Paying yourself enough?
I thought I'd sit down and figure what you'd have to make as an O/O in order to match what you could do as a company driver. I rounded some numbers to make them easier to work with and had to make some assumptions, but this should be a pretty accurate approximation.
A company driver making $.43/mile driving 115,000 miles will make around $50,000. After SS and Medicare that comes out to $46175.
Taking into consideration the tax deduction and a 10% tax burden, pre-self employment tax and O/O would have to earn about $53,000 to arrive at that same $46175.
Almost all companies offer 401(k) programs. The tax deferment is irrelevant since similar options are available to the self-employed. However, company programs generally have a company match. Even if you don't take advantage of this free money, that is part of the compensation available to you and has to be figured in. On $50,000 gross income, a run-of-the-mill program like Schneider's will mean $2,000 to you.
Most company health insurance is significantly cheaper than what you could find on your own FOR THE SAME COVERAGE. Again, you might be able to get by with less, but what's available is the value the market places on you. In my experience, a 40 y.o. with a family of 4 might expect to pay $250/month for company insurance. That same coverage would probably run in the neighborhood of $500 if that same person was getting his own insurance. A good clue for those of you that have left companies is how much your COBRA coverage premiums were. I know some people pay less than $250/month more and some pay more. I was just looking for an average. At that rate, that's an additional $3000/year.
Workers' Comp is the last bennie. As an O/O, the substitute (though it's not nearly as good) is occupational accident insurance. Most lease operators are required to carry this, many independents don't bother. But as a company driver, you're covered by Workers' Comp at no cost, so that's part of your compensation package. Rates vary, I'll use $2000/year.
So, in order to provide yourself with comparable bennies, you need to make an additional $7000, bringing the total to $60,000 per year. This means that in order to be in the same boat financially as a company driver making $.43/mile, you need to pay yourself 21% more, or $.52/mile...assuming you run the same number of miles.
I bring this up because I talk to so many O/O's that allocate $.40 or less for driver pay figuring that's similar to what they'd make as a company driver. They simply don't account for the tax implications nor the total value of the compensation package available. Paying yourself $.45/mile is not the same as a company paying that to you.
And I'm not even broaching the subject of ROI, or profit. Without which a business is still a money losing venture.
Alright, bring on the dissents
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, but you know, it's a bit more complicated than that. I won't go into details, but you'll guess...
Originally Posted by no_worries
