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DO ‘SAFE RATES’ ACTUALLY PRODUCE SAFETY OUTCOMES? A DECADE OF
EXPERIENCE FROM AUSTRALIA
Kim holds a PhD and a Masters of
Business by research in the field of
Freight Productivity as well as a
Bachelor’s Degree in Mathematical
Sciences. He joined the University of
Melbourne as a fractional appointment
in 2002 and became Chair of the
National Truck Accident Research
Centre in 2011.Since 2007 he has also
been Director of the Industrial Logistics
Institute.
K P HASSALL
University of Melbourne
Department of Infrastructure
Engineering, Chair National
Truck Accident Research
Centre
Abstract
On 1 July 2014 the Australian government activated a body called the Road Safety
Remuneration Tribunal. This tribunal would examine and legislate minimum rates of pay for
owner drivers. This determination was based on the premise that there were strong links
between truck crashes and driver remuneration. This perception has been held in Australia
since the early 1990s. In April 2016 the Tribunal set an owner driver pay rate determination
which precipitated industrial action. From 1991 to 2006 research had been undertaken into
the safety of the ’hire and reward’ sector, however, by 2016 perceptions about this sector
were provably outdated. The expert findings in the National Transport Commission’s report,
(NTC, 2008) were weak. In 2013 new benchmarking of the ‘hire and reward’ versus the
‘ancillary’ segments’ safety performance was undertaken with strong findings. This paper
presents arguments from the most recent data and counters the industry remuneration/safety
link.
Keywords: Truck Safety, truck crashes, heavy vehicle accidents, driver remuneration
1. Introduction
There have been several studies into the safety of the ‘hire and reward’, often called the ‘for
hire’, trucking sector in Australia. To mention a few: Hensher et al (1991), Quinlan (2001),
ACIL Tasman (2003), and National Transport Commission (2008). The safety aspects of the
’for hire’ trucking industry. All these reports examined a range of problems within the
industry but none offered conclusive proof that remuneration and safety were linked. The
following discussion examines three, possibly weightier arguments that certainly do not
support the accident-remuneration link, but also for the first time benchmarks the ‘ancillary’
sector against the for ‘hire sector’ with surprising results.
The Road Safety Remuneration Tribunal was established in 2014 with a mandate to
investigate owner driver safety and to set a ‘Safe Rates’ remuneration scheme for Australian
HVTT14: Safety and Remuneration
2
Owner Drivers. The Transport Workers Union (TWU) strongly supported the RSRT claiming
that both the ‘hire and reward’ sector and especially owner drivers were at risk by not having
a ‘Safe Rates’ regime in place.
The following three arguments, although some are stronger than others, are presented to help
demonstrate that no major statistical or causal link can be made between driver remuneration
and safety for the ‘hire and reward’ trucking sector in Australia. The proof is even weightier
that such a link exists between remuneration, and particularly the safety of owner drivers,
which was the specific focus of the Road Safety Remuneration Tribunal’s deliberations over
the period 2014-2016.
. 2. Argument One: The Directional Nature of Major Crashes in Australia
In Australia the National Truck Accident Research Centre (NTARC) publishes a biennial
report on major truck crashes in the ‘hire and reward’ trucking sector. Major losses are
examined across some 19 criteria ranging from cause, driver attributes, truck type, area of
accident etc. However, one particular criterion is highly surprising and certainly relevant to
the Safe Rates argument. This is the directional nature of the major crashes. What is
surprising is that the forward legs of interstate and major regional trips are incurring some
70% of the major crashes. Why is this important? Many of the linehaul forward legs of truck
trips carry a freight premium. For example, on a weighted average basis between Australia’s
six major mainland State capitals there is a freight premia of 45% on the forward leg, The
basket of listed rates was also extended to major regional cities and the weights were
developed in proportion to one of Australia’s largest carriers. Examples of forward legs are
Sydney to Brisbane, Melbourne to Adelaide, Sydney and Melbourne to Perth, Melbourne to
Sydney etc. The premia can vary significantly, being zero on the Sydney to Adelaide corridor
to being over 100% on the East Coast to Perth corridor. On the total revenue for a capital city
return trip, on a weighted average basis, the forward leg on average returns 58% of the
revenue and the backhaul leg some 42% of the revenue. However, it is the forward leg that
commands the freight rate premium.
0%
20%
40%
60%
80%
71%
29%
58%
42.0%
45%
0%
Forward Leg Accidents and Interstate Freight Rate Directional Split
Accidents % Forward Leg Revenue Forward Leg Premia
Source: NTARC, 2015 , TWU/ARTIO Interstate Rates Tables, Translog databases
Figure 1: Directional Nature of Major Accidents and Rate Imbalance
It is also noteworthy that around 50% of major crashes happen within 100 kilometres of base,
and that some 70% of major accidents happen within 250 kilometres of base. Many of these
HVTT14: Safety and Remuneration
3
trips will be interstate intended but occur within an urban or regional environment and will be
thus categorized as such. However, the directional freight rate premium argument will still
apply to many of these trips.
Is the implication, therefore, the more you pay on the outbound leg the more accidents you
are likely to have? This would seem to be a silly implication, and it is far more probable that
accidents happen for many other ‘non freight rate’ related reasons. But the observation does
not support a ‘Safe Rates’ proposal and runs contrary to the hypothesis that lower freight
rates cause more accidents as the backhauls only incur 30% of major collisions and attract a
28% lower freight rate.
3. Who are ancillary operators?
The road transport industry is comprised to two large segments. These are the ‘hire and
reward’ sector that does road transport for money and there is the ‘ancillary’ sector. The
ancillary sector, known in the USA as the ‘own account’ sector, does not do truck driving for
freight rates. Ancillary drivers are those that carry their own production sometimes on a full
time basis and sometimes on an ad-hoc basis. For example, the farmer is an ancillary
operator, who perhaps does seasonal drops of grain to a railhead. Farmers are the largest
number of single fleet operators in Australia and significantly outnumber the number ‘hire
and reward’ owner drivers. The small manufacturer who perhaps three times a week does
deliveries of his goods to customers, the fruit shop owner who goes to the markets four times
a week to put fruit and vegetables in his shop are all ancillary operators. But there are big
ancillary operators who employ their own drivers. Large cement manufacturers who own
their own concrete agitators, mining companies and construction materials companies, and
even the army who employ their own drivers on salary are examples of larger ‘ancillary’ road
transport operators.
3.1 Perception: The ‘hire and reward’ sector is the culprit
Following the significant Long Haul Safety report (Quinlan, 2001) which examined only the
‘hire and reward’ sector, the New South Wales Road Transport Association held a State
convention in Terrigal in 2002. The proposal was directed to the author as to whether or not
the ‘hire and reward’ sector was primarily responsible for truck fatalities. The response was
overwhelmingly yes, that the ’hire and reward’ sector was responsible for the vast majority of
industry fatalities.
This perception went unchallenged up until recently. In 2014 Safe Work Australia produced a
very significant analysis of 787 driver deaths in Australia over the ten year period from 2003
to 2012. What was an exceptionally useful finding was that driver deaths in the ‘ancillary’
sector were almost equivalent with the number of deaths in the ‘hire and reward’ sector. As
rates do not apply in the ancillary sector how is it that the driver fatalities in this sector are
virtually identical to the driver deaths in the ‘hire and reward’ sector that is supposedly
impacted largely by freight rates? Perhaps the causes of driver deaths in the ancillary sector
are the same as in the ‘hire and reward’ sector and that freight rates, which play no part in the
safety of the ancillary sector, cannot be responsible for the same number of deaths seen in the
‘hire and reward’ sector. Other factors are at play.
HVTT14: Safety and Remuneration
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Table 1: Driver Deaths and Heavy Trucks Population by Operational Sector
Sector Driver Deaths
2003-2012 Proportion Trucks > 12T Proportion
H&R 400 51% 129,100 52%
Ancillary 387 49% 117,400 48%
Total 787 100% 246,500 100%
Source: Australian Bureau of Statistics 2014, Detailed SMVU data cubes, WorkSafe Australia,2014
Table 1 reflects the proportion of driver deaths by a WorkSafe proxy for ‘hire and reward’
operations, although some of this category also has some postal and warehouse drivers which
are actually ancillary drivers, and other not for hire sector drivers, ie, true ancillary. What can
be seen is that the ‘for hire’ sector claimed 51% of the deaths and the ancillary sector 49% of
driver deaths. Coincidentally this split between ‘for hire’ and ancillary deaths was almost
equivalent to the heavy truck population split of vehicles greater than 12 tonnes Gross
Vehicle Mass (GVM). This heavier end of the truck fleet encounters the vast bulk of driver
deaths in Australia.
What can also be deduced is that employees in the ancillary sector, being full time or ad hoc,
are as likely to be involved in a driver fatality as a ‘for hire’ employee. Being an ancillary
employee will not lessen the probability of a driver having a fatal accident.
400, 50.8%
387, 49.2%
Driver Deaths Australia: 2003 - 2012
For Hire Ancillary/Other
Safe Work Australia 2014
Figure 2: Driver Deaths Australia, by Ancillary and For Hire Segmentation
On a per 10,000 vehicle basis the rate of driver deaths would calculably be similar for both
sectors as the number of heavy vehicles are approximately the same. However, on a per
million kilometres travelled basis Table 3 tells a different story. In the examination of four
vehicle classes 2 axle rigid trucks up to 12T GVM, 3 Axle rigid trucks over 18T GVM, six
axle semitrailers and 9 axle B-Doubles the percentage of kilometres travelled by the ancillary
operators is about one seventh that of the ‘for hire’ operators. If fatalities are approximately
the same for both sectors, them on a million kilometres travelled basis the ‘ancillary’ sector is
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several factors less safe than the ‘for hire’ sector, at least for these vehicle classes. Yet it is
the ‘for hire’ sector that comes in for continual regulatory review.
Table 2: Proportion of travel by Ancillary Operators for various truck types
Vehicle Number Number Ave km Ave Km National mkms mkms Percent
type H&R Ancillary H&R Ancillary Ave H&R Ancillary Ancillary
H2ART 25365 29353 27972 16100 21603 709.5 472.6 40%
H3ART 26461 29353 50609 12135 30375 1339.2 356.2 21%
6AA 32022 13699 92491 20850 71026 2961.8 285.6 9%
9ABD 12154 1907 188000 26100 166043 2285.0 49.8 2%
Total 96002 74312 7295.4 1164.2 14%
Sources: ABS SMVU detailed data cubes 2014, Translog Operator activity data bases 2013-14
The conclusion is that drivers are being killed in accidents for a myriad of reasons but as the
same approximate number of drivers are being killed in the ancillary sector as in the hire and
reward sector the low freight rates argument cannot be the major causal determinant in driver
deaths in the ‘hire and reward sector because freight rates play no part in the ancillary
trucking operations but we see an equivalent number of driver deaths.
4. Are owner drivers less safe than other operators?
At the macro level there are many groupings to which road freight transport can be
categorized:
ÿby commodity carried, eg containers, forestry, livestock etc
ÿby rigid vs articulated truck operations
ÿby long distance vs regional vs urban operations
ÿby ancillary vs for hire operations, and
ÿby fleet vs owner driver operators.
These are all examples of how to segment the road transport industry. In this case the ‘owner
driver’ group, within the ‘for hire’ sector, was the prime focus of the Road Safety
Remuneration Tribunal (RSRT) in Australia.
In its 2015 report on the state of the heavy haulage road contract accidents, the National
Truck Accident Research Centre (NTARC, 2015), examined the proportion of major
accidents and losses by fleet size. In Australia National Transport Insurance (NTI), is the
largest truck insurer of the ‘hire and reward’ sector. NTI has coverage of over 50% of the
insured heavy vehicle market which forms a very suitable sample population on which to
base accident observations. NTI also supplies the accident data to its research arm which is
the National Truck Accident Research Centre.
NTI’s insured heavy truck portfolio is reflected in Table 3, on a portfolio proportion and
accident claims proportion basis. Table 3 also reflects where the industry problems are in the
heavy ‘for hire’ road transport sector.
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Table 3: Major Accident Claims against Insured Portfolio by Fleet Size
Operator Size Large Fleets SMEs Owner Driver Total
Insured per cent 61 20 19 100
Claims per cent 51 29 20 100
Source: NTARC 2015
Roughly the large fleets are 61% of the insured portfolio but these fleets reflect only 51% of
the major incident claims. The Small Medium fleets (SMEs) are over represented with 29%
of the claims against 20% of the insured portfolio. The owner driver sector represents 19% of
the insured portfolio and has almost an equivalent percentage of claims, being just 20%. If
poor safety practices by owner drivers, being an outcome of poor rates, or other reasons,
these ‘poor practices’ are not reflected in the major accident statistics. The owner driver
insured portfolio size virtually matches the size of the accident claims.
Why is this an important finding? If there existed a major safety problem with the owner
driver segment the claims should have represented perhaps 30% or 40% of major impact
collision claims, but this is certainly not the case. In brief there is no statistical over
representation of the owner driver segment in heavy contract road haulage accidents in
Australia at this time. The small/medium fleets in Australia are a much worse insurance risk
that the owner drivers are.
0%
10%
20%
30%
40%
50%
60%
70%
Owner Driver SME Large
Comparison of Insured Fleets
against
Major Accidents
Claims by Fleet size - Australia 2013
NTI Portfolio Major Claims
Figure 3: Major Accident Claims: Insured Portfolio against Actual Losses
5. Conclusion
The perception that the ‘hire and reward’ sector’s safety performance is linked to
remuneration has often been touted by academics and industry critics based on data over the
HVTT14: Safety and Remuneration
7
period 1991 to 2006. However, despite an industry, which has, over this 15 year period been
plagued with fatigue breaches, drug use and bad business practices, the direct link between
safety and pay rates has never been conclusively proven. Since significant regulatory
programs such as Fatigue Management and Chain of Responsibility have been enacted post
2006 there have been considerable declines in fatigue related heavy vehicle accidents.
(NTARC 2011,2013) as just one area of improvement. Also, the first empirical evidence that
the safety performance of the ‘for hire’ transport sector is no worse than the ‘ancillary’ sector
and perhaps even better has recently emerged. This is the first time that such conclusive data
has become available for the ancillary sector. As for the safety of the ‘owner driver’ segment
being worse than the rest of the ‘hire and reward’ sector, this premise is absolutely false and
this argument was the basic premise around the establishment of the two year Road Safety
Remuneration Tribunal investigations, and the basis for the final pay rates determination. It
should be noted that the Tribunal was disbanded two weeks after the determination was
delivered.
Since the first significant data has emerged on the safety performance of the ‘ancillary’
sector, there is considerable scope for research to improve our understanding of this sector
which has been sadly neglected for the last twenty years.
References
∑National Truck Accident Research Centre (2015), Major Accident Investigation Report,
National Transport Insurance, Brisbane, 9.
∑National Truck Accident Research Centre (2011), Major Accident Investigation Report,
National Transport Insurance, Brisbane, 18.
∑WorkSafe Australia (2014), “Work Related Fatalities Involving Trucks, 2003-2012”.
WorkSafe Australia, Canberra.
∑National Transport Commission, (2008), “Safe Payments: Addressing the Underlying
Causes of Unsafe Practices in the Road Transport Industry”, NTC, Melbourne
∑ACIL Tasman (2003), “Freight Rates and Safety Performance” Prepared for the SCOT
Working Group, ACIL Tasman, Canberra.
∑NSW Road Transport Association Convention, Proceedings and Questions (2002).
Terrigal NSW.
∑Quinlan MA, (2001), :Report of Inquiry into Safety in the Long Haul Trucking Industry”,
Motor Accidents Authority of New South Wales, Sydney.
∑Henscher D.A et al (1991),”Long Distance Truck Drivers on-road Performance and
Economic Reward” , Federal Office of Road Safety, Number CR99,Canberra.
Glossary
ABS – Australian Bureau of Statistics
ARTIO – Australian Road Transport Industrial Organization
H&R – Hire and Reward
NTC – National Transport Commission
NTARC – National Truck Accident Research Centre
TWU – Transport Workers Union
RSRT – Road Safety Remuneration Tribunal
SMEs – Small Medium Enterprises
SMVU – Survey of Motor Vehicle Use
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