Understanding the Difference Between a Freight Broker and a Freight Agent
Two common roles in the industry are freight brokers and freight agents. While they are similar, there are some differences that will be explained here.
How They Are The Same
They both act as intermediaries between shippers and carriers. They help shippers find carriers to transport their freight, and they help carriers find loads to transport. They are responsible for handling all aspects of the transaction, from negotiating rates to tracking shipments and ensuring timely delivery.
Freight Brokers
Freight brokers are w2 employees that work for brokerages that are licensed by the Federal Motor Carrier Safety Administration (FMCSA). The brokerage is required to hold a $75,000 surety bond or trust fund. Brokerages are also required to carry liability and cargo insurance.
Freight Agents
Freight agents, also known as independent freight agents, work on behalf of freight brokerages. They help find new business and customers for brokers and handle the day-to-day management of shipments and customer relationships.
Like freight brokers who work at a brokerage, freight agents are not required to have a license or surety bond. They work under a freight brokerage's authority and are paid a commission on the revenue earned from shipments they secure for the broker.
Key Differences
The big difference here is that the broker is a w2 and the agent is a 1099. Meaning, the brokers is an employee and the agent is an independent subcontractor.
Another key difference is that a broker has a salary and benefits. Because of this, the commission structure is less favorable for the broker. Broker commission percentage is typically much lower than an agents. However, because the broker is an employee, they have a salary whereas as the agent (subcontractor) does not.
Building a successful book of business can take months if not years for some people. Having the salary is a necessity for many. However, if someone is in a financial position to pursue the career as an agent, they will likely make more in commissions in the long run.