• Home
• Used vehicles
• Product news
• Dealer news
• Compliance
• Buying advice
• Archive

Assessment of Rates for the Conveyance of Light Machines in

a Sulk-load Vehicle Over Distances Ranging from 6o to 70o Miles 'Raises the Question

How Overtime Affects • Haulage Charges

IHAD, aninteresting, although simple, problem of rates to deal with the other day. It concerned the transport of special machines, comparatively light in weight and therefore needing a vehicle suitable for the conveyance of bulky -goods. The distances were fairly large and each journey involved quite a number of deliveries. The inquirer asked what he ought to charge in respect of journeys ranging from 60 to 700 miles. The deliveries per journey would be from 12 to 30. The vehicle he was using was a 30 m.p.h. machine on a low-priced chassis, actually a furniture van with Luton-type body, thus giving the capacity that he needed. The work necessitated the employment of a mate as well as a driver. I gathered that it took I 4 hours to load the vehicle. Further information I had to deduce from two examples which he gave Me.

A 381-hour Trip

In one of these examples the total distance travelled was 400 miles, involving 27 deliveries and a time, from start to finish, of 30 hours. In the other case the total distance was 700 miles, and the time quoted was 384 hours. I was not told how many deliveries were made over that route.

I decided that the first thing to do was to work out a thneand-mileage basis with this vehicle, employing two men instead of the usual one.

As usual I commenced with depreciation. The vehicle, besides being used for these long-distance journeys for the delivery of machinery, was also engaged on furniture removing. It seemed likely, therefore, that its mileage would be at least 800 per week, so that depreciation would be best assessed on a mileage basis.

I assumed that the initial cost was £750 and that the vehicle was equipped with 34 in. x 7 in. tyres, the cost of a set of which would be, in round figures, £90. Deducting £90 from £750 leaves £660. I assumed that the residual value, that is the price to be obtained when sold, would be £160, leaving £500 as the basis for assessing depreciation.

The type of vehicle was not one from which it is possible to obtain a big mileage before it is due for replacement and in this case I took 100,000 miles. Dividing £500 by 100,000 gives L2d. per mile for depreciation.

Then I examined the running costs. Assuming petrol to be Is. 11d, per gallon, with the vehicle averaging 12 m.p.g., which it should, that gives I.92d, per mile for fuel. For oil, I took the figure in the new version of "The Commercial Motor" Tables of Operating Costs which are very shortly to be issued. That figure is 0.16d.

I allowed 24,000 miles for a set of tyres at £90, which is 0.90d. per mile. For maintenance, I took the figure from the Tables, 1.42d. per mile, and for depreciation the 1.20d. calculated above. That gives me a total of 5.60d. for running costs. Add 20 per cent. or one-fifth to that for profit, which is 1.12d., and we get 6.72d. whjch can reasonably be taken to be 64d. per mile as the mileage charge to be made in connection with the operation of the vehicle.

Now for the fixed charges. I will assess these on a weekly basis. First, the taxation will bc 12s. Then, the basic wage for the driver on a 44-hour week is £5 2s. and for the mate £4 13s. Next comes provision for National Insurance (employer's contribution) at 8s. 4d. and provision for holidays with pay, 13s.

I took rent and rates at 10s. per week, vehicle insurance at 13s. per week, interest at 9s. per week and establishment charges at £2 12s. The total is £15 8s. per week, To that 1 add, as in the case of the mileage, 20 per cent. for profit, which is approximately £.3 2s. giving £18 10s. as the weekly charge which the operator must obtain to have the minimum 20 per cent. profit.

Spread that over a 44-hour week and it is equivalent to 85. 6d. per hour. I proceeded to assess these rates on the basis of the two figures, 8s. 6d. per hour plus eid. per mile.

1 decided that the first thing must be to try to discover what was the average time needed for individual deliveries en route. As my only information related to the one 400mile journey, I had to make certain assumptions. I was also told that that journey was through a district where there was a fair amount of congestion from time to time and therefore high average speeds could not be expected.

I therefore assumed that the average speed was 20 m.p.h. That gave me 20 hours, out of the total of 30, as running time. I have already stated that loading time was quoted at If hours, which left me 84 hours covering the time needed to make 27 deliveries. That means that each delivery took little short of 20 minutes and in the subsequent calculations I took 20 minutes as being the appropriate figure.

I started by considering a 60-mile journey, in the course of which I assumed there were 12 deliveries. From a knowledge of the district in which the vehicle was operating, I concluded that the speed of travel during the 60-mile run would certainly not be more than 15 m.p.h. My time for the 60-mile journey is thus 94 hours, made up of four hours for 12 deliveries at 20 minutes each, four hours for 60 miles at 15 m.p.h. and 14 hours for loading.

2s. a Mile for 60 Miles Now it is necessary to work out the charge per mile which must be made for this journey. I have, first of all, 60 miles at 64d, which is 405d. Then I have 94 hours at 8s. 6d., which is 102d., giving 969d. The total charge must thus be 1,374d., or a fraction over Is. I id. per mile. To allow for contingencies, I decided that a fair rate for that would be 2s. per mile.

The next distance which I took was 120 miles and for that I assumed 15 deliveries, which, of course, would mean that the time for deliveries would be five hours. I took six hours as the travelling time, assuming an average 'of 20 m.p.h. and with If hours for loading that gave me 124 hours. Working 'the charge out in the same way as in the first example, that gave Me Is. 54c1. per mile and again allowing for contingencies I advised the operator to charge Is. 6d. per mile.

Similarly, for a 200-mile run taking 18 deliveries, I obtained Is. 4d. per mile. For the 400-mile run, concerning which I had fair information. I found the rate to be Is. 3d. and for the 700-mile journey, Is. Id, per mile.

Thus there is a descending scale of charges which I could hand to the operator and which he could use quite quickly in working out the appropriate charge for any consignment. If he had mileages between those quoted it would he quite satisfactory for him to take averages.

For example, for 100 miles, he might expect to charge a little more than the Is. 6d. calculated Tor the 120 miles, but, of course, considerably less than 2s. per hour for the 60 miles. Probably Is. 8d, per mile would fit that, and so on. Then he raised a question which has been raised blore, but with which 1 have never dealt in detail in these articles. He said: " You have based your charges on a 44-hour week, but in most weeks the men are working 10 hours a day every day, from Monday to Friday. Saturday is only a fourhour day because we do not do any travelling on that day. The men turn into the garage, clean up the vehicles, grease and oil them, check up the tyres and so on. Should I not charge more, because I shall have to pay these men, two hours overtime every day, that is 10 hours per week?"

Diminishing Ratio of Fixed Charges

Hitherto I have usually said that the extra cost of the 'overtime is more than allowed for by the fact that the fixed costs generally are based on a working week of 44 hours. If a haulier is working, say, 54 14urs, then the proportion of 'fixed charges will become less. In this case, however, my friend was a little more insistent than any previous inquirer and I had to work the figures out, with the following results.

First I took the simple way, demonstrating how small is the difference in cost, if the extra expense due to overtime be taken into consideration.

I took it in connection with the 400-mile 30-hour journey described earlier. That 30 hours, I was told, was covered in three working days of 10 hours each, which meant that the payment of overtime for six hours was involved. I must make it clear that it is only the extra amount for overtime, in each of those six hours, that is involved; that is to say.

not the full time-and-a-quarter, but only the quarter. . The ordinary payment for wage without overtime is already included and allowed for in the 8s. 6d. an hour which is being charged for time. For the driver, the overtime rate is 2s. 103d., as against the ordinary rate of 2s. 34d. The difference is 7d. an hour, so that the' total involved is six times 7d., which is 3s. 6d. The ordinary wage for the mate is 2s. 11d, per hour and for overtime 2s. 71d. The difference is 61,,d. and that, for six hours, is 3s. 3d. The total extra payment involved in wages is thus only 6s. 9d. or 8Id.

The vehicle travelled 400 miles, and the extra cost per mile involved in the payment of this extra 8Id. for wages is thus Id.-less than the allowance made in the mileage rates for contingencies-so there is nothing there. Even if I add, as perhaps I should, the 20 per cent. profit for that 6s. 9d. it is still only 8s. Id. or 97d. and the extra cost per mite, on that 400-mile run, is less than id., or still less than the provision made in the rate for contingencies.

Taking a Broad View

Now let us look at it in a broader light. Here we have to be rather careful otherwise there is a risk of making some error. In order to deal with the matter properly we must make out a fresh schedule of fixed charges leaving out, in the first stage, the wages paid.

la that way we have, for each week: tax, 12s.; workmen's insurance, 85. 4d.; provision for holidays with pay, 8s. 8d.; rent and rates, 10s.; insurance, 13s.: interest, 9s.; establishment charges, £2 12s.-total, £5 13s. Add 20 per cent. for profit, LI 2s. 6d., and we get £6 15s. 6d, per week as the time charge on account of those items.

Over a 44-hour week, that would be 3s. hi. per hour, but for this operator's 54 hours, the provision for these particular fixed charges is reduced to 2s. 6d. per hour instead of 3s. Id

Now we turn to wages. First of all let us set down the basic wage for each man. That for the driver is £5 2s., and for the mate £4 13s.; then come eight hours' wage at 2s. 10,1d. for the driver, which is El 3s, 2d. and a further two hours at time-and-a-half, 3s. 50. an hour, which iS 6s. 11.1d, For the mate, similarly, there are eight hours at time-and-a-quarter that is eight times 2s 71d. or £1 Is. 2d., and two hours at 3s, 2.'ad. I will call that 3s. 2d„ that is 6s. 4d. for the two hours.

The total is £12 12s. 7/d. Add, for profit at 20 per cent„ £2 10s. 61d. say, and we have £15 3s. 2d. That is spread over 54 hours, which is 5s. 7k1. Add the charge for wages. 5s. 74d. to the 2s. 6d. for the other fixed costs and we have 8s. IN. That is 4-1d. less than the charge per hour according to my usual method and the surprising result is that by not making provision for overtime but using the basic 44 hours in assessing costs, I am giving the operator the benefit of 41d. per hour. It would perhaps settle the argument for readers generally if I now take another and quite different example. It is the extreme case of a 15-ton oiler running 1,000 miles a week with driver and mate both working 70 hours a week.

First let me work this problem out on the orthodox basis. The fixed charges for a 44-hour week comprise tax, £2 4s.; driver's wages, £5 14s.: mate's wages. £4 Ds.; National Insurance contributions. Si. 4c1.: provision for holidays with pay, 9s. 2d.; garage rent and rates, 12s. 6d.; vehicle insur

ance. £2; interest, 19s.: establishment charges, £7-total. £25 per week. Add £5 for profit at 20 per cent., and the result is a total of £30 per week as a time charge. On a 44-hour week basis that is 13s. 8d. per hour.

The running costs approximate to 81d. and adding 11d. for profit I get a round figure of 10d. per mile. The mileage chart is not greatly affected, so we need not worry a great deal about extreme accuracy in respect of that item.

Now the revenue for a 200-mile journey, taking 16 hours, including loading and unloading, will comprise 16 hours at 13s. 8d. which is £10 18s. 8d. phis 200 miles at ttki., £8 6s. 8d., altogether £19 5s. 4d.

Time Charge 5s. an Hour

Now let roe work it'out the other way. First of all, the fixed charges, excluding wages, are: Tax, £2 4s.: National Insurance contributions, 8s. 4d.; provision for holidays with pay. 9s. 2d., garage rent and rates, 12s, 6d.; vehicle insurance, £2; interest, El 19s.: establishment costs, £7-total, £14 13s. Add, for profit. £2 I8s. 6d. and the total revenue per week for the time charge is shown to be £17 I Is, 6d. That is spread over 70 hours, so the time charge per hour must therefore be almost exactly Si. per hour.

Now it is necessary to deal with the wages, and this is .rather complicated. First, the driver's basic rate is £5 I4s., but he has altogether worked 26 hours' overtime. Of that, eight hours are at time-and-a-quarter. or 3s. 21-1d. per hour, making LI 5s. 101d. The remaining 18 hours are at timeand-a-half, or is 3s. INA,, and that makes £3 9s Ii d. The total is £10 9s. 91d.

The mate has a basic rate of £4.13s.'per week. He works eight hours at 2s. 70., totalling El Os. I Id., and 18 hours at time-and-a-half, or 3s. 21d. per hour, making £2 17s. 41d. His total is £8 lls. 31d. The total of wages for the two men per week is £19 Is, lid. , Add, for profit at 20 per cent.. £3 18s. 101d. and we get a total of £23. The amount, spread over 70 hours, gives us 6s. 7d. per week, so that altogether we have Gs. 7d, plus 5s„ which makes I ls. 7d. as against the previous 13s. 8d. Now if I take out the revenue for that 200-mile rim, l must charge for 16 hours at 1 ls. 7d., which gives me £9 5s. 4d., plus again 200 miles at 10d., or £8 6s, 8d., as before, so that the appropriate revenue is only £17 12s., as compared with £19 5s. 4d. by the previous method. Clearly, therefore. what I regard as the orthodox method, that is to say taking the figures for a 44-hour basic week, is at the very least the more satisfactory to the operator. S.T.R.