What does a self-employed chauffeur need to earn each week? That was my question for our team recently. It was vital to ask because, earlier this year, DrivenByQ had to consider a price increase. It was in response to the national minimum wage rising to £12.71 per hour (for employees in the UK aged 21 or over). It sparked a lot of debate – and spreadsheet analysis!
The private hire industry needs independent, sub-contract chauffeurs running their own vehicles. It is how the industry copes with peak demand. It also gives companies like DrivenByQ a flexibility to cope with seasonal trends. Like many businesses, we have peaks and troughs. When we are quiet, self-employed, sub-contractors find work from other sources.
Running a vehicle as part of a business is expensive. In the last few years, new cars have almost doubled in price. Insurance costs have risen by as much as 50%. Licencing costs have increased substantially too. Garage bills have climbed sharply (after so many mechanics left the industry). Then there’s the current pain point – fuel. All these factors combined add pressure on price.
So, let’s go back to the question: what does a self-employed chauffeur need to earn each week? Well, if you take the national minimum wage of £12.71/hr and project it over a 40 hour a week, it returns £508.40. The issue, however, is that anyone who is self-employed needs to account separately for holiday pay and sickness. They also need an accountant to submit their figures to HMRC. These are costs employees don’t incur.
Buying a car and keeping it busy involves risk so, there must be an incentive for someone to do this. There must also be something to motivate Chauffeurs who work erratic patterns, often starting at 3am or finishing after midnight. They suffer disruption which needs consideration. In the winter, they might even have to dig a car out of the snow. It needs to be worth the bother.
When you add everything together, a driver needs to personally earn an absolute minimum of £15 per hour. Something in the region of £30/hr is better though. It might sound a lot but half of what a chauffeur earns is swallowed by their running costs. Simple things like a mobile phone bill or broadband fees. Then there are real costs like tyres, servicing and mechanical repairs.
If forty hours at £15 per hour, equates to £600 per week. It means a driver typically needs a turnover of £1,200 a week. This is just to earn slightly more than the equivalent of minimum wage as an employee. It sounds a lot but, turnover and profit are not the same thing! What is more, new competitors keep popping up with low rates. It might incentives a consumer, but corporate clients considering due diligence need long term reliability and sustainability.
For a company like DrivenByQ to attract the best talent, and to have availability at peak times, (such as 8am on a Monday morning), we must pay the best rates. This in turn means we must charge a reasonable fee. Raising prices in response to external pressure is never easy but, we must keep things in perspective. Yes, someone can always do things cheaper but just imagine a VIP arriving late, just because their driver wasn’t motivated!