality drivers.

Tracking and payroll can be a bit more complicated, but this is easily solved with the help of software solutions that can facilitate tracking and payroll calculations. Keep in mind that you may still need to pay your drivers even if a run is canceled due to bad weather or other circumstances.

Ready to buy FedEx routes? Contact the experts at KR Capital.

Whether you need help finding available routes or understanding your FedEx route contract, KR Capital can help. We are a full-service FedEx brokerage firm with a robust inventory of resources and partnerships to help you establish a successful FedEx route business from the ground up. Call us today at 503.664.0753 or fill out our online form and a member of our team will contact you shortly.