After weeks of negotiations, UPS Inc. and the Teamsters union have reached a five-year contract that could avert a nationwide strike. The agreement, if approved by the union members, will bring the creation of 7,500 full-time Teamsters jobs and fill 22,500 open positions.
According to the agreement, existing workers will see significant wage increases, with full-time employees earning an additional $2.75 per hour in 2023 and a total increase of $7.50 per hour over the course of the contract. Part-time workers will also receive a raise, with current employees immediately earning up to $21 per hour, and new hires starting at $21 per hour and advancing to $23 per hour. This is a significant improvement from the current average floor of $16 per hour for part-timers.
In addition to the wage increases, part-time workers will benefit from double the general wage increases compared to the previous contract, resulting in a 48% average total wage increase over the next five years. Part-time UPS Teamsters will also have priority for seasonal support work and will have a guaranteed eight-hour shift when using their personal vehicles.
Both the Teamsters and UPS have hailed the agreement as historic. The union has praised UPS for committing $30 billion of new money, while UPS CEO Carol B. Tomé believes the contract represents a “win-win-win agreement” that addresses the concerns of all stakeholders.
This tentative contract marks a significant milestone in the relationship between UPS and the Teamsters, ensuring stability, job growth, and improved wages for thousands of workers.
The contract will now be presented to the 340,000 union members for voting and is expected to be concluded by August 22nd.
One notable aspect of the contract is the inclusion of air conditioners in larger delivery vehicles purchased after January 1, 2024, addressing the issue of sweltering heat during deliveries. Additionally, drivers referred to as “22.4s” will be reclassified as Regular Package Car Drivers, putting an end to the unfair two-tier wage system. Another significant change is the introduction of Martin Luther King Jr. Day as a paid Teamsters holiday at UPS for the first time.
Analyst Bascome Majors suggests that UPS and the Teamsters could potentially negotiate 7-day-a-week service without reopening the entire contract; however, it should be noted that UPS does not operate on Sundays.
For the contract to be effective, the master agreement from last Tuesday’s negotiations, along with more than 40 local and regional supplemental agreements, must be ratified through majority votes. It is expected that the rank and file will approve the contract, given that the negotiating committee unanimously approved it with confidence.
UPS’s recent deal with labor unions has raised concerns about the company’s ability to achieve profitable growth in the face of labor cost inflation. While estimates suggest a 7%-8% increase in labor costs in the first year and 4% to 5% in the following years, it is uncertain whether productivity offsets will balance out these figures.
Experts, such as Gordon Glazer from Shipware LLC, believe that the contract heavily favors labor, making it harder for UPS to compete. Glazer emphasizes that simply raising rates won’t be enough for UPS to stay competitive, and the company will need to be strategic to ensure each deal contributes to its profitability.
Looking ahead, shippers are wondering what UPS’s annual general rate increase (GRI) will look like for 2024. Tommy Storch, a transportation procurement expert at Insight Sourcing Group, predicts at least an 8% increase in the GRI when considering fuel surcharges and accessorial fees. FedEx may follow a similar path.
In response to higher labor costs, UPS will focus on reducing its cost per package by taking on more volume. This strategy aims to offset the impact of increased labor expenses.
Source: FreightWaves
