What is Detention Pay? And How to Determine Yours
Detention pay is a crucial aspect of the trucking industry, and it’s important for owner-operators to understand what it is and how to determine their own detention pay rate. Detention refers to the amount of time that a driver is detained at a shipper or receiver beyond the agreed-upon appointment time. This can result in a loss of income for the driver, as they are not able to take on other loads during this time. Detention fees are charged to offset the cost of a truck being detained, and they can vary depending on the amount of time the driver is detained. It’s important to note that detention fees differ from demurrage fees, which are charges associated with long-distance freight shipping. By understanding the concept of detention fees and how they affect your freight costs, you can negotiate better rates with shippers and receivers and ensure that you are fairly compensated for any extra time spent waiting at loading docks.
What is a Detention Rate
A trucking company’s detention rate is not a random number picked from a hat. Outside of parking, detention is one of the biggest complaints within the trucking industry. Most shippers and receivers have a 2-hour window to load/unload a truck. Any time spent outside of the allotted two hours is detention. The detention is used to offset the cost of a truck being detained at a shipper or receiver. If you are working through a broker, detention rates have typically already been negotiated with their shippers and receivers. If this is the case, you will not need to figure out your detention rate. However, if you are not using a broker, your detention rate may be good information to know. To get started, you need to know your operating cost to better evaluate what you need to charge for any days of detention or accessory charges while waiting on your truckload. In your negotiation of the rate, you will need to do your homework and know what is expected or included in their terms as well. This could consist of a grace period, storage charges, free time, or a number of free days. There may also be different policies on an empty container vs a full container.
Difference Between Detention and Demurrage
It’s important to understand the difference between detention and demurrage fees in the trucking industry. While the terms may be used interchangeably, they are actually two distinct concepts. Demurrage fees are associated with long-distance freight shipping and are charged when import containers or ocean freight arrive at container yards in the United States. Demurrage charges can also apply to export containers leaving the United States.
In contrast, detention fees are charged for the amount of time a driver is detained at a shipper or receiver beyond the agreed-upon appointment time. While both detention and demurrage fees can result in a loss of income for truck drivers, they are charged for different reasons and are not interchangeable. As an owner-operator or carrier, it’s important to understand the differences between these fees to ensure that you are being charged the correct amount and that you are negotiating fair rates with shippers and receivers.
Detention Cuts Truck Driver Profits
Detention is not only a frustrating experience for truck drivers, but it can also significantly cut into their profits. The Hours of Service regulations allow truckers to work for up to 14 hours each day, with 11 of those hours designated for driving. However, any excess time spent waiting at a shipper or receiver cuts into a driver’s valuable work time and can result in a loss of income. In addition, extended detention can have serious consequences, such as missing an unloading time or needing to pass on another load due to a missed pickup time. These scenarios can damage a truck driver’s reputation and ultimately cost them money. As an owner-operator or carrier, it’s important to understand the impact of detention on your bottom line and to negotiate fair truck detention rates with shippers and receivers to ensure that you are being compensated for any extra time spent waiting at loading docks.
Detention Rates Cut Shipper Profits
Detention rates are not only important for truck drivers, but they also have a significant impact on shippers and carriers. Carriers often have a detention rate to offset some of the income lost during detention. The detention rate is a fee that carriers charge for their time spent waiting at loading docks, and pricing can range from $25 to $100 per hour. While this fee does not fully make up for the cost of the driver’s stationary truck and lost time, it helps to soften the blow. However, for shippers, driver detention rates are unexpected costs that can cut into their profits. As a result, it’s important for shippers to be aware of detention rates and to negotiate fair rates with carriers to ensure that they are not being charged excessively for detention time. By working together to minimize inefficiencies and reduce wait times, shippers and carriers can ensure that detention rates do not have a negative impact on their profits.
How Do You Calculate Your Detention Rate?
Calculating your detention rate is an essential step in ensuring that you are financially covered during downtimes. To determine your detention rate, you first need to understand your operating costs. Your operating costs include all the expenses required to run your company, such as fuel, maintenance, tires, permits, and salaries. Once you have a clear understanding of your operating costs, you can break down these costs further to determine your operating cost per hour. By knowing your operating cost per hour, you can calculate how much a detention time costs your business and negotiate a fair fee to cover these costs. Factoring in your hourly rate is also important, as it allows you to determine how much you should be compensated for your time spent waiting at loading docks. Inefficiencies at loading docks and appointment times can cause extra time and expenses, which must be accounted for in your detention rate negotiations. By knowing your arrival times and working closely with dispatchers, you can also minimize wait times and reduce the need for extra time spent loading docks. Overall, understanding your operating costs, hourly rate, arrival times, and inefficiencies are crucial to determining your detention rate and ensuring that you are financially covered during downtimes.
What is Your Average Cost Per Hour?
John Doe’s trucks drive mostly on the highways, and most of those roads have a speed limit of 60 mph. To determine how much money it costs to run a truck for 1 hour at 60 mph, John needs to multiply his cost-per-mile by the speed limit.
If John’s trucks are not moving, he is not making money. As determined above, it costs John, on average, $75.54 an hour to run his trucks. To cover the cost of an idle truck, John decides to charge a $75.54/hour detention rate when his truck is held longer than two hours at a shipper or receiver.
NOTE: Negotiating detention with a broker or shipper needs to happen while you are negotiating your freight rate. In addition, make sure to get the final, negotiated amount in writing, or you run the risk of not getting paid.
Stay on top of your monthly expenses. Know when your costs change and update your operating cost accordingly. Your operating cost helps you determine your detention rate.
What Happens Now
Detention is a problem that affects everyone involved in the trucking industry. When a truck driver is detained, everyone loses money. The driver loses income due to lost work time, and carriers may have to pay out detention fees to compensate for the driver’s lost income. In addition, shippers may face unexpected costs that cut into their profits. With electronic logging devices (ELDs) measuring Hours of Service more closely, the issue of detention is becoming more prominent. As a result, more attention is being focused on shippers and receivers to fix the problem. If shippers and receivers do not work to reduce wait times and minimize inefficiencies, freight and detention rates will continue to rise to compensate for the truck driver’s lost income. By working together to reduce wait times and improve efficiency, everyone involved in the trucking industry can benefit and minimize the impact of detention on their bottom line.
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