How Do My Drivers Get Paid? – An Essay - Fred Stock  3/22/11

            Working with people just starting their companies, we are frequently asked about the arrangements between owners and drivers regarding money. The answer is simple; They ain’ no answer! (smile)   

            The arrangements are endless in variety. Many companies own all the cars and lease them to the drivers for a specific period of time: a day, a week, a month, three months. Meters in some places are set to work until the cut-off date programmed by the management, and at the end of the term, the meter quits working. Some companies rent/lease the car to the operator for a day or two at a time, usually longer, and the company takes a percentage of the gross. The driver is responsible for gasoline, car wash, oil changes, but the company is responsible for transmissions and brakes, and insurance.

            In some few situations, the company employs the drivers, and has all the responsibilities of owner/employee relationships in any company. Workman’s Comp and health insurance and unionization and so forth, with the benefits of being able to fire and hire, require dress codes, etc. as with any company employing workers. Our business is so fluid that this does not always prove to be the best choice. But some places it works well. And what happens when your employee who knows all about the company and its numbers decides he wants to go on his own? Severance? Notice period? 

            Some places the “company” is only a dispatch center, the operators pay a set amount per week (or whatever period) and the business is theirs. They maintain the car, carry the insurance, gas, etc. and keep what they make. The dispatch center is the call center for the group, publishing and promoting the company name. Usually all the cars will be painted the same, and recognizable by the public. Some places the cars are NOT the same, and they get a magnetic sign set for the car, and magnetic toplights. After work, they take the car home and the only sign that it is a taxi is the meter which is covered on the dashboard with a towel!

            In Palm Springs for years, the owner of a given company (Lets call it AJAX – not a real company) had a few cars – maybe 1 or 3 – and operated the dispatch if there was any at all. Then there were dozens of operators who owned or shared cars which had the AJAX logo on the side and the name on the toplight. The cars often were found sitting at the Palm Springs Airport without making any effort to snag other rides. When a plane came down, they lined up waiting for fares. Once in a while they would get a ringy-dingy from AJAX with a call, and they would evaluate the call against the expected waiting time for the next aircraft landing.  They would elect to “pass or play?”  Many of these people were making so little money they eventually went out of business. The only one to prosper was the owner who charged them a weekly fee for using his banner and telephone number. It also made for a bit of under the table dealings: when a “good ride” came in, of course it went to the owner’s three cars first. There was much weeping and gnashing of teeth. (I just made that up!) (No?)
           Today that’s all changed, and only three larger companies are in existence here. Each required to qualify for a “franchise” governed by a regulator. There are fewer cars now, by perhaps a hundred or more, but the public seems to be well served. The jury is still out on franchising. The story isn’t finished here. I suppose it is working in other cities, and perhaps failing in yet others.

            As far as making a decision about your new company, try to view the arrangements you are considering from all points of view. If you are the company, what are you advertising to the public, and what amount must you make to survive?  What will you be offering to your drivers  in return for loyalty and agreement – these are also friends in most cases so think it through carefully. If you are the operator/driver, what are you willing to do to make your living, and what is beyond your limits? You can’t expect to work 120 hours a week and still survive without running off a cliff asleep at the wheel. And I suppose you selfishly want to have a life too – see how you are? (smile) . Now, If you are the clients – the public – what will you gain if the driver/company relationship is this way or that? What do you want from a taxi when it pulls up in front of your house or hotel?

            There is a lot to consider. Perhaps you can set up a system to your liking, and tell your operators right up front, “we are going to try this.” If it turns out to be unfair or unworkable for one reason or another, leave the door open to change it. Bring in the people who will be affected by your decisions, and get them to participate in the negotiation/planning/decision-making. It seems likely they will cooperate more if they feel they are part of the planning process.

            Remember too, nothing is ever set in stone. You can change your rates and you can change your car colors. You can also change your methodology and practices. You can even grow or quit. Try to have a dedication to your choices, be consistent, but at the same time keep your eyes open and consider changing what does not work in your area.

            There are places where you MUST lease out your vehicles and set limits. The driver’s pool expects that’s how it will work. Anything else will feel suspect to them. There are places where that arrangement would look like overkill – way too urban for this little nook. Some people will NEVER work for a company which dispatches and directs them – they want freedom to go out and get their own business. Others would never want to do promotion or advertise their personal service – want to make their night’s wage and go home. Your area and situation are imperative in the discussion. Also,  there is sometimes a consideration of the wishes and needs of another player in the game. The City regulations are important in most cities, but if you are right on the edge of a large military base, what the base commander wants and requires must be considered too. All these factors must be mixed into your soup as you spice it to taste.  Bless you and good luck! -fhs