S1 E47 How to Roll Out Truck Driver Per Diem Without Driver Pushback

A good truck driver per diem program can save drivers money, reduce payroll taxes, and benefit the entire company. But if it's rolled out poorly, it can create confusion, distrust, and unnecessary pushback from drivers.

In this episode, Mike Ritzema shares the five steps every trucking company should follow before implementing per diem. You'll learn why education comes before payroll changes, why transparency matters, how to answer the tough questions, and how to build trust throughout the process.

If you're thinking about adding a per diem program, don't make payroll your first step. Make communication your first step.

Learn more at truckingpayroll.com

Transcript

SPEAKER_00 0:01

Just because Predeum saves drivers money and gives them a bigger paycheck doesn't mean they'll like it. In fact, I've seen companies save thousands of dollars for themselves and their drivers only to create a driver revolt. It's not because Predeum is bad, but it's because they rolled it out badly. Welcome to the Driven for Success Podcast. This is the podcast for trucking company owners who want to build better businesses, make better decisions, keep their drivers, and grow without losing control. My name's Mike Ritzema. I'm your host and owner of Superior Trucking Payroll Service, where our mission is simple to help trucking families. This podcast is one of the ways we fulfill that mission. Today we're talking about something that has nothing to do with IRS rules and everything to do with trust. Because rolling out PreDiem as a plan isn't a payroll project, it's a communication project. Pre diem is usually a win. Drivers pay less tax, so they get more money in their paycheck. Companies save payroll taxes and they save on work premiums. Everybody wins, right? Well, on paper they do. Then the drivers get their first paycheck. Suddenly, the phones in the office just start ringing nonstop. What happened to my wages? Why is my gross pay lower? Is this even legal? Am I losing money in this deal? Nothing actually went wrong. Nobody explained it. Drivers don't resist per diem. They resist surprises. There's all these times, again, if you talk to drivers, I've said this before, but if you talk to a driver and ask them why they left their last company, almost always it's a trust violation. It's the recruiters lied to me, the dispatcher lied to me, they screwed me on my pay, which all of these things may be true and may not be true. I have no idea. I was not there. And it's not my job to adjudicate it. But it's trust. So when that doesn't happen, when there's something that is not going right according to the book that they're expecting, they feel like they're getting cheated almost every single time. So it's not that you're cheating them, it's that they feel cheated, and that's where the trust goes away, and that's where you lose drivers, is when you lose the trust. So we're going to talk about the steps today to uh not have that happen when you institute a Pradeam program. First thing is you have to educate before you change anything. It starts by getting out in front of this. Do not announce this on payday. Don't just slip it into payroll. Don't just send one quick email, hey, we're doing this thing. Meet with your drivers. By the way, meet with your drivers is good advice anyway. Again, it helps build that trust, just in general, but that's super important. But explain what Predm is. Explain why the IRS allows it, how it saves on taxes for the driver, how it affects gross pay and net pay. And don't hide the fact that the company saves money too. Tell them up front because they're going to be looking for your angle. They're going to want to know why you're doing this just to give them more money. So when you tell them we win and you win and the IRS loses, okay, that's something they can get on board with. And I'd tell them that too. Uh, this isn't a program, though, where the company wins and the driver loses, and usually that's the case, where one of them has to win and one loses. This is where they both get to win, which is why it's so great. But the larger benefit goes to the driver. But tell them why you're doing it too. Because they'll need to know that. We'll help them make sense of it all. Uh if you have to hide the fact that the company saves money, you haven't explained for diem well enough. And if you explain it after payday, you've waited far too long. Yeah, you can do this in person is ideal, but even a phone call works. Do it on small meetings with drivers. Know that they're going to have questions, and those questions are good. The drivers that ask questions are engaged. So that's always good. It's why even when people put comments on social media posts for the podcast here, and if some of them are not super complimentary, I'm I'm at least happy that they're engaged. Or if someone wants to argue with me about Per Diem, because we have a lot of posts on it on YouTube and things like that, and on LinkedIn. If they want to argue with me about it, I'm just so happy they're engaged. And so I it's an opportunity to explain it to them as someone who doesn't have a dog in the fight. Uh, but and don't don't rush through this explanation. Well, walk them through it slowly. Explain, hey, look, we're gonna take some of your gross pay, we're gonna turn it into non-taxable reimbursement. So your gross pay is gonna be smaller, but you're gonna pay a lot less tax. So you're gonna come out ahead. Your check's gonna be $100 bigger every week. So that that's the part you want to focus on for them. That's what's in it for them. Uh it was an old marketing thing when I was in school with them. What's in it for me? That's what you explain to them. This is what's in it for you, an extra hundred bucks a week in your check. So you tell them that, you explain that the driver saves about four times as much as the company. You're on your way. Now let's talk about how to do this. I would say the numbers I'm giving you so far are theoretical. I'm telling you you're gonna save about $100. But they don't have to be theoretical. Show them two different paychecks with identical drive, like loads, identical miles, identical days out, identical everything else, and then show them the difference. One has then the two checks, one has per diem and one doesn't. And just show them, hey, look, your gross pay is bigger on the no per diem, but your net pay is bigger on the per diem. And your taxes are lower on the per diem, then just ask them which one do you want? Which amount do you want in your checking account? Do you want the one without per diem that is a little less, or the one with per diem that's about a hundred dollars more? And again, if you can use their actual check from the prior week, that's great because that's gonna really nail it down for them. But if you want to just use model checks or an average check, you can do that too. Everybody will understand. And it explain it as we're getting over on the IRS just a little bit. Most drivers, again, with their general lack of trust from their industry experience, will like that idea. So, and don't just celebrate them. Show the math. The visual examples will really help you make it more clear to them. Clarity, as we've talked about all the time, clarity is the thing, right? Clarity is the fuel that makes everything go. So you put that in there, and you say, hey, look, your gross pay can your net pay can be $900 or $1,000. Which would you like? Every company's numbers are going to be a little different. You all pay a little differently, which is what we love about trucking companies. Some pay percentage, some pay by the hour, some pay salary. Some pay, most pay by the mile. So you make it look like your pay stuff. Don't just take a generic one that you find on Google or something. By the way, if you need those, reach out to us and tell us how you pay. We'll help you with it just to be helpful. And the real examples, when you can show them real paychecks, those beat the theoretical ones. Like if I just put a PDF on our website and just said go download it, that's fine. It'll work 60-ish percent of the time. But if we can make it look more like yours, if we can make it more of your examples and how you pay, it's gonna look much more familiar to them. And that will help build trust. Now we need to talk about the trade-offs. We're gonna talk about driver objections more next week. So I'm gonna go through this fairly quickly. But let's not pretend that the drivers don't have some trade-offs here. And let's not also pretend that drivers haven't talked to other drivers, and some of these drivers have opinions about everything, and some of their opinions vary from what everybody else's are, right? That's how it works. There are objections. Lower wages, lower taxable wages can affect your social security when you retire. Sometimes it makes it a little harder to get a mortgage or a loan because they'll look at your income from your the gross pay instead of the including the pre diem. So there's things that trickle down the line from there that just are issues that need to be addressed. And again, we'll address more of them next week. But be honest with them about it and tell them right up front: hey, look, this is going to affect your Social Security. Spoiler for next week, one of the things you do is put a third or a quarter of that savings that you got, that extra money, into a tax-deferred savings account. You'll make up more than the difference. It will affect mortgages, and this is how we'll handle it. It will affect these other things, and this is how we handle it. Honesty builds so much more trust than a perfect sales pitch, especially on things like this. The driver needs to know that you've considered what their objections might be. So let's not ever hide the possible downsides of this. To me, it's you get $100 more, but you've got $25 in downside. So let's not just say you get $100 more at the end. No, there's downside on this, and we need to talk about it. The drivers will appreciate that you're up front about it. And the fact that you acknowledge their objection, even if they don't understand the objection, they just heard it somewhere. If you can address it, at least they'll feel heard. And again, most if you talk to your drivers, feeling heard is a big thing. They need to feel like part of the team. And when you just throw this at them and say you're going to do it, that's a plan for failure. You gotta, you've got to get some buy-in from these guys. And I would, by the way, I would start with the driver who's the ringleader. You all know who your driver is. If you've got 20 trucks, you've got one driver who tells everybody else how it goes, that's the first driver you want to bring in. That is absolutely the person you want to talk to first because they will help you convince everybody else. Cannot overstate that who that driver is. Everybody, if you have 20 drivers, you have one of those. Start with them. Now, in most situations, drivers should have the opportunity to opt out of Predium. I would ask them to do it in writing, but that's the technical thing. But I'd show them and I'd say, look, this is the thing, you're gonna get more money in your net pay every single week. Your paycheck's going to be bigger. But some drivers will are just absolutely not convincible of this. They just aren't. It's like they're like driver that you could offer to give them something. You could give them a raise, or you could give them a new truck, or you could give them the pick of their route that they want to run, and they're still gonna not believe you. So when you have drivers like that that just absolutely won't do it, you've shown them the paperwork on you've shown them an old check and a new check. And the new check's bigger, but no, they're like, no, I want the old check. I think you're trying to stick it to me. I think the world's out to get me, whatever the decision is, right? You let them do it. Let them opt out 100% of the time. Let them opt out. Uh, you don't want to lose a good driver over the possible savings. As a trucking company, you're gonna save 40-50 bucks a week, depending on your work comp rate by paying per diem. We've talked about this in previous episodes. We have a calculator on our website if you want to see exactly what you'll save at truckingpayroll.com. There's a save money with per diem button right on the right on the top of the page. You can go there and see what you're gonna save, but you'd never you'd never give up that driver for $40 or $50 a week in possible savings. Because that driver's good. That driver's the one who's always on time, who's not drama about other things. Right? This is just a hill they want to die on. Don't make them die here. Let them not, let them opt out 100%. So easy. They may change their mind later, by the way. When you're really cool about it, when you tell them you don't want per diem, even though we think it's better, you're your own person. We respect that. We're gonna opt you out. If you ever want to opt in, you just let us know. Absolutely. And they'll like you for it. Now the next step is we got to prepare the office for this. Drivers are gonna ask questions beyond that first meeting. Payroll is gonna need answers. They might ask dispatcher safety about how it works. Sometimes they just ask the person that's on the phone. So if every department gives a different explanation of this, the confidence of the driver begins to disappear. Everyone in the company should have the same story. So I would say even roll it out to the office first before you roll it out to the drivers and explain how it's gonna work and explain how it's gonna change their paychecks. Because if everybody can help roll this out, it just makes everything easier. But confusion spreads faster than good information. If you're not clear about this, if your dispatch gives a completely different answer than your safety person or your payroll or your accounting people give a different answer, the drivers are gonna start feeling like there's something shady going on. We can't have that. The message has to be consistent. I would even suggest developing an internal FAQ document about it. We can help you with that too. Just reach out to us because it's that important. You just you want everybody singing out of the same hymn book, right? That's everybody's gotta do that. Otherwise, again, you're gonna be like, well, this person told me this, and that person told me that, and then the ringleader person who I talked about before, that's gonna be the person they listen to. So, and if they're getting different stories, man, it's just trouble everywhere. So, what happens next? Once the drivers receive two or three paychecks, once we get into this, the questions usually stop because they're seeing the savings in their check. Their fear disappears, the new paycheck becomes normal. And the drivers have talked to each other a little bit too. And they go, Oh, the company I used to work for did this, and it was great. That's what you want. That's why I always tell companies to expect questions during the rollout. And don't panic. This is normal. The drivers are supposed to have questions. Some of the drivers are gonna call after the first payroll, even though you rolled it out to them. That might be that their spouse saw the pay stub and is asking questions. Why do you have less gross pay? And you're like, no, focus on the net here. Here's what we did. I wouldn't, as a general rule, talk to the spouse about the driver's paycheck just as a good policy. You only talk to the driver, but the driver's gonna be relaying questions. That's great. You answer them for them, of course, patiently. When the driver's asking you a question again, they want to learn, they want to know what's going on. So they're asking means they're wanting to be part of the process, they're wanting to be engaged, and that's fantastic. They're wanting clarity, right? And we talk about clarity all the time. The goal of this is not a perfect rollout, the goal is a trusted rollout. Where the driver, you're you can use this to actually build trust between the drivers and the trucking company. And anytime you can do that, it is a worthwhile endeavor. The fact that you're saving money as a trucking company is the cherry on top of the pie, right? Because that that driver trust, oh my gosh. We'll talk about this in episodes coming in the future, I'm sure. But driver retrust, driver trust is driver retention. End of story. So if you don't have driver retention, it's because your drivers don't trust you. Uh that may sound harsh, but it is what it is. And it's pretty universally true. Ruling out pre diem isn't difficult. Rolling it out poorly is. Take your time, explain it well, answer every single question, show the numbers, show your math, be honest about the trade-offs. And remember, you're not just introducing a tax avoidance strategy. You're asking drivers to trust you. Per diem doesn't create trust. The way you roll it out does. Next week, we're going to talk about what happens when the driver hears all of this, understands it, and still says no. Or has sometimes they have legitimate reasons that they want to decline per diem. If you're a trucking company owner, you need to understand those reasons before assuming they're making the wrong decisions. And we'll talk about what their objections are, what it's really about, and how you can help them see the lights. We'll see you next week.