A common question that people ask is the difference between a freight broker and a freight agent.
A freight broker is someone that is licensed by the Federal Motor Carrier Safety Administration (FMCSA) as a property broker / freight broker to broker freight. Freight brokers are responsible for managing shipments from Point A to Point B for shippers, but they are also responsible for:
- Assessing a shipper’s credit
- Invoicing shippers
- Paying motor carriers
- Collecting receivables
- Bad debt
In essence, a freight broker is the entity that is licensed to broker freight and is responsible for all the business aspects of the transactions and therefore, need to be bonded.
A freight agent, on the other hand, is someone who works under a licensed broker. An agent does not need to be licensed or bonded. There are essentially no tests or requirements needed to become a freight agent. The primary job of a freight agent is to find shippers, rate shipments, source carriers that will move those shipments and dispatch drivers; all in all, the job of a freight agent is to make sure their customer’s freight picks up on time and delivers on time with no issues and no damages. Freight agents are very customer-focused on solving the shipper’s needs. Freight agents are not responsible for invoicing, collections, credit assessment, bad debt, insurance or anything related to business transactions.
Freight brokers and agents are two very different roles that work closely together. Freight agents can work as W2 employees but are typically independent contractors that work on straight commission which typically ranges from 50-70% of the gross profit from each load. The percentage generally depends on volume, experience, the type of shippers that are engaged and margins. The working relationship between a freight broker and agent is a partnership that can be very beneficial for both parties when both parties understand their roles and responsibilities.
Encompass Risk Solutions understands fleet management and the importance of mitigating your business risk. Contact us today to learn more about transportation safety, risk reduction and insurance coverages.