September 24, 2021

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4 min read

Own authority vs Independent contractor: who would win?

We use the terms “working with own authority” and “working as an independent contractor” a lot of times speaking about freight business. Some people even think that these two things are practically the same, but this is only partially true.

The main distinction between them lies in the question: “Who owns the operating authority?” As for owner-operators, they do it themselves, which is having a designation for the company to use the trucks. On the other hand, independent contractors have to seek for the company to work with, but not as a part of it.

Let us find the difference to define which variant is better for you in terms of profit.

Making “hidden operations” clear

If you are working with your own authority, you already have a clue about all the taxation. However, being an independent contractor means that you are not always aware of the expenses you may get. They are mainly connected with the people you have to hire to delegate some important functions.

First of all, pay your attention to the sales. To calculate all the possible expenses, use the help of brokers, freight forwarders, or agents.

Secondly, you need a person to plan your schedules, e. g. the time spent on the road, loading, and unloading the truck. As for planning the trip, you could use the computer, but there is still a person in charge of the automated system.

Thirdly, to control the timetable and solve possible problems on the routes, you need to find a good dispatcher. This person will work as an important link between the customers and drivers.

Fourthly, do not forget about paperwork as the load is shipped. A staff member who would make invoices is a must for your successful business.

And lastly, you are going to find a person for dealing with State licensing and managing the whole process.

If you are lucky enough to get another employee for negotiating, it all will be quite helpful. For example, they could make contacts with fuel companies to receive a better price and take part in bonus programs, or they could apply to an insurance company to find the most suitable policies for health, cargo, or physical damage.

However, bear in mind that in many companies there is a rule of having one office worker on five trucks, so there will always be people who take several duties at once.

Now, let us take a look at the expenses you have to consider.

Road and fuel taxes are the things you need to calculate and keep track of in a special program. Again, you can hire a specially trainer person for that, or do it on your own. The same goes with payroll; either you do it alone, or you hire a staff member to work with the accounts.

Safety issues are the next thing you should take into consideration, including anything from driver screening to risk management.

To finish with, you could always have some extra expenses connected with equipment maintenance, administrative costs, or some other services. Do not forget to keep them in mind, too.

So, how to calculate your “hidden operations”? Look at the information below to help you.

Rule of One Office Person per 5 Trucks – 10% of revenue
Broker / Agent / Freight Sales Fees and Costs – 7% of revenue
Receivables Financing / Factoring – 5% of revenue
Liability / Cargo Insurance – May be included in the contract – 5% of revenue
Facilities / Trailer / Misc. Costs – 5% of revenue
Information Systems, Wireless and Communication Programs – 2% of revenue
Licensing – May be included in the contract – 2% of revenue

Which one to choose?

Judging by all the things we mentioned, it is impossible to say which variant would be ideal for you and your purposes. All in all, you will have to think for yourself, yet there are some visible tendencies.

It is better to choose to work under your own authority if you have a good base of customers, or if you are specialized in some niche market. For this, you should spend more time studying the ways to maximize your revenue and minimize both costs and risks.

Working with a fleet is a great solution for those who want to focus more on the road productivity and not to think much about available programs and administrative tasks, as everything is provided by the company.

If you are willing to lease with us on any of these terms, write us to get more information.

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