The majority of Western European transport companies decide to flag out in order to survive. By this we mean they follow the path of their competitors from Central and Eastern Europe. Due to the open EU borders, their competition is able to offer their services to Western European markets, however at competing price levels. Simultaneously a large amount of transport companies experience a shortage in motivated drivers for their international rides. The latter limits both their existing operation as well as their growth strategies.
In order to survice such Western transport organisations often choose to flag out. Meaning establishing their own local (daughter) company in an Eastern European country, such as Poland, Romania, the Czech Republic etc. Core activities – such as marketing, sales and finance- remain seated in the mother country. A part of the operation is then transferred to the local (daughter) company.
75% LABOUR COST REDUCTION
Flagging out is based on a rock solid business case. The employers’ cost for a Dutch driver are between € 4,500 – € 5,500 per month. Depending on the country, the employers’ cost for a driver in Central and Eastern Europe is between € 1,250 – € 1,900 per month. A labour cost reduction up to 75% is thus easily realised.
Moreover the majority of the employers’ cost are based on actual delivered performance. In practice this additional benefit results in a productivity growth of the transport company.
Next to the labour cost advantage, many transport companies also decide to flag out due to a shortage of drivers. The amount of Western drivers who are willing to drive international rides is too modest to fulfil the demand for international transport.
The amount of available Central and Eastern European drivers is more than sufficient to meet this demand. Moreover the conditions for international transport, such as driving in the evening, weekends etc. are met without any hesitation.
IN COMPLIANCE WITH LEGISLATION
The labour cost reduction of 75% as mentioned above, is fully in compliance with (EU and local) legislation. The EU harmonisation level of local legislation differs per country however. As a result many changes in legislation are applicable. Hence after implementing payments structures, it is necessary to check these frequently and to optimise these where needed.