Transportation and transportation-related industries employ more than 13 million people in the United States, representing nine percent of the U.S. workforce. With a stream of new folks continually entering and leaving the industry, it can be helpful to review basic terms for those who are just getting their start in transportation. This blog is dedicated to one of the major players in trucking and transportation: the freight broker. While there are lots of different roles and nuances within freight brokerage, individual freight brokers and freight brokerage companies specialize in one primary activity — and that is finding transportation for manufacturers and distributors who need to transport freight.
What Does a Freight Broker Do?
As our colleagues at FreightWaves write, “The simplest answer is that a freight broker serves as an intermediary between shippers and carriers.” Freight brokers specialize in finding and securing transportation for shippers who need to move their goods. Freight brokers negotiate rates, terms and conditions with carriers to transport freight across oceans, countries, states and/or provinces. Manufacturers and distributors use freight brokers because they have the skills, resources, technology and training to ideally find the best price and best carrier for moving their goods. Carrier relationships, access to real-time technology, and good communication typically influence a freight broker’s success.
Who Employs Freight Brokers?
Companies that specialize in freight brokerage typically hire freight brokers. Logistics companies (also known as 3PLs) that offer freight brokerage as one of their services to shippers also hire freight brokers. Licensed freight brokers usually have their own companies and may hire other brokers, while W-2 freight brokers (sometimes referred to as freight broker agents) work for a company with a freight broker license. It’s also possible to work for a company as a contracted 1099 freight broker. Within the trucking and transportation industries, the term “freight broker” can refer to the company with the freight broker license or to the individual people brokering freight within the company.
How Do Freight Brokers Get Paid?
Most freight brokers working in brokerages or 3PLs are paid a base rate and can earn additional commissions based on the business they transact as representatives of the shipper. Unlike many sales jobs, a freight broker’s commission is based on the gross margin on each load brokered — not on gross revenue. This highlights the importance of cost-savings on each load brokered. The gross margin on a load is the price charged to the shipper less the price paid to the carrier to transport the load. As a result, the lanes and types of loads you deal with as a freight broker can have a significant impact on your commissions, as can general market and economic volatility.
How Much Do Freight Brokers Earn?
FreightWaves’ 2022 salary and commission survey asked nearly 300 U.S. freight brokers about their base pay and commission earnings. According to the survey results, the average entry level base annual salary for a freight broker is $48,000. The survey also found that the average commission rate on gross margins for entry level freight brokers and managers is approximately 15 percent. Your commission rate as a freight broker will depend on the licensed freight broker for who you work, but the industry standard commission rate is typically between 50 and 70 percent of the gross margin on the load.
If you’re ready to learn more about how you can become a freight broker, read “Freight Broker Training Options.”