Why drivers quit — and what keeps them on the road

New research shows short-term subsidy pay can reduce turnover and boost profits, but only if used strategically.

Drivers are driving their employers to distraction. The average annual turnover rate for long-haul truckers is nearly 100% at many major trucking companies, and for local delivery companies, the problem is almost as bad. Hiring new drivers is expensive and time-consuming, damages productivity, and harms the customer experience.

That's why long-haul and local delivery companies are experimenting with offering short-term subsidy pay on top of regular, fixed hourly compensation to keep drivers on the job longer. That strategy works, according to supply chain management professors Elliot Rabinovich and Scott Webster and Penn State Assistant Professor Lina Wang.

"A mixed compensation approach, combining both subsidy and regular payments, is more effective in reducing driver attrition and maximizing profit," they write in their 2025 paper "Structural Estimation of Attrition in a Last-Mile Delivery Platform: The Role of Driver Heterogeneity, Compensation, and Experience," published in Manufacturing & Service Operations Management.

To reach this conclusion, the authors studied six years of employment data from the Dallas-based TForce Logistics, which hires independent contractor drivers around the U.S. and Canada who use their vehicles to deliver products to residents and businesses such as Staples and Home Depot. Each driver gets a delivery route in a fixed territory. Their regular compensation rewards them with higher hourly pay, but only as they become more productive with experience and can deliver more packages per hour.

Why early support matters more than long-term rewards

When TForce hires new drivers, it has no way of knowing which are better suited for the job, and as a result, it must create a compensation scheme that, on average, will work best for all drivers and those who are most likely to quit after only a few weeks.

Another problem is that when all drivers start work, they don't know their routes and work more slowly. To compensate, TForce gives all drivers substantial subsidy pay. In some cases, new drivers get, on average, $824 in base pay per week, supplemented by $133 in subsidy pay, which declines over time as drivers become speedier.

Even with subsidy pay, several TForce's drivers leave in the first year. "If we look at the slope of quitting, it's very deep in the first weeks. Once a driver lasts a while, he's less likely to quit. The critical time is at the very beginning. Because they're not as productive then, that's when they're most likely to quit," says Wang.

If subsidy pay is higher earlier in a driver's tenure, doing so will have a bigger job retention impact than if the subsidy pay boosts later. Even though the longer-term financial rewards of the job will not entice them to stay, the subsidy pay will keep them on the job longer than they otherwise might have. "The subsidies help those drivers hang in there until they reach some level of productivity," says Wang.

"There's something called the 'job matching hypothesis,' " says Webster. "It postulates that people quit early because they didn't know what they were getting into. As they get more experience on the job, they get a better sense of whether it aligns with their needs and interests. If you can get that person over the hump during that period when their hourly pay is relatively low, they're going to stay around longer."

Using subsidy pay strategically — and sparingly

It allows new drivers to increase their hourly pay over time, instead of enticing them only with high regular pay. "If you ramp up the regular pay early, you have to stick with that for as long as the person is going to be on the job, but subsidy pay disappears after a while," says Rabinovich.

After a while, the employee retention benefits of subsidy pay diminish, and employers like TForce run the risk of offering such extra pay for too long. "Subsidy pay becomes largely ineffective in inducing drivers to stay after the 20th week in tenure because, by this time, on-the-job learning is no longer as effective in promoting retention," the authors write.

"Managers are afraid of losing drivers. Our message to managers is to be very careful because keeping subsidy pay around too long will not be good for their company's bottom line," says Wang. "It's important to have good base pay tied to productivity. In the long run, that will be more effective at retaining drivers."

Subsidy pay is inappropriate for a white-collar or factory setting. Employers should use piece-rate pay, such as per package delivered or garment sewn per hour, only when it aligns with the nature of the work.

Even so, "every organization that uses subsidy pay will apply it differently," says Webster. "How do you set the amount of subsidy pay in the first few weeks, or reduce it later? That's going to be more nuanced. It's going to be company-dependent."