Gareth86:
Hi guys and girls, my name is Gareth I want to start a driver agency soon but need a little help if you can, first insurance what type of insurance would I need with drivers, driving other companies vehicles do I need to cover myself incase they damage it or worst case kill someone. Tax how do I work out the tax and national insurance I need to deduct from employees? Does an account work this out for me? To set myself apart from other agencies I’m going to do a driving assessment on them. I have worked for a few agencies and they have all made me do a written test but never have they bothered to see if I can drive or if I have a good driving attitude, however the assessment would be done in a car. I would like some feed back from you about this. Other agencies charge between 25% and 40% on top of the drivers wage one agency charge £12.50 (class 1) and pay there driver £7.50 this is in Manchester I think I will charge a little bit less and pay my hardworking driver more. Does any one know what other agencies charge and pay rates are? Please give me any feed back you have good or bad.
Many thanks Gareth
Gareth, the fact you’re asking those questions suggests you shouldn’t do it.
So you’ll charge less than the 25% the agencies are charging on top of the drivers wages and you’ll pay the drivers more. Planning on doing this for free are you.
Here’s a clue. In addition to what the driver is paid per hour, the employer has to pay employers NI and statutory holiday pay on that hourly rate. I’ll illustrate:
Drivers hourly rate £10/hr.
Employers NI (12.8% of hourly rate): £1.28
Statutory holiday pay (10.7% of basic rate - holiday pay not paid on overtime): £1.07
So for the £10/hr the driver gets, it actually costs the employer £12.35. So if you were to charge the client 25% above what the driver gets paid which is £12.50 per hour, you’d make 15p per hour. Out of that 15p per hour, you’ve got to draw a wage and cover all the overheads you’ll have. However you’ve said you’d like an accountant to do it all so your accountant has just swallowed that 15p profit and will probably want the same again.
Lets put a few more holes in this daftness.
The driving assessment. There is absolutely no point whatsoever in doing a driving assessment in a car. It bears absolutely no relation to driving a wagon other than there’s three pedals, a gearstick and a steering wheel.
Running costs. Running an agency, even from a room in your house is going to cost you £10,000’s a year before you’ve even drawn a wage. You can spend £500 just on ONE ADVERT in a local paper. 500 business cards will set you back another £100. You can easily use £150 a week in petrol running around visiting clients. If you’re planning on having driver negligence insurance, there’s another £3-£5k.
Wages. Clients aren’t going to pay you every week. Expect 60 day payment terms and monthly billing if you’re lucky. That means that you are going to have to stand the drivers wages for TWO MONTHS and that’s if you’re lucky and they pay you when they’re supposed to. Most don’t. If you’ve 5 drivers working fulltime earning £500 a week, you would need to have £25,000 just to cover two months wage bill until your invoices started rolling in and that £25,000 just meets their wage bill - it doesn’t pay your wages or any of the bills/costs, not even a postage stamp.
To sum it up: The costs are too high, the profit margin is too low and there’s far too many agencies already out there cutting each others throats. Clients rarely pay on time, if at all, and in the meantime you’ve got to pay the drivers.
A tale of caution:
A friend of mine had his own agency. did quite well and had plenty of work. Had 50 employees in various food factories and on farms locally. Hardly got a decent nights sleep, got let down by people not turning in and companies were slow to pay. Ultimately, even though he had the thick end of £100k outstanding in unpaid invoices, he ended up going bankrupt.
