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Driver Inc. model finally getting attention

Posted: October 11, 2018 by Mike McCarron

From all accounts coming out of last month’s Canadian Trucking Alliance (CTA) board meeting, the driver contractor issue is finally getting the attention it deserves. With Driver Inc. on the agenda, the alliance brought Canada Revenue Agency (CRA) to the table and the government said it’s serious about nailing culprits who are not paying their fair share of taxes or forming sham companies for drivers who have no clue what they are signing up for.

In spite of what many believe, I applaud the work of the CTA. Getting clarity from CRA on Driver Inc. is good for the industry.

Contract drivers should not be an all-or-nothing proposition. In fact, a cleaned-up Driver Inc. might just be the answer to our chronic driver shortage.

Legal Driver Inc.

Driver Inc. is a model where drivers who do not own, lease, or operate their own vehicle become incorporated and work for carriers as independent contractors. The driver sets up a PSB (Personal Service Business) and is issued a T4A.

Some carriers get this right, with a contract that’s fair and establishes the independence of the driver. Others use it as a device to rip off the taxman or take advantage of drivers who don’t know what it means to be an independent contractor.

Industry leaders and the CRA have an opportunity to crack down on bad operators and educate drivers and carriers about a legal and responsible approach to Driver Inc. In the process, I believe we can fill some seats.

It’s cultural

The math indicates that contracted drivers may take home a bigger paycheque (no tax, EI, or CPP withheld) but net less after expense, taxes, and no access to benefits. Makes you wonder why anyone in their right mind would agree to or insist on such a structure.

It can be a cultural issue. Drivers who come from entrepreneurial cultures look at their peers who started with one truck and now own hundreds. They want that stature within their communities as well. The paycheque is secondary to the chance to strut forward as your own boss.

Fleets that can appeal to this cultural effect—and adjust their driver policies accordingly—might have fewer empty seats than carriers that don’t.

Hybrid Driver Inc.

How times change.

Back in the mid-1990s, you were either a carrier or a freight broker. Fast forward and today it’s hard to find a carrier that doesn’t broker freight.

Carriers’ perception of freight brokers 22 years ago is comparable to their thinking around Driver Inc. today. They don’t like it, don’t understand it, and don’t want to miss the boat if it can help their business.

I’ve spoken with many (including some of CTA folks) who think that having a pool of self-employed drivers makes sense as long as they meet the CRA’s definition of independent contractors. They can offer a legal, responsible Driver Inc. option alongside having salaried employees. It makes sense to me.

Salaried drivers

One of the concerns that fleets have with using contracted drivers is the impact it will have on their current company drivers. My guess is a big fat zero.

Not one employee driver is going to cross over and give up access to EI, workers comp, or disability insurance. All you have to do is show them how their take-home pay and benefits will be affected if they give up a regular paycheque. Like that’s going to fly at the dinner table.

On the other hand, independent driver status will appeal to a whole new group of entrepreneurs. Having clear direction from the industry and CRA is a huge help.

I hope now you understand why I have been saying for some time that if I still owned a trucking company I would adapt the Driver Inc. model.

Mike McCarron is the president of Left Lane Associates, a firm that specializes in growth strategies, both organic and through mergers and acquisitions. A 33-year industry veteran, Mike founded MSM Transportation, which he sold in 2012. He can be reached at mike@leftlaneassociates.ca, 1-844-311-7335, or @AceMcC on Twitter.

 

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