Paying Drivers on Fuel Surcharge Is Costing You Money — Driven for Success Episode 38

Most trucking companies don’t overpay their drivers on purpose. But a lot of them are doing it. And it comes down usually to just one number.

If you pay your drivers a percentage of revenue, there’s a good chance you’re paying them on the increased price in fuel. And fuel is not performance.

Welcome to the Driven for Success Podcast. This is a podcast for trucking company owners that want to build better businesses with better processes, less chaos, and less driver turnover. I’m Mike Ritzema, owner of Superior Trucking Payroll Service, where our mission is simple: to help trucking families. This podcast is one of the ways we fulfill our mission.

And in today’s episode, I want to talk to you about something that can quietly create problems in your business, and you might not even realize it.

This all comes from a conversation I had this week. There was a trucking company owner who I met at the Mid-America Truck Show, and she had asked me a number of great questions. She was really wanting to make her business better, and she kept coming back to my booth and asking me, “Well, what about this? And what about that?” And we had a long conversation this week about her business.

And what she said to me was, “Something just feels off. Yeah, I’m getting more money for the loads because of fuel, but I pay my drivers percentage of revenue, so the drivers end up getting a piece of that. And I don’t think that’s right.”

And wow, did my heart go out to her? Because she’s exactly right. It’s a tough problem because you agreed to pay your driver, say, 25% of revenue, or 30%, or whatever your number is for the load, but that was when fuel was constant.

Well, with all of what’s gone on, fuel’s not constant anymore. So we’re going to have to figure out what to do about it, and that’s why she called me.

Because she’s getting more money for the load, but she’s paying more to the driver, and she actually loses out in the transaction. So, like we said, fuel went up, as we all know. So the revenue went up. She’s able to get more money from the broker. She’s a small trucking company, so she doesn’t have direct shippers. But some of that fuel money went to the driver, so the profit actually went down.

So revenue goes up, profit goes down. That is a bad formula for you.

So if you don’t separate your fuel surcharge from your revenue, your numbers are going to lie to you because you’re going to look at your revenue, like if you compare to last year, for example. You go, “Hey, last year I did, you know, $5,000 a truck in revenue, and this year I’m doing $5,200.” Well, that sounds great, but fuel’s up $1.87 a gallon over last year. Diesel is nationwide, according to the Department of Energy. So, did you really make any more money?

And this is why it gets confusing. It’s just what we just talked about here. You feel like your revenue’s going up. You’re like, “Hooray, I’m making more money per truck per week than I made last year. So good for me.” But when you’re paying percentage, your driver pay goes up, and that extra money that you got for fuel really goes right in the tank.

And it works the other way too. The drivers wouldn’t like it if they started with you when diesel was $3.50 a gallon and they were getting percentage. And let’s imagine the best-case scenario, right? World peace everywhere, diesel’s two bucks a gallon, diesel’s a buck fifty a gallon. Well, these drivers would be taking big pay cuts, and they’re not going to like that either, because they’re going to be like, “Hey, just because fuel went down, why am I getting paid less?”

So everybody realizes it when they’re on the short side of it.

So, with these changes in fuel price affecting your revenue, you might think you’re growing or struggling, and neither one may be true. You’re just looking at revenue versus revenue instead of looking at net-of-fuel revenue versus net-of-fuel revenue.

So let’s talk about how we fix this. I’m going to do my best to explain it verbally. On our website at truckingpayroll.com, we have an article up already. I’ll have a link to it in the show notes. If you go to truckingpayroll.com/podcast and find this episode, you’ll have a link to it. The article can show you visually more of what’s going on.

But you have to back your fuel out of revenue. And you need that number for a good comparison.

Now, the number I’m using is the number that we used when I was the CFO of a trucking company. And the way that we did it was we had a baseline fuel amount of $1.10 because I’m that old, and fuel sometimes went under that.

And what we would do is charge the shipper a penny a mile for every five cents it went over that $1.10. For every dollar increase in diesel, because now diesel prices aren’t just $1.15 or $1.20, you can do it in dollars. You’re getting 20 cents a mile.

The idea was that the truck would get about five miles to the gallon. Again, this is the early 2000s, so that was about right. So you could do a little better and make a little money, but it was pennies.

So with diesel being about $5.40 this week, that’s $4.30 above our baseline amount, which means at 20 cents a dollar for every dollar a gallon, that’s 86 cents a mile of your revenue that is really just fuel surcharge. So you’re not making as much as you think you’re making, which sounds bad, but that depends on where you started in trucking as far as what you think fuel should be.

You could set it at $3 a gallon in your own head, as long as you keep it constant. You’re going to know what to expect. And if it drops below that, you’ll deal with it then.

But I like the $1.10 one because we’re never getting diesel below $1.10 again. And it’s not so much to measure how much over $1.10 it is. It’s really to compare it to prior periods and see, when you’re comparing revenue, like April of 2026 versus April of 2025 or 2024, that you can take that fuel surcharge component out before you start handing out bonuses to people for increased revenue, even on the dispatch side, which is why I think this is such an important topic.

It’s not just about paying your drivers. It’s also about comparing your performance this year to last year, or the year before, or the month before.

So let’s talk about an example load. We got a thousand miles, and we got $3,500 to do it. Sounds great. Well, the fuel in this example, using $5.40 a gallon for diesel, which is the national average this week, is 86 cents a mile times a thousand miles. I picked a nice, easy number. It’s $860 that is really fuel surcharge.

And the remaining of the $3,500, which is $2,640, is your actual revenue net of fuel. So $3,500 is not your revenue here. $2,640 is. That’s the number you should really manage to. That’s your number that you should focus on because fuel’s going to go up and down.

And now that sounds worse. You’re like, “I really like $3,500 better.” Absolutely, I do too. But when you’re comparing it to last year, you do the same thing for last year and figure out how much of your revenue was net of fuel. And you’re just going to be working with slightly lower numbers, but it’s really about the comparison of year to year when you’re trying to compare your performance as a company, and also for how you’re going to pay your driver.

Because the driver should really get paid on the $2,640. The driver shouldn’t get paid on the $3,500 because they shouldn’t get a piece of the fuel surcharge.

And just so we’re clear, we’re talking about company drivers. We’re not talking about owner-operators here. Owner-operators should absolutely get all the fuel surcharge if they’re the ones putting the fuel in the truck and paying for it. Absolutely. I’m talking about company drivers in particular here.

But the goal of it is to measure what your operation really produced. And they didn’t produce the $860 for fuel. They produced the $2,640. The $860 is an external thing. It’s because diesel’s so expensive. Believe me, if diesel was $1.10 a gallon, you wouldn’t be getting $3,500 for that load. There’s no way. You’d be getting $2,640. So that’s really the number we want.

Hopefully that’ll make sense. Again, the article that we have too will show you some graphic visuals that will really help you.

So a lot of companies that pay percentage pay it on the full $3,500 to the driver, which means you’re paying them on the fuel. You’re paying a percentage on money that was never yours. It was just a pass-through cost.

Fuel surcharge is a pass-through. A pass-through is something that you’re collecting, but it’s going right out the door. It’s almost like a lumper, if you want to think of it that way. Yeah, you get the bill for the lumper, but you’re not going to pay your driver a percentage on the lumper, are you?

It’s not about performance or efficiency or execution. It’s an external cost that’s out of the control of the shipper and the trucking company and the broker.

So I want this to seem really clear, and I want you to almost wonder, if you’re paying full percentage, “What am I doing here?” Because I think that you’re feeling it too. I think that you’re like, “Man, my revenue’s up, but I’m not as profitable as I was a month ago before all of the international unrest, or whatever you want to say, caused the fuel to go up.”

I’m not worried about the cause. I’m worried about that the fuel went up. So I’m not trying to turn this into a political thing here. But the fact of the matter is, fuel is more expensive than it was a year ago. So you should be subtracting that part out.

So let’s look at the bigger picture here. Fuel’s up about $1.87 from last year, according to the Department of Energy. We’ll put the link to this. If you don’t have it, we’ll put the link in the show notes as well. truckingpayroll.com/podcast. We’ll put a link right there. You can get your own Department of Energy weekly updated prices for fuel.

But that’s 37 cents a mile in the way that we do fuel surcharge. So if your fleet runs 50,000 miles a week, which isn’t that hard to do, depending on the number of trucks you have. I mean, it’s really hard, I guess, if you have one truck. But if you’re running 50,000 miles a week for your fleet, that’s $18,500 in additional revenue.

It’s not really revenue. It’s like $18,500 in lumpers, like we said, or any other kind of reimbursement. It’s really just a reimbursement. It’s not growth, especially if you compare to last year and you’re looking at, okay, this week in April 2026 versus this week in April 2025, however you want to measure it, and you ran 50,000 miles both this year and last year for that week. That additional $18,500 that you have this year that makes you feel like you’re more successful, that’s not growth. That’s fuel that’s going right into your tank.

So what I don’t want you to do is to look at that and feel like, “Oh, look how much better we are. We made $18,500 more this week than we made last year. We’re really figuring this all out.” I mean, I’m glad. I want you to feel good about things. But I’ll tell you, when this fuel all gets settled out and you’re looking at your numbers a year from now, and you’re comparing this week in April 2026 to this week in April 2027, and your numbers are down because fuel went back down, I don’t want you to be bummed out either. I want you to go, “Okay, if we net out fuel, this is where we were.”

And it’s also possible that you were improving or not. One of the worst scenarios is that you’re $10,000 up with the example that we gave where $18,500 should be fuel, and your revenue’s $10,000 higher than last year, and you’re high-fiving yourself. “Hey, we’re $10,000 higher.” You’re actually $8,500 lower.

And that’s the real trap because you’re like, “Well, revenue’s up, so I feel pretty good about it.” But you’ve got to net out that fuel. Otherwise, everything goes sideways.

If you don’t separate the fuel, you really can’t objectively compare your performance year over year. You really won’t understand your margins, which you need to understand, which loads are profitable, and all that math changes if you don’t account for the price of fuel.

So it’ll help you price correctly because right now you could know that you should be getting 37 cents a mile more than you got last year. Whatever you decided last year’s number was acceptable, add 37 cents.

You’re also going to know if you’re improving. Are we making better decisions? Those better decisions will be if our revenue is up more than the $18,500, then we are. If it’s up less than that, then we’re not. So that’s why it’s so important to know.

If you don’t strip out fuel, you don’t know your business. You don’t know if you’re performing well, and you have to know that trucking is way too hard, as we all know, for you not to be able to have the best information to make decisions.

This isn’t some accounting trick. It is a little, but it’s really not an accounting trick. Let’s carve out the things that can be carved out, and let’s objectively evaluate our performance.

Trucking, like I said, is hard enough. Let’s not make it harder by confusing numbers. Let’s not give ourselves a false sense of security because we’re up $10,000 and we should be up $18,000. Or if you’re up $25,000, which would be great, that means $18,000 and change was fuel and the rest was your improved performance. But we need to know that.

We need to know how we’re doing in real time, and this is a way to do it because the revenue is going to drive everything else.

So it’s easy to feel stuck here. It’s easy to look at your numbers and just kind of gloss it over. There’s a nice, easy way to do this. We’ll probably build something on our website that will help you with it, and we can help you compare those numbers.

Now, there’s one more part of this. Drivers don’t push back on that when they can’t see it. So when you show the math, it’s clear and it’s consistent.

So one of the things you absolutely, positively have to do is, if you’re going to pay the driver net of what I call net of fuel, if you’re going to pay them a percentage on that, then you absolutely have to show them how you compute it. I would even show them the website where the numbers come from for the fuel price.

And you may have to up your percentage because you’re paying them on a lower number. This is not to pay your drivers less. It’s to correctly pay your drivers, and that’s a big difference.

Because your driver right now, if you’re paying them on full gross revenue, including a fuel surcharge, they’ve gotten a big raise in the last month or six weeks, right? The fuel’s gone up 37 cents a mile over the last year. If you’re paying them 25% of that, that’s over nine cents a mile that they get as a raise. That’s a huge raise. But they didn’t earn it.

And when it goes back down, they’re going to come complain to you about a pay cut. They’re going to be like, “Why am I getting paid less?” And you’re like, “Well, fuel went down.” And they’re like, “Well, that’s not my problem.” So it’s not their problem when it goes up either. But you’ve got to explain it to them. You’ve got to show them your math every single time.

My advice would be to have something on your pay stub, something like: here was the gross, the $3,500 we talked about in that load. Here’s the number of miles we went. Here’s the implied fuel surcharge, which was the 86 cents a mile. So this much was actually fuel surcharge dollars, which was $860 in our example. Here’s the $2,640. Here’s your percentage. Here’s what you get.

That’s the best way to do it. You’re going to walk them through the math on every single load, every single time. It’s something we can help you with if you’re one of our clients. We’ll do it for you. But you’ve got to do it.

You’ve got to, number one, take fuel out of your percentage calculation for a company driver. Absolutely, because you’re going to ruin yourself with high fuel prices. And you’ve got to show the driver how you’re doing it so that they understand it as well, and so they can follow the math right along.

Because you have to build trust with the driver, especially a driver who may haul different loads different weeks and get different pay for the exact same load because they’re percentage. And we all know markets go up and down. You absolutely have to show them the work and build the trust with them.

Because again, as I’ve said this before, ask any driver to tell you a story about how their previous trucking company cheated them on pay and buckle up, because they’re going to talk for a while. I’m not saying the trucking company cheated them on pay. I’m saying they felt cheated. You show your work, they don’t feel cheated.

So you make it clear and consistent, and you show your math because confusion creates conflict and clarity builds trust every single time.

This isn’t about complicated accounting. It’s a relatively simple formula that we’ll share with you on the website. But it’s about making better decisions with better numbers. Because if your numbers are wrong, your decisions will be too.

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