In the commercial trucking industry, there are two primary models of drivers: independent owner-operators and company drivers. Each model has its own set of operational, financial, and risk management challenges, particularly from an insurance perspective. Knowing the differences between the two is essential for understanding and navigating this dynamic landscape.
Understanding the models
Owner-operators are independent businesses that own, finance, or lease their trucks. They are responsible for maintenance, fuel, and workers' compensation insurance (or a similar type of insurance, depending on the province). The relationship between owner-operators and carriers is typically contractual.
Company drivers work directly for a carrier and drive vehicles owned by the company. The employer handles all logistics, including insurance, maintenance, and compliance. They also take care of all necessary tax deductions and payments to the government.
In Canada, many companies use a mix of company drivers, and owner-operators, while some choose only one type.
Which model is better?
Both approaches have their benefits and drawbacks, which often depend on a company’s culture and its focus on safety.
A 2016 study by the Midwest Transportation Center at Iowa State University examined the differences between the two groups of truck drivers. According to data from the Federal Motor Carrier Safety Administration (FMCSA) and Commercial Vehicle Safety Alliance (CVSA), the report shows that owner-operators have fewer collisions and lower out-of-service (OOS) rates.
Owner-operators take personal responsibility for their truck maintenance, so they tend to be more diligent to help avoid costly downtime. Company drivers, on the other hand, often have a different level of commitment toward maintenance as they may not drive the same truck every day, while owner-operators always use their own vehicle.
Pros and cons of company drivers
| Pros of having company drivers | Cons of company drivers |
Control and workforce development Companies have more control over routing, schedules, and logistics. Training can bring inexperienced drivers up to the company's standards. |
Higher overhead The carrier handles the risk, and the financial burden of vehicles, insurance/deductibles, fuel, maintenance, benefits and vacation pay. |
Consistency and compliance More predictability and better performance, ensuring smooth operations and happier customers. With compay drivers, it is easier to enforce safety rules and check how well drivers are following them, ensuring a safer workplace. |
Turnover Drivers are often recruited or move to carriers who offer better pay and/or benefits. |
Branding Trucks can be fully branded with colors and decals, ehancing your company image. |
Administrative Carriers typically require human resources, recruitment and compliance staff to manage. |
Pros and cons of owner-operators
| Pros of using owner-operators | Cons of using owner-operators |
Lower capital investment The financial risk falls on the owner-operator (to purchase the truck). |
Cutting corners As the cost of maintenance/compliance rises, it may be done less frequently or below normal standards, often leading to more costly breakdowns or out-of service violations. |
Scalability The flexibility to increase or decrease the fleet size based on their current financial, or economic situation with no large capital outlay. |
Less control Owner-operators may cut corners with compliance if there are cost savings to be made. (This will greatly depend on leadership and company culture.) |
Experience and motivation Owner-operators often have more experience because they usually start as company drivers before becoming owners. Owner-operators are small business owners. Their income depends on how well they perform. |
Liability exposure Owner-operators, in many provinces, can opt-out of purchasing Workplace Safety and Insurance Board (WSIB) insurance. However, to legally opt-out of having WSIB, an alternative that meets or exceeds WSIB standards must be in place. This is an important step that can often be overlooked. |
Making the choice
From a risk management perspective, companies must weigh the cost-efficiency and flexibility of owner-operators against the control and consistency of employing company drivers. The right balance depends on operational goals, regulatory environment, and the company’s comfort in managing risks.
