I recently spoke with a prospect from a trucking company that was dealing with some really complex challenges around Payroll. As with many other industries, one of the most critical was the shortage of people and the constant turnover. In order to stay competitive, they have created complex pay rules that result from trying to maximize pay for performance. In this industry they are using a mileage and delivery-based payment program, which helps balance profit margins to stay competitive in the marketplace.
A solution to this complex challenge requires tracking data HR systems will not have standard:
- CDL Tracking
- Rig Assignment and Vehicle Maintenance
- Truck information
- Trip Details
Employees and Contractors
To further complicate the pay issues, this industry relies on owner operators/independent contractors to fill the needed truck driver vacancies, in addition to their company paid drivers. These drivers must be paid not through payroll, but through Accounts Payable, and be given a 1099 form. Some of the complexities with contractors is that they own or lease their rigs, and must pay lease payments on their rigs, maintain insurance and bonds to cover maintenance. All of these are paid out of the proceeds from their driven mileage, which doesn’t always cover the monthly payments, so overdue amounts must be tracked as well.
Driver Health, Lifestyle, and Pay Equity Sentiment
As you can imagine, being a truck driver is not the easiest job in the world and they face many challenges which make it difficult at times to maintain a healthy lifestyle including mental wellness. Naturally, working several days on the road and not seeing family takes a toll on people. The lack of ability to measure driver satisfaction to proactively deal with health, lifestyle and pay equity in the market are also big factors within the trucking industry and can exacerbate turnover problems by not making it clear why drivers may be unhappy. Companies must stay in touch with their people and know how they are feeling.
The Solution: Solving the Challenges
Needless to say, when I started talking to this company the challenges were large and they had gone out to market without a lot of success, but one of my favorite parts of my jobs is trying to solve the problems of our customers and prospects. With SAP SuccessFactors Employee Central and Employee Central Payroll, we are able to solve these unique challenges of this trucking company with our flexible solutions and I wanted to share some of the details of the ideas I came up with and what we were able to show them.
Easily Track Customer Specific Data for your Drivers
The first thing we came up with is to use standard SAP SuccessFactors capabilities to capture elements for payroll rate calculations. We can easily differentiate between company drivers vs independent contractors, and further breakdown to classification of drivers: e.g., dedicated, probationary, trainers or trainee drivers which can have different payroll implications.
In this industry, contracts are formed between the trucking company and the recipients of the delivered goods. These contractual pay elements can be configured and captured in our standard field Contract Type. This contract assignment provides the ability to build rules to default payment types, and rates based on a rate lookup table which I will discuss later.
We can also provide drivers the capability to update their assignment preferences in our Geographic Mobility including language skills, as well as Certificates and Licenses that are critical to the Driver’s route scheduler as they plan specific routes or territories. This self-service ability will provide a better experience for both the driver as well as the planner and create an efficiency in the process.
Creation of Trucking Specific Data in the Extension Center
The next thing we needed to do was capture Trucking specific data that HR systems wouldn’t include such as:
- Driver’s CDL Information
- Truck Information
- Trip Details
And, we also have payroll specific challenges presented by the Contract Driver:
- Balances and payments for the Truck Lease
- Insurance and Bond Balances
- Claims/Employee owing money
To meet these specific requirements, we created new objects using our Extension Center.
Custom objects are simple to create within the Extension Center. You define the fields needed, add a workflow where approvals are required, and set up the role-based permission for view and/or update. I have provided a couple of the screens created to capture the detail that we needed for Trip Details, and the Tractor Recap, both fed the requisite data by payroll after payroll is run.
After creating these custom objects, we added it to the People Profile. Once these screens are permissioned, these summaries are available to the drivers. They can be accessed on the mobile application or desktop to provide immediate detailed information to Drivers. This real-time information will allow them to reconcile their trips much easier than before. For the contractors, their bond and insurance balances as they contribute to the balance, or consume the balances performing maintenance on their trucks is also displayed for them to track which will result in less calls/questions and overall confusion.
Convenient Mobile Access
Drivers can access all the detail on the desktop or on the SAP SuccessFactors mobile application which is available on both iOS and Android including the sections regarding trip and rig information which we added to the people profile. This provides the drivers with great flexibility, and instant information to understand how they have been paid, and how they compare to the market.
Trip Data and Payments
The driver trip information is calculated in payroll and stored on the employee profile to provide the trucker with an instant breakdown of trips, with origin, destination, paid mileage, and other incentives.
I also added a section for vehicle maintenances which the driver can view the assigned rig information. It could be expanded to capture maintenance being performed and a date when the driver might expect to be reassigned to his rig as requested by the customer. We have the ability to track any information that is necessary here.
I added a section where drivers can upload their Commercial Drivers License (CDL) information and track expiration dates. Rules can be built to alert the Driver and his supervisor, or HR Business Partner when the CDL is about to expire to ensure timely renewal which is a huge benefit to the customer compared to their old manual process.
Pay Information & Driver Sentiment
In order to address the sentiment concerns I mentioned earlier, we embedded a survey to measure driver sentiment right by the pay information. We know that drivers will always want to know their pay details and can provide feedback along the way so that the company can be proactive to handle any perceived issues, and make sure the drivers are content with their route assignments and pay as compared to the market.
We allow you to capture employee feedback so you can do something about it. A lot of turnover occurs because of perceived pay inequities, or route assignments and to understand those problems at the source (Prior to people leaving) and then make appropriate changes. As this information is captured, and as you take action to mitigate, you can track if you are doing better over time by measuring turnover percentage over time.
The Trucking Company was also required to provide the Independent Contract Driver with details on balances of the Lease, Bond, and Insurance payments. This information is managed in payroll, and posted to Finance, as well as provided here so that the Owner Operator can view all information in one place. The Driver will always know where they stand on all balances.
Company Driver: Complex Pay Rate Details
To manage all the rates paid to the Company Driver based on their Contract Assignment, we captured all the pay rates that are defined per Contract Type, and defaulted them to the Compensation Section of the Employee Profile based on our Driver Rate Table. The Company Driver’s Benefit Deductions are defaulted based on the Trucking Company plan rules.
Independent Contract Driver/Owner Operator: Complex Pay Rate Details
To manage all the rates paid to the Contract Driver/Owner Operator based on their Contract Assignment, we captured the pay rates defined per Contract Type, and defaulted them to the Compensation Section of the Employee Profile based on our Driver Rate Table. The Independent Contractor has a number of deductions that default, as well, to capture the deductions for bond payments, lease payments, Fuel and Road Use Taxes, and insurance payments. The Total Lease Amount is tracked in one-time payments
For the Payroll Administrator, our Payroll Control Center is used to run the weekly Driver Payroll. We can easily use Alerts and KPIs to provide validation on the input from the Trucker’s mileage submissions, and other inputs, ensuring a seamless, compliant and accurate payroll that is aligned with the company rules.
We can also manage several pay rules directly in the payroll engine during the payroll calculation, and have created constants to track maximum payment amounts, and added payroll cycle rules to calculate more complicated payment amounts.
Company Driver Payroll Rules
Guaranteed Pay: Based upon the company requirements we created constant values for certain groups with guaranteed amounts to be paid if driver does not reach that minimum gross. We then created a rule that sums up gross from other mileage pay and compares with constant. If driver is short, then this rule adds the difference as Guaranteed Pay.
Effective Rate Per Pay Period/4 Wk Average: One of the requests was that drivers want to know their effective rate per pay period, and over a 4 week rolling average to help them understand how much they are being paid per mile driven. This is the rate they are comparing to see if another transportation company may offer a higher rate per mile. This is a convenient way to show the driver this important comparison data right on their pay statement and ensure they are considering factors such as guaranteed pay into this calculation. Having it in payroll results will also make it easier for the company to report on it and know if they need to adapt their policies.
Team Miles: We were even able to track team miles. These team miles are sent in and paid based on the rate in the constant table for the assigned contract.
Miles Driven Bonus: Constant values were created for groups with Miles Driven Bonus amounts to be paid. Constants contain different rates based on mileage range. Two payroll rules calculate the miles driven and then multiply with relevant constant to pay miles driven bonus.
Independent Contractor Driver Payroll Rules
Driver owing: When an Owner Operator driver’s paid miles and other pay does not cover all of the obligations, they are in a situation where they owe the company more than they are being paid. In SAP Payroll we refer to this as a claim. This claim will remain on the pay statement until is it covered by future earnings on miles driven and other pay.
In the following period, you can see that mileage and other pay was sufficient to cover all lease, bond, and insurance payments, as well as the prior claim, so our standard functionality paid and cleared the claim.
Independent Contractor Paid through 3rd Party Remittance
Paying the Independent Contractor occurs via Third Party Remittance. This posts to the GL and is scheduled to run as part of the automated processing that runs in the Payroll Control Center. Third Party Remittance generates the payment via the Accounts Payable function (or SWIFT process). Annually, payments are reported to the IRS and the Owner Operator Driver with a Form 1099.
At this point, you may be wondering about updating the rates for the Drivers, as negotiated rates change. Let’s look quickly at the rate table, and the process for update.
Driver Rate Table
I configured business rules to default the applicable contracted payment types, and rates, and simplify the hiring process and avoid inaccurate data that could result in issues. The Driver Rate table contains the contractual payment types and the associated rates. They are applied with our powerful business rules engine, defaulting the payment types in the employee profile upon hire or transfer, or change of contract assignment. As updates are made in the Driver Rate table with new effective dates, these updates may be automated upon transfer, or hire, and/or scheduled according to your requirements.
Defaulting Pay Components
Within Manage Business Configuration we are able to trigger the updates for Company Drivers and Independent Contractors/Owner Operators.
Providing the Analytics Dashboard
Some of the most exciting functionality for the leadership team was in the form of our Analytics Dashboard. This is their secret weapon to have the data they need to make the right decisions which can then help reduce turnover and improve business results.
Here, we are providing leadership details on specifics and areas for improvement as well as trends. It is equally important to analyze the health of your organization through reporting and analytics.
In the transportation industry, carriers, or trucking companies are typically operating as “hybrid” companies consisting of both employee drivers and owner operators. The creates challenges regarding the analysis of payroll for both employees and third-party contractors.
This application showcases an SAP Analytics Cloud Analytics Designer application that provides our Trucking Company an effective tool for analyzing both employee drivers as well as owner operators.
Our application provides a unique blend of dashboard analytics, 3rd party mapping and navigation software, pop-up dialogs, and coding to enable inter-application communication. The result is an analytical application that eases the payroll analysis in carriers, or trucking companies with payroll consisting of both employees and independent contractor/owner operators.
At a glance, we can see payments and expenses categorized by different segments of the company.
Driver Sentiment and Market Analysis
Realizing Driver Turnover is a huge challenge for transportation companies, understanding Driver Sentiment is critical. As I showed earlier, we embedded a survey in the most important section for the Drivers where they check their pay and now, we can show that driver sentiment can be displayed as one factor in determining how you compare market pay and how you are perceived by your drivers. Our solution allows you to capture employee feedback so you can do something about it. A lot of turnover occurs because of perceived pay inequities, or route assignments and to understand those problems at the source (Prior to people leaving) and then do something about it. As this information is captured, and as you take actions to mitigate, you can track if you are doing better over time. Companies understand that to be competitive, they must also monitor diversity targets.
Our ability to offer drivers a detailed view of their routes and resulting pay is critical to remain competitive in the market. Each Driver can be provided with access to their specific pay information. This is the area where we applied 3rd party mapping and navigation software, pop-up dialogs, and some coding to enable inter-application communication.