UPDATE: Over the years, since leaving Beeline, I have given more thought to Beeline's contract labor business model. My original post below is still valid, but I want to add a few paragraphs here to explain at a more conceptual level why Beeline's business model is great for Beeline and its customers and TERRIBLE for contractors.
When Beeline switched from employees to contract labor, they shifted a big chunk of their operating costs to contractors without a concomitant increase in driver pay. As with all businesses that switch to contract labor, it was a one way street in Beeline's favor.
With lower operating costs, Beeline is able to keep its pricing artificially low and/or pocket as profit what had been operating costs. Equipment, fuel, maintenance, insurance, and payroll costs were all shifted away from Beeline and onto contractors.
Meanwhile, market realities mean contractors cannot dictate the pricing of their services. They have zero negotiating leverage. In practical terms, they are not true contractors. If they were, Beeline would be forced to bid out their work, just like if they were hiring painters or plumbers or electricians.
If contractors could set pricing, and if they had visibility of the full costs of running capital equipment (their vehicles) and a sole proprietorship, they would certainly charge Beeline more than Beeline pays them. Think about it. If contractors had complete knowledge of all the costs involved (as detailed in my original post below), Beeline would see little cost difference between employees using company-owned equipment and contractors using contractor-owned equipment. The costs should be essentially the same, no matter who is paying for them. The cost of owning/leasing a car is about the same for me as it is for Beeline. Fuel costs, the same. Insurance, the same. Beeline's half of an employee's FICA taxes are the same as my self-employment tax.
The shift to contract labor has occurred across the US economy. And it's killing us. I'm not beating up on Beeline's owners. They're no different than a million other company owners. I can imagine they felt they had to move to contract labor to compete or maintain a target profit margin or whatever. But you don't have to participate. And it would be nice if the IRS would tighten up the contract versus employee labor rules.
Here's my original post about the true cost of working for Beeline Courier Service:
What I've found is that working for Beeline as an independent contractor is not sustainable.
When Beeline switched from employees to contract labor, they shifted a big chunk of their operating costs to contractors without a concomitant increase in driver pay. As with all businesses that switch to contract labor, it was a one way street in Beeline's favor.
With lower operating costs, Beeline is able to keep its pricing artificially low and/or pocket as profit what had been operating costs. Equipment, fuel, maintenance, insurance, and payroll costs were all shifted away from Beeline and onto contractors.
Meanwhile, market realities mean contractors cannot dictate the pricing of their services. They have zero negotiating leverage. In practical terms, they are not true contractors. If they were, Beeline would be forced to bid out their work, just like if they were hiring painters or plumbers or electricians.
If contractors could set pricing, and if they had visibility of the full costs of running capital equipment (their vehicles) and a sole proprietorship, they would certainly charge Beeline more than Beeline pays them. Think about it. If contractors had complete knowledge of all the costs involved (as detailed in my original post below), Beeline would see little cost difference between employees using company-owned equipment and contractors using contractor-owned equipment. The costs should be essentially the same, no matter who is paying for them. The cost of owning/leasing a car is about the same for me as it is for Beeline. Fuel costs, the same. Insurance, the same. Beeline's half of an employee's FICA taxes are the same as my self-employment tax.
The shift to contract labor has occurred across the US economy. And it's killing us. I'm not beating up on Beeline's owners. They're no different than a million other company owners. I can imagine they felt they had to move to contract labor to compete or maintain a target profit margin or whatever. But you don't have to participate. And it would be nice if the IRS would tighten up the contract versus employee labor rules.
Here's my original post about the true cost of working for Beeline Courier Service:
What I've found is that working for Beeline as an independent contractor is not sustainable.
Here’s how the
numbers added up for me:
I worked for Beeline a total of 22 weeks between July and
December of 2012. During that time I drove 23,827 miles and was paid $14,228.
My total fuel cost was $3,275, or $0.14 per mile (driving a
’98 Camry getting 25.9 mpg).
Beeline charges each driver a communications fee and administration
fee each pay period totaling $37.50.
Putting all this together yields the following:
Weekly GROSS Revenue
|
$647
|
Weekly Fuel Cost
|
($149)
|
Weekly Beeline Fees
|
($20)
|
Weekly NET Revenue
|
$478
|
Another way of looking at it:
Weekly GROSS Revenue
|
60 cents per mile
|
Weekly Fuel Cost
|
-14 cents per mile
|
Weekly Beeline Fees
|
-02 cents per mile
|
Weekly NET Revenue
|
44 cents per mile
|
My shift ran from 6:00 a.m. to 2:00 p.m. However, I usually worked
past 2:00 p.m. I did not keep data on total hours worked, but I probably
averaged 10 hours per day, or 50 hours per week.
So what’s the problem with making $478 per week?
The problem is, the calculations above do not take into
account the true cost of running my vehicle for Beeline. In addition to
actual fuel costs and Beeline fees, I should recognize depreciation,
maintenance, and insurance costs. Although they are not obvious, they are as real
as the costs of fuel and fees.
The IRS, for 2012, sets the total cost of running a business
vehicle at 55.5 cents per mile. Built into that standard mileage rate is an
implied amount of depreciation, fuel, maintenance, and insurance. Let’s do the math
using the IRS number.
I drove 1,083 miles per week. So according to the IRS, I can
claim vehicle costs of $601 per week (1083*0.555). If the real costs of depreciation,
fuel, maintenance, and insurance for my vehicle are 55.5 cents per mile, then my
effective net revenue was only $26 per week ($647 gross revenue minus $20
Beeline fees minus the IRS’ $601).
In reality, I was working for 52 cents an hour. Ouch!
Maybe you think 55.5 cents per mile overstates the true costs
of depreciation, fuel, maintenance, and insurance. Ok. Let’s see how it looks
under different scenarios. See the table below for other calculations.
Cost per Mile
|
Weekly Cost (1,083 miles)
|
Effective Hourly Pay (50 hr
work week)
|
$ 0.555
|
$ 601
|
$0.52
|
$ 0.450
|
$ 487
|
$2.79
|
$ 0.350
|
$ 379
|
$4.96
|
$ 0.250
|
$ 271
|
$7.13
|
$ 0.140
|
$ 152
|
$9.51
|
Any way you look at it, I was making less than $9.51 per
hour.
Suppose I leased my vehicle for $3,600 per year, replaced
the tires every year, changed the oil every 6,000 miles, and replaced brake
pads as required. Under that scenario I’m looking at about $14,000 per year to
run the car, including fuel. That puts me at an effective hourly pay rate of about
$7.00.
Eye-opening, isn't it? And I haven't even mentioned self-employment taxes and other costs associated with owning your own business.
Here are some other details about working for Beeline you
need to know.
- Beeline pays its on-call contractors 50% of invoice. In other words, Beeline sets the rates and pays contractors half of that. There is no way to audit what Beeline is charging its clients. You have to take Beeline’s word.
- Beeline charges independent contractors admin and communications fees totaling $75 per month. Why? Because they can.
- The lowest amount I was paid for a run was $1.00. My average pay per run was $10.11. (This average includes a number of outliers from doing after-hours, out-of-town runs and for filling in occasionally for route drivers.
- Among the worst-paying runs are Red Cross, Kroger Floral, and the payroll companies. See examples below.
- My average run was 14.6 miles from pickup to delivery.
- My shift ran from 6:00 a.m. to 2:00 p.m. My average first call came in at 6:25 a.m. I usually worked past 2:00 p.m., but I did not kept statistics on how often or for how long. My best guess is I averaged 50 hours per week.
- My data reflects pay for on-call work with occasional fill in work for some of the route drivers.
Beeline’s rates appear to be all over the board.
I've seen calculated rates ranging from 30 cents a mile to over $6 per mile (the contractor receives half of that). Rates vary according to number of packages and how fast they have to be delivered.Here are some examples of actual runs and how much I was paid.
From
|
To
|
Paid
|
Per Mile Calculation
|
Red Cross
|
Norton Downtown
|
$1.81
|
$1.81
|
Red Cross
|
Norton Audubon
|
$2.30
|
$1.35
|
Red Cross
|
Clark Memorial Hospital
|
$2.30
|
$1.56
|
Red Cross
|
Veterans Admin Hospital
|
$2.30
|
$0.56
|
Red Cross
|
Floyd Memorial (New Albany)
|
$4.21
|
$0.51
|
Red Cross
|
Flaget Memorial (Bardstown)
|
$26.67
|
$0.76
|
Red Cross
|
Taylor County Hospital
|
$55.88
|
$0.65
|
Baptist East
|
Norton Suburban
|
$2.82
|
$3.13
|
Norton Suburban
|
Baptist East
|
$3.22
|
$3.57
|
Norton Audubon
|
Norton Suburban
|
$3.68
|
$0.55
|
Norton Brownsboro
|
Norton Audubon
|
$3.68
|
$0.22
|
Kleinert Kutz Downtown
|
Kleinert Kutz New Albany
|
$3.35
|
$0.29
|
Kindred Hospital
|
Jewish Hospital
|
$4.99
|
$3.56
|
Toshiba (Stanley Gault Parkway)
|
Jewish Hospital
|
$6.00
|
$0.34
|
Toshiba (Stanley Gault Parkway)
|
4121 Dutchmans Lane
|
$6.00
|
$0.49
|
Toshiba (Stanley Gault Parkway)
|
Clark Memorial Hospital
|
$6.00
|
$0.33
|
Nazareth Home
|
Sts Mary & Elizabeth Hospital
|
$10.35
|
$1.28
|
PCA (Otto Knop Drive)
|
Green Meadows (Mt Washington)
|
$11.55
|
$0.66
|
PCA (Otto Knop Drive)
|
Rivers Edge (Prospect)
|
$16.49
|
$1.03
|
PCA (Otto Knop Drive)
|
Colonial (Bardstown)
|
$18.14
|
$0.52
|
PCA (Otto Knop Drive)
|
McCreary Health (Pine Knot, KY)
|
$124.50
|
$0.67
|
PCA (Otto Knop Drive)
|
Goshen, IN
|
$300.00
|
$1.15
|
