NZ courier drivers often earn below minimum wage

MEDIA RELEASE
11 November 2010

NZ courier drivers often earning below minimum wage

Many New Zealand courier drivers are struggling to earn a viable living as courier companies have aggressively slashed prices they charge to gain customers, a practice that increased significantly during the recession, say industry experts.

Urgent Courier’s Managing Director Steve Bonnici says many courier firms are charging prices as low as they were 20 years ago. During that time input costs for the likes of fuel and vehicles have soared for driver contractors who are obliged to operate their own businesses.

“Many of our competitors pay no attention to the social impact of their businesses and have cut prices back to ridiculous levels,” Mr Bonnici says. “While the cut pricing continues, it’s impossible for contractors working for the discounters to earn a living wage.”

While courier drivers have few of the benefits of employees, they are still obliged to wear a corporate uniform, work certain hours, apply for annual leave, and work exclusively for one company, as well as providing their own vehicle to work from. Their plight mirrors those contractors working in the film industry; earlier this month the government amended labour laws for workers on films such as The Hobbit to ensure that if they sign up as independent contractors they cannot subsequently legally claim to be employees.

James Smith of National Road Carriers, which represents about 2,000 transportation businesses including couriers, says some courier companies are charging prices that are well below cost, pushing earnings for owner-drivers to inadequate levels.

“People who go into the industry typically have appalling levels of financial literacy, but a very strong work ethic and, for whatever reason, they have to buy their own jobs,” says Mr Smith. “They’re often desperate; they haven’t been able to find a job and they have to support themselves and support their families. Some of them work extremely hard for relatively low reward.”

Mr Bonnici says the financial viability of drivers is the number one threat to the fast delivery market, which has historically struggled to attract sufficient numbers of drivers even in times of economic plenty. The rise in unemployment during the recession has allowed cut price operators to implement their strategies to buy market share, as there has been a ready supply of jobless people willing to become couriers.

Urgent Couriers has an explicit policy of maintaining pricing at a level that is fair for customers, while providing contractors with the ability to make a living wage in the region of $18-20 per hour after expenses. Anecdotal evidence from couriers looking for work indicates some firms are paying less than the minimum wage of $12.75 an hour; that’s not enough to live on, especially for drivers with families and mortgages, says Mr Bonnici.

Paul Holdom, who has been a player in New Zealand’s courier industry for almost 25 years, says real courier revenue has probably dropped 20-30 per cent since 1990 to around $3,000 to $4,000 a month. All while the costs of operating their own business has climbed and congestion has reduced the ability of drivers to make multiple journeys in cities such as Auckland.

Most express courier firms typically operate on a 60:40 revenue split, whereby owner-drivers comprise 60 per cent of the company’s overall costs and the firm keeps the remainder, Holdom says. Courier companies are able to drop their rates so low by squeezing the courier earnings part of the equation, leaving their gross margin intact whatever prices they charge.

“It’s sad what’s happened to our industry; there are plenty of owner-drivers out there whose revenue before expenses is barely the minimum hourly wage. After they have paid costs out of this revenue they are below the poverty line,” says Holdom, who developed CourierPost Urgent for NZ Post and is now sales manager at Inter City Urgent.

“They’ve invested in vehicles worth $10,000 - $30,000 and they’ve got families and mortgages. We know, anecdotally, that some companies have told them that these jobs are only suitable for young, single people as only they can afford to live on what they earn as an owner-driver.”

Mr Holdom says courier prices would have to rise some 30 per cent to get back to where couriers can earn a sustainable living.

Mr Bonnici says people are often lured into the industry with the promise of high salaries and employment autonomy. “New couriers often encounter challenges with money management, planning for taxes, submitting GST and tax returns, and maintaining the efficiency of their small business.”

Urgent Couriers provides support to its contractors by offering financial management seminars, assisting with tax claims, offering bonus schemes and implementing initiatives such as Mobile AdVert, by which contractors can earn additional income each month selling advertising space on their vehicle.

Ends

About Urgent Couriers
Urgent Couriers is one of the largest specialised, on-demand courier services in New Zealand. Founded in 1989 by managing director Steve Bonnici, it has 25 per cent of the Auckland fast-delivery courier market. Urgent Couriers employs 20 staff and has 65 courier contractors. The company’s catch phrase is: ‘faster, smarter, greener.’

www.urgentcouriers.co.nz

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