What commission percentage do freight brokers get paid? There’s a bunch of variables that go into answering this question, so let’s take a look at a few of the common freight broker jobs and how much commission they earn.
When it comes to the amount of profit a freight broker earns, and even more so the percentage of that money that they actually keep, it mostly depends on the business model they are working in. The three main business models for brokering freight are as follows: owning a freight brokerage, being an agent for a freight brokerage, and being an employee of a freight brokerage. In all three of these business models, the same work is being performed, but not necessarily by the same one person. Let’s take a look at each of these and what percentage they get to keep.
A freight broker that owns their own brokerage is licensed directly with the FMCSA. Since they own their own company, they don’t receive a commission percentage, but rather they keep 100% of the company’s profit. Although this might sound enticing, they are responsible for many costs associated with running their business such as insurance, software, and factoring just to name a few. They also have to perform the administrative duties associated with running a brokerage in addition to just brokering freight. When scaled in size, licensed brokerage owners can earn a very good income.
A freight agent is not a licensed broker, but instead they are an independent contractor that represents the licensed broker. The licensed broker (usually a mid-size company) maintains the legal authority, bond, and insurance while the day to day brokering is conducted by the freight agent or group of freight agents. The agent works from their home office and merely focuses on getting freight from their shippers and matching those shipments with carriers to move them. All other back-office tasks are completed by the licensed brokerage company. These tasks generally include billing, collections, claims handling, cash flow, marketing, IT support, agent development, and sometimes pricing/dispatch services. Since agents don’t perform all of the tasks that go into running a brokerage, they don’t keep all of the profits. Agents are generally on a commission split that will vary around 50-70%. This means that for every $1 of profit that they produce, they earn around 50-70 cents. The licensed brokerage company keeps the other 30-50% to run its back office operations and for profit. With such a high commission percentage offered to freight agents, a brokerage will usually require their agents to be experienced and already have an established customer base before they are offered an opportunity to join the brokerage as a new freight agent.
Also referred to as W-2 brokers, this is the most common freight broker in the market. There are a lot of large freight broker companies that operate using this model. Some examples of large companies that use this model are TQL, Coyote, and CH Robinson. They might resemble the boiler room type of sales environment with thousands of employees. They can also be much smaller with perhaps only 10 employees or less. In general, the company has a broker authority from the FMCSA and hires employees to drive sales and manage operations. The company owns the customer accounts, performs all back-office business functions, and furnishes each employee with an office to work in. W-2 brokers typically earn a base salary with a commission directly tied to their profits. According to a recent Freightwaves survey, median pay in this model is $40,000 base salary plus an average commission rate of 13.2% on gross profits. W-2 brokers make the lowest commission percentage of the three models we’ve outlined here, but they are given a base salary, an office to work in, and job training. You don’t have to have any experience to start as an employee of a brokerage
So there you have it - we’ve outlined three different scenarios for brokering freight and the commission percentage for those brokers. Which one would you prefer?