Lower Annual Wage Inflation. The contract includes a combined wage increase of $4.15/hour over the life of the contract. This implies 2.1% annual wage increases, down from 2.3% and 2.7% annual increases in the prior 2 contracts (see Exhibit 1). The deal also includes “significant” increases in benefits for employees, although the exact amount wasn’t quantified yet.
But Higher Part-Time Pay. Starting pay for part-time employees (about 50% of total Teamster members) will increase materially from $10 currently to $13 going forward. This is double the increase in part-time pay compared with the last contract and should more than offset the benefit from slightly lower wage inflation for full-time employees.
2-Tier Hybrid Driver is Positive. The deal will create a 2-tier hybrid driver that should materially reduce the cost of weekend deliveries for UPS. Currently, UPS pays its drivers overtime for Saturday deliveries which the company started last year. Going forward, this new class of employees will act as package handlers during the week and drivers over the weekend, and make a blended rate between the 2 pay scales. This will eliminate overtime pay for weekend deliveries and should allow UPS to start Sunday deliveries.
Share Shifts from the Rails. The contract requires UPS to shift some volumes off of the rails and back onto UPS trucks. As a result, UPS will create at least 2K new high-paying sleeper jobs for line-haul transportation.
Is it Enough? While the reduced cost of weekend deliveries is definitely an incremental positive, we don’t believe this contract provides UPS a material improvement in labor savings and flexibility that we believe is necessary to offset continued mix headwinds from rapid B2C growth.