Percent of gross or cents per mile: which costs you less?

Neither one is always cheaper. Which structure costs you less depends on two numbers: what the freight pays per loaded mile, and how much empty running and extra stop work there is. Cheap freight with a lot of deadhead and live loads makes a percentage cheaper for you. Good freight with clean drop-and-hook makes cents per mile cheaper for you. Below is the same driver, the same two weeks, priced both ways, plus a formula you can run on your own loads.

What each structure pays, and what it does not

Cents per mile pays for distance, then adds money for work that is not distance. A common setup for a 1099 driver on one truck:

• Calculated miles × a per-mile rate
• A flat amount for each live load
• A flat amount for each stop-off between the first pickup and the final drop
• Detention by the hour or flat, at the amount you decide — what the carrier pays you for waiting is a separate question
• Receipts paid back, cash advances taken out

Percent of gross pays for one thing: the dollars on the load. A percentage pays nothing extra for empty miles, nothing extra for a live load, and nothing extra for a stop-off. The driver sits at a dock for four hours loading by hand and the number does not move. He runs 180 miles empty to the next shipper and the number does not move.

That is the whole story in one line. Percentage pay is simple because it ignores the work your driver argues about.

One more thing to settle before you compare anything: percent of what. The order gross the carrier shows on the settlement, the line haul only with fuel surcharge and accessorials left out, or your own net after deductions. Those are three different numbers. The examples below use the order gross the carrier shows.

Two weeks, priced both ways

This is an example, with round numbers. Say the driver is Ray. Cents-per-mile side: 60 cents a mile on calculated miles, $30 a live load, $25 a stop-off. Percentage side: 28 percent of order gross. Assume you pay for empty miles on the per-mile plan, which is your call and is written down.

Week A: two long loads

2,400 loaded miles, 180 empty miles, $5,160 of order gross, one live load, no stop-offs. That gross works out to $5,160 ÷ 2,400 = $2.15 a loaded mile.

Per mile:

• 2,400 + 180 = 2,580 miles
• 2,580 × $0.60 = $1,548.00
• 1 live load × $30 = $30.00
• Total: $1,578.00

Percentage:

• $5,160 × 28% = $1,444.80

The percentage costs you $1,578.00 − $1,444.80 = $133.20 less.

Week B: three short loads

1,600 loaded miles, 320 empty miles, $3,700 of order gross, two live loads, three stop-offs. That gross is $3,700 ÷ 1,600 = $2.31 a loaded mile — better paper than Week A.

Per mile:

• 1,600 + 320 = 1,920 miles
• 1,920 × $0.60 = $1,152.00
• 2 live loads × $30 = $60.00
• 3 stop-offs × $25 = $75.00
• Total: $1,287.00

Percentage:

• $3,700 × 28% = $1,036.00

The percentage costs you $1,287.00 − $1,036.00 = $251.00 less.

Week B paid a better rate per loaded mile than Week A, and the percentage still won bigger. The reason is the 320 empty miles and the five extra stops. On the per-mile plan you paid $192 for the deadhead and $135 for the stop work. On the percentage plan you paid nothing for either.

The break-even line rate you can run yourself

For any week, figure what the freight would have to pay per loaded mile before the percentage starts costing you more than cents per mile:

Break-even loaded-mile rate = (total per-mile pay for the week) ÷ (your percentage × loaded miles)

Week A: $1,578 ÷ (0.28 × 2,400) = $1,578 ÷ 672 = $2.348 a loaded mile.

Week B: $1,287 ÷ (0.28 × 1,600) = $1,287 ÷ 448 = $2.873 a loaded mile.

Below that rate, the percentage is cheaper for you. Above it, the percentage costs you more. Week A came in at $2.15 and Week B at $2.31, both well under, so the percentage won both times.

You can flip the same math and get a break-even percentage instead: per-mile total ÷ order gross. Week A is $1,578 ÷ $5,160 = 30.6 percent. Week B is $1,287 ÷ $3,700 = 34.8 percent. That is what you would have to offer on a percentage to match what cents per mile already pays him.

Same week, better freight, opposite answer

Keep Week A exactly the same — 2,400 loaded, 180 empty, one live load — and only change the rate.

Loaded-mile rate	Order gross	28% of gross	Per-mile pay	Percentage costs
$2.15	$5,160	$1,444.80	$1,578.00	$133.20 less
$2.35	$5,640	$1,579.20	$1,578.00	$1.20 more
$2.80	$6,720	$1,881.60	$1,578.00	$303.60 more

At $2.35 the two plans are a dollar and twenty cents apart. At $2.80 the percentage costs you $303.60 more for the identical work — identical miles, identical stops, identical hours out of Ray's week. The driver's pay moved $436.80 and his week did not change at all.

That is what you are agreeing to when you pay a percentage. You hand the driver the rate market. When freight is soft, you pay less. When freight is strong, you pay more. That is not a small detail on a one-truck operation, and it is the part nobody says out loud when a driver says "just pay me a percentage."

What it adds up to over a year

Say 44 paid weeks, 30 of them like Week A and 14 like Week B.

Per mile:

• 30 × $1,578 = $47,340
• 14 × $1,287 = $18,018
• Total: $65,358

Percentage at 28 percent:

• 30 × $1,444.80 = $43,344
• 14 × $1,036 = $14,504
• Total: $57,848

Spread: $65,358 − $57,848 = $7,510 for the year. On these two weeks, a 28 percent plan pays about 11.5 percent less than 60 cents a mile plus stop pay.

That is real money and it is not free. A driver who works out that he is $7,510 behind on the same work does not stay. And the $7,510 is concentrated in exactly the weeks he hated — the short, choppy weeks with deadhead and live loads. Cheap freight is when a percentage saves you the most and when it feels worst to him.

If you want a percentage to land close to cents per mile on your own freight, run your last eight weeks both ways and look at the break-even percentages. On the two weeks above, 31 to 35 percent was the honest range, not 28. Figure the cents-per-mile side of each week first — the driver pay calculator will do that on your own miles and stops — then divide it by the order gross to get the percentage that matches it.

Write the rule down, whichever you pick

The choices that move the money are yours to make and yours to keep the same every week: whether you pay empty miles, what counts as a stop-off and what is just the final drop, whether a live load is flat or by the hour, and if you go percentage, whether it is on order gross, line haul only, or your net. Put those in writing with the rate, hand your driver a copy, and apply them the same way on every load.

This week

Pull your last eight settlements and figure two numbers per week: total loaded miles and total order gross. Divide to get your real loaded-mile rate. If it is running under about $2.35, a 28 percent plan is cheaper for you than 60 cents plus stop pay — and you now know by how much, and who is paying for it. Then run the break-even percentage on those same weeks and decide what number you would be willing to say out loud to your driver.