Employee turnover is one of the most challenging issues facing many industries in the U.S. With so much spent on hiring, training, on-boarding, and getting workers up to speed, a short turnover period may cost the company more than the worker added. Many employers are struggling to address the issue, especially in times where the unemployment rate remains so low.
The trucking industry has been dealing with high turnover rates for years. Some trucking and transportation companies are learning from other employee-owned businesses and have seen results in transitioning the company to an employee-ownership model, including Employee Stock Ownership Plans (ESOPs). ESOPs often have much higher retention rates, in addition to the other benefits of giving workers a financial interest in their future with the company.
Battling 100% Turnover Rates
Some big trucking companies have a turnover rate of almost 100%. With the high cost of training up truck drivers, reducing driver turnover can be a significant factor in trucking company profitability. As some trucking companies have discovered, sharing the profits with the drivers has allowed the companies to retain workers, increasing the overall health of the business.
ESOPs are qualified retirement plans where workers are given an interest in the business as a form of retirement benefits. When the employee retires, the ESOP trust will buy back the shares, giving a retirement income to the workers. Like other forms of employee-ownership, when the worker is given a financial interest in the company, both the worker and the company can benefit.
Trucking and Transport ESOPs in the U.S.
Every year, the National Center for Employee Ownership (NCEO) lists the 100 largest majority employee-owned in the country. As the number of companies switching over to ESOPs grow and the success of ESOPs result in higher growth rates, the list continues to change every year, with representation across a multitude of industries.
One of these top-100 companies is Quickway Carriers, a freight transportation company in Nashville, Tennessee. Formed as an ESOP in 2004, Quickway now has about 1,400 employees, including truck drivers and other logistics workers.
Trucking Company ESOP Experience
A few companies in the trucking industry have transitioned to ESOPs. TMC in Des Moines, Iowa became employee-owned in 2013. According to TMC, the benefits of working for an ESOP trucking company include:
- Greater job security,
- Higher retirement assets,
- Teamwork with financial motivation to work together, and
- Growth potential.
Another trucking company, Paschall Truck Lines of Murray, Kentucky, also became an ESOP in 2013. Since expanding and becoming Paschall Logistics, the 100% employee-owned company underwent the transition when the then-owner was looking for an exit strategy. As an ESOP, Randall A. Waller, the owner and chief executive, was able to sell the company while allowing the owners to benefit and keep the jobs in the same community where the business started.
ESOP as an Exit Strategy Option for San Diego Business Owners
If you have any questions about how an ESOP can benefit your company, Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm with a focus on employee benefits law. Contact our office today with any questions on how we can help you and your business succeed.