Counting the Cost of R.H. (80)
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IN all industries wages are a major factor in both staff relations and profitability. Because of the special features inherent in transport operation, problems relating to wages present difficulties peculiar to this industry. In recent years these difficulties have been added to by delays both on the road, because of traffic congestion, and at terminal points when loading or unloading is being undertaken. In niany cases these delays are beyond the control of the transport operator; nevertheless, as a result of such delays, his bill for the cost of operating the vehicle is appreciably increased.
Irrespective of such delays, however, labour costs—even at standard rates—constitute a substantial proportion of the total cost of operating a vehicle, and therefore even a relatively small percentage increase on the basic amount can add substantially to the total. Additionally, although constituting a higher proportion of the total cost of the service provided than correspondingly applies in other. industries, wages in transport cannot always be directly related to " production " in terms of loads carried or mileage run. This is because, as already mentioned, some of the factors governing load and mileage are beyond the control both of employer and driver.
In the new Regulations, R.H. (80), which come into operation on Monday ne„xt (November 23), the rates of minimum remuneration for road haulage workers are given, varying according to size of vehicle and area of operation. These regulations will have the effect of increasing the amount of wages paid for two main reasons. Under R.H. (78) the first six hours of overtime were payable at a rate of time and a quarter. Under R.H. (80) only the first two hours of overtime are payable at time and a quarter and the remainder at time and a half.
Grade 2 Eliminated Additionally, under R.H. (78), there were three geographical areas—London, Grade 1 and 2. But in R.H. (80) Grade 2 is eliminated, so that the wage rates of workers in former Grade 2 areas are up-graded to those applicable to Grade 1. In effect, for those workers now in Grade 2, this amounts to an increase of 4s. a week on the basic grade.
Whilst these individual adjustments may appear to add a relatively small amount to the wages bill, their effect is unfortunately accumulative, not only on overtime working but also as a further addition to previous adjustments. ,
Superimposed on any direct wage increases is the effect of five-day working and other restriction on collection and delivery times which, in turn, directly affects the amount of useful work done—that is, the amount of traffic moved. Only too often the resulting reductions in traffic moved, and consequently revenue earned, are accompanied, illogically, by increased hours worked arid swollen wages bills.
Accordingly, to judge the effect of overtime working both under R.H. (78) and the new R.H. (80), the following details of operating costs are given in relation to a 5-ton four-wheeler.
The effect of raising the fuel tax by 6d. per gallon in last week's Budget is to increase the running cost in this example by 17s. per week. But to facilitate direct cornparison"solely on the wages increase the effect of the fuel price change has been omitted.
It will be assumed that this vehicle has a standard platform body and is fitted with an oil engine, so giving an unladen weight of 2 tons 17 cwt. This would result in an annual licence duty of £42 and, allowing for a proportion of the carrier's licence fee, the equivalent cost per week for licences would be I7s. 8d. This calculation, as with the other four items of standing cost, is based on a 50-week year to allow for drivers' holidays or vehicle overhaul.
Dealing in detail with the item of wages, it will first be assumed that this vehicle is based in a Grade I area and accordingly, under R.H. (78), the minimum remuneration for a 42-hour week for an adult driver will be flO Os. 3d. Under the heading of "wages ", however, the actual amount of pay handed to the driver will not be the total cost of this item to the employer. He is under a statutory obligation to make the appropriate National Insurance contributions. In addition, many employers will consider it prudent to make voluntary insurance contributions to cover employers' liability formally met by the Workmen's Compensation Act. In this particular case these two additions would bring the minimum total amount payable by the employer to £10 14s. a week.
A further addition, however, has still to be made-the adjustment to allow the driver to have a fortnight's holiday with pay. This amount is derived by multiplying the basic weekly amount by 52 so as to give the total for the year, which is then divided by 50, the actual number of weeks worked by the driver. This calculation results in a final basic amount of £11 2s. 6d., an increase of £1 2s. 3d. a week on the original minimum wage of £10 Os. 3d., even for a basic 42-hour week.
Vehicle Insurance The third item of standing costs in respect of this 5-tonner is the rent and rates in respect of garaging the vehicle. This is reckoned at £1 Is. a week, whilst comprehensive vehicle insurance is reckoned to cost £106 18s. a year, or £2 2s. 9d. a week. Assuming this vehicle costs £1,308, interest charged at a nominal rate of 5 per cent on • the capital outlay would amount to the equivalent of £1 6s. 2d. a week.
The total for the five items of standing cost for this 5-tonner is thus £16 10s. Id. Where the vehicle averages 600 miles a week the standing cost per mile would be 6-60d.
Dealing now with running costs, these will be calculated on a mileage basis in contrast with standing costs, which are reckoned on a time basis, whether per year, per week or per hour, For this 5-tonner fitted with an oil engine, the fuel cost per mile is reckoned at 2.79d. This amount is calculated on the basis of a rate of fuel consumption of 18 m.p.g. and assuming that the operator buys his fuel in bulk at 4s. 2.1c1. a gallon. Lubricants add 0.26d. and tyres 1.26d. a mile, assuming a mileage life per set of 30,000. Maintenance, including washing. servicing and major repairs, is assessed at 2-31d. per mile.
To derive the amount to be written off as depreciation, the equivalent cost of the original set of tyres is first deducted from the initial cost of the vehicle, as this item of equipment has already been dealt with separately. The assumption is also made that if thp type of work under consideration requires a new vehicle initially it is not logical also to assume that the same class of work will be satisfactorily undertaken at a later date by a vehicle virtually run to destruction. Accordingly, an ultimate residual value is allowed for and deducted from the balance already obtained to give the final amount to be written off as depreciation, which in this instance amounts to £1,019. Assuming a vehicle mileage life of 150,000, the resulting depreciation cost per mile is 1-63d.
Total Operating Cost The addition of the five items of running costs is therefore 8.25d. per mile, or £20 12s. 6d. a week, still assuming that 600 miles have been run. The addition of standing costs and running costs gives a total operating cost of 14.85& a mile, or £37 2s. 7d. a week.
It will now be assumed that, whilst the average weekly mileage remains the same at 600, the actual working time is increased to 50 hours. When this is reckoned on the basis ofR.H. (78) there will be an addition of £2 10.s. Id in respect of the resulting overtime, consisting of six hours at time and a quarter and two hours at time and a half. The increased amount for wages so derived likewise increases the total standing cost to £19 Os. 2d. and the total operating cost to £39 12s. Rd. a week.
If, however, this overtime is reckoned on the basis of the new R.H. (80), then only the first two hours of overtime are reckoned at time and a quarter and the remainder at time and a half, with a resulting total weekly wages bill of £13 17s. 4d. This increases the total operating cost per week to £39 17s. 5d. It will be noted that there is now a difference in wages of £2 14s. 10d., as compared with the original total when 42 bout's were worked under R.H. (78).
As already mentioned. Grade 2 is eliminated in R.H. (80). Under R.H. (78) an operator in Grade 2 would have to meet a total wages bill of £10 18s. 4d. when a 42-hour week applied. The resulting total operating costs per week, still assuming an average weekly mileage of 600, would be £36 18s. 5d. Where a 50-hour week was worked (and still reckoning on the basis of R.H. (78) in a Grade 2 area), the total wages bill would be £13 7s, 5d., with a total operating cost of £39 7s. 6d. However, with R.H. (80) implemented. the same operator would then be governed by the rates applicable to Grade I. with a resulting wages bill, as already determined, of £13 17s 4d. This amount is £2 19s. more than what such an operator would have paid for a basic 42-hour week when Grade 2 rate applied.