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Regular salary or commission?

May 2011


Still related to the topic of the road crash that claimed the life of a UP Professor last week are current discussions on the compensation of public utility vehicle drivers – particularly drivers of buses. The boundary system is the one that is predominantly employed by many operators or companies with their drivers. It is quite a simple system where the driver practically rents the vehicle from the operator for a certain amount that is related to the characteristics of the route that he or she will be plying. Thus, the longer routes with the higher passenger demands typically pay more than shorter ones or those with less demand.

What a driver would earn during his shift (in a day) would include the amount he would be spending for fuel and maintenance costs. This means that the driver would have to earn significantly more than what he plans to take home because from the gross income for a day’s work he would have to subtract the boundary (vehicle rental) fee, fuel costs and maintenance costs. Should he be apprehended for any traffic violation, he may also have to shell out more money for fines or, in certain cases, bribes to crooked traffic enforcers. Theoretically, however, if a driver is able to cover more round trips in a day he has the potential earn more in terms of net income. Thus, it can be inferred that traffic congestion would be among his main problems if he is to reach his goal of a decent take home pay. As such, the objective for any driver is to maximize his passengers for every trip that he makes and maximize the number of trips that he makes in order to maximize his income.

Meanwhile, the salary type of compensation involves a fixed payment for services rendered by a driver regardless of the number of passengers he is able to pick up or of even maybe the number of round trips per day that he is able to make. The latter parts of that last sentence is probably the most significant difference in the characteristics of the two compensation schemes that we are now attempting to compare. These are the characteristics that are often mentioned whenever inefficiencies and inconveniences in road public transport services are discussed since it is argued that scheduled services and behavior change, ergo better public transport services, will be possible if drivers won’t have to compete against each other for passengers or recklessly speed up in order to cut travel and turnaround times.

But can a fixed salary or a system much like those in most conventional or regular companies be acceptable in the first place to both driver and operator? What are the views from the drivers and operators themselves? What would be the implications and impacts of having salaried drivers much like employees of a conventional company?

The theoretical answer to the first question, and one that would most likely be provided by proponents of regular salaries, is a resounding yes. However, the response to the second question would be problematic once one realizes that the answers to number three seem to be unfavorable to both driver and operator while appearing to be beneficial for commuters. For the first question, a fixed salary may not necessarily be acceptable to drivers since  it is not necessarily advantageous to them. A fixed salary means they will lose the potential of earning more income that is possible from the current practices of driving aggressively and pursuing as many passengers as possible.

The idea of putting a cap on their income is one thing, the prospect of having a paper trail for a regular salary is another. If, as proposed, drivers would have regular salaries like most employees working in offices, then companies may have to employ a system similar to that in other business where they will now be withholding taxes and other dues for benefits like social security and healthcare. While the BIR might end up happier with this set-up, surely the drivers who until now perhaps do not even pay their taxes at all will oppose a system where they will end up with potentially less net income.

On the part of the operator or company, having drivers with fixed salaries would also mean less potential income at the end of the day as revenues may be reduced. The reduction would be mainly due to less passengers as drivers are no longer pressured to take as many passengers as they can. They are, after all, assured of a fixed salary and do not have to stay longer at stops just to maximize the number of passengers they could pick up. Such result would definitely be welcome to passengers who would benefit from shorter dwell times (delays) and faster travel speeds. But from the perspective of operators or companies, it is bad business and they may end up being exposed for their financial incapacity.

This perspective of the operators and drivers is validated by the recent interviews by news crews of the former group where they practically opposed regular salaries for drivers. Operators reasoned that drivers would be on the losing end of the deal while not discussing how it would affect them and how the prospect of salaried drivers may lead to increased efficiencies of public transport services and even alleviate traffic congestion. On the part of the drivers, there are basically mixed views on regular salaries with one group saying it is acceptable to them and another saying it is disadvantageous in their cases. The impression for both groups, however, is that they are basically ill-informed and do not fully understand the implications of having regular wages. Perhaps their understanding is limited also by the fact that many of these drivers might feel beholden if not loyal to their operators/companies.

While the jury is still out on salary vs. commission, it should be noted further that salaries may only be applicable to companies or operators with several units of PUVs (perhaps something that resembles a fleet). As such, the preceding discussions and arguments may not be applicable to drivers of jeepneys or AUVs and perhaps even tricycles and pedicabs, most of which are individually owned. This becomes a weakness of the proposal for regular salaries as it becomes clear that only buses will be affected and their operations influences. In Metro Manila, perhaps the impacts would be marginal since jeepneys comprise much of the public transport supply and would pose more unique problems pertaining to driver compensation.

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