FedEx plans to scrap employee bonuses this year Incentives program expected to be casualty of economic downturn

By Wayne RisherUpdated: March 20, 2019 11:30 PM CT | Published: March 20, 2019 5:10 PM CT

FedEx plans to scrap annual incentive bonuses this year, an austerity move that would cost some employees thousands of dollars depending on their pay grades.

The annual incentive compensation (AIC) program, which bases year-end bonuses on percentages of employee pay, is expected to be one casualty of a $1.5 billion shortfall in revenue in the fiscal year ending May 31.

“The international macroeconomic weakness and resulting revenue shortfall no longer support AIC funding, and our expectation is that there will be no AIC payout this year,” FedEx Corp. executive vice president and chief financial officer Alan B. Graf said in a note to employees Tuesday, March 19.

It’s unclear what the action will cost FedEx’s Memphis area employees, who number about 30,000 out of 450,000 FedEx employees worldwide.

It also calls into question the prospects for annual or cost-of-living pay increases and long-term incentive program payouts later this year.

Memphis-based FedEx is the largest private employer in Memphis and Tennessee and a key driver of the local economy.

FedEx said in a statement Wednesday, “The continued global economic slowdown has led to financial results below our expectations, and we are taking immediate steps to address the short-term challenges and evolving market conditions, including elimination of funding for the FY19 Annual Incentive Compensation (AIC) plan. We remain committed to maximizing our opportunities for long-term growth and success ahead.”

FedEx gave a dismal earnings report for the second consecutive quarter Tuesday, blaming continuing economic softness in Europe and China and a slower than expected integration of European acquisition TNT Express for taking a bite out of international express revenue. It also reduced its full-year profit guidance for the second time since September.

Graf alluded to the cut in annual incentive compensation during Tuesday's earnings call, saying, “Our strategic management committee has been investing a significant amount of time identifying operational and financial steps to address the challenges we are facing.”

“To mitigate the lower-than-expected revenue trends, we have further reduced our variable incentive compensation, launched our voluntary buyout program and limited hiring and discretionary spending,” Graf said. The company is offering voluntary buyouts to certain U.S. employees but won't know until April how many will be approved for it.

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WAYNE RISHER: Inside the FedEx voluntary buyout offer: Is it sweet enough?

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In a note to employees, Graf discussed the earnings miss and some of the planned cost-saving moves.

“While elimination of AIC funding, expense controls, and other measures are difficult in the near term, I want to be clear that we remain undeterred in the investments we are making in innovation, network infrastructure, and automation that will increase our competitiveness and drive our long-term growth and success,” Graf said.

“While the impact of these investments cannot always be measured or experienced from quarter to quarter or in one fiscal year, the amount of innovation we are driving and opportunity in front of us is greater than any other time in the history of the company,” Graf said.

“All of our team members will play a role and benefit from our success in the years ahead. Thank you for your ongoing commitment as we work together to transform the business and maximize the opportunity ahead,” Graf said.

The latest moves are in stark contrast to what was happening this time last year. FedEx was planning to raise employee pay and performance-based bonuses, sharing some of the company’s tax savings from the federal Tax Cut and Jobs Act of late 2017.

The company later said about one-third of more than $200 million in pay-related upgrades was attributable to performance-based incentive plans for salaried personnel.

Annual incentive bonuses vary according to the classification of FedEx employee, from a single-digit percentage for professionals to much higher for vice presidents. However, employees typically don’t receive the full percentage bonus because of the way incentive compensation is calculated, based on the company’s financial results.

An employee making $80,000 a year who receives a bonus based on 7 percent of salary would be in line to receive $5,600, for example.

Upper-level employees, vice presidents and higher, are also expected to go without annual incentive bonuses under the measure announced by Graf.

It did not address another type of bonus, long-term incentive pay, which higher-ranking employees receive based on aggregate earnings per share goals over a three fiscal year period.

Out of $16.6 million in total compensation in the 2018 fiscal year, company chairman and chief executive Frederick W. Smith received an annual incentive compensation payout of $1,656,161 and a long-term incentive compensation of $6 million, for example.

COVID-19: UPSERS WIN PAID LEAVE

POSTED ON MARCH 18, 2020

UPS will pay up to ten days of paid leave to Teamsters who are diagnosed with COVID-19, living with someone with COVID-19, or have been quarantined by a government agency, medical professional or UPS.

UPS management had previously announced that workers affected by the Coronavirus would only be granted unpaid leave. 

More than 15,000 Teamsters signed a petition from UPS Teamsters United protesting the company’s failure to provide paid leave or address hazardous unsanitary conditions. We made our voices heard!

UPS has reached an agreement with the Teamsters to pay workers up to 10 days of paid leave at the worker’s daily guarantee if you are:

• diagnosed with COVID-19
• living with someone with COVID-19, or 
• quarantined by a government agency, medical professional or UPS 

The company will make regular pension and health and welfare contributions for these hours of paid leave.

Under the agreement, UPSers can use all sick days, vacation days, and personnel days after the 10 days of paid leave are exhausted. There will be no discipline for absenteeism due to COVID-19 related issues.

Teamcare Approves Temporary Disability Benefits

Teamsters covered by Teamcare are eligible for Short-Term Disability benefits if they are under a physician’s care or have been advised by a physician, teladoc or state agency to self-quarantine. 

UPS employees still need to contact Aetna to report their disability.

UPS Teamsters who are covered by other Teamster plans should contact their locals or benefit funds. 

Layoffs

Package Division Director Denis Taylor told Teamster officials on a conference call today that he expects large-scale layoffs at UPS during the COVID-19 pandemic due to commercial closures. The increase in residential delivery will not offset the decline in the company’s core business, Taylor said.

Unsanitary Conditions

UPS Teamsters and local unions continue to demand that UPS address unsafe and unsanitary conditions. 

Get in the F*cking Line Behind the Rest of us Human Beings Here

Thom's blog

Get in the F*cking Line Behind the Rest of us Human Beings Here

  Dear airlines, hotel chains, banks, and other industries who are begging Donald Trump and Congress for bail outs. Get in the f*cking line. Most of you didn't even pay taxes last year.

The front of the line this time needs to be people with medical and student debt, people who have lost their jobs, people who are homeless, and people working in the gig economy. Everybody else: get in the f*cking line.

In 2008, the Bush administration was able to find over $20 trillion to bail out the banks and insurance companies; last year Trump found one $1.5 trillion to cut taxes to the billionaire class and America's largest corporations. It's not gonna happen again if we have anything to say about it. They can all get in the f*cking line behind the rest of us human beings here.

-Thom

US unions. FedEx mounts big-money push to head off unionization by US workers

Michael Sainato

Tue 14 Jan 2020 05.30 EST Last modified on Tue 14 Jan 2020 05.32 EST

FedEx workers hoping to unionize and get better pay and benefits have met with a well-financed barrage of opposition from the company, according to recordings obtained by the Guardian.

Workers who charge that their benefits are less than at rival UPS said the company has bombarded them with anti-union messages and forced them to attend anti-union meetings.

The Guardian obtained recordings of meetings that were mandatory and required workers to sign in, according to a FedEx employee, held at FedEx facilities in 2015 and 2016, where managers and union avoidance consultants lectured workers on unions as the Teamsters was attempting to organize FedEx drivers at several locations around the United States.

“It’s time to campaign. If you don’t want this third party coming in putting a wall between us, it’s time. Because when you campaign and tell them you don’t want them here, eventually it becomes loud and clear to them. You can do that,” said a FedEx human resources manager in a July 2016 captive audience meeting.

In the meetings, FedEx human resources managers often cited anecdotes to dismiss union organizing.

One, in the same July 2016 meeting, said: “Recently I had this question come up from an employee. Why is there a small group of employees at our company who seem to be very ungrateful at what the company has to offer them? Why do some employees give their allegiance to strangers and an organization like the Teamsters rather than this company that continues to provide for us, that has provided us with a long list of benefits and incredible pay, not to mention good equipment and facilities?
“I don’t have an answer, I don’t know. I feel your pain. I appreciate the company and what they offer. I have an attitude of gratitude.”

In another alleged anecdote, the same FedEx manager told workers a story about an unnamed 58-year-old employee for three years who supported unionizing because they wanted a better pension plan.

The manager told workers: “He’s getting closer to retirement. He tells the HR manager. The manager said: what have you done leading up in your career to prepare for retirement? You can’t hold FedEx Freight accountable for your own inability and failure to prepare for your retirement. He changed his whole attitude about it and started supporting the company because he took ownership of his own failure.”

In the meetings, FedEx managers and consultants claimed negotiations with labor unions are a gamble.
“It’s like going to Vegas and rolling the dice,” one said.
They also referred to union authorization cards as a “blank check”, and told workers “they need money, they’re running out of money. They want your money. They want our money.”

In a video used by FedEx to deter unionization, the Teamsters union was characterized as a plot to undermine FedEx by UPS, where about 250,000 employees are represented by the Teamsters.
“A package lost by FedEx equals a package gained by UPS,” said a narrator in the video.

FedEx, the second largest logistics company in the US, spent $837,000 between 2014 and 2018 on union avoidance consultants, according to a recent report published by the Economic Policy Institute. The report found by examining publicly available forms filed by consultants with the Department of Labor, US employers spend around $340m annually on union avoidance consultants, with FedEx as one of the top spenders.

FedEx’s anti-union campaign between 2014 to 2018 was largely a success. In April 2019, the only FedEx Freight workers unionized in the US voted against an effort to decertify the Teamsters union at a warehouse in Stockton, California, but prior decertification efforts were successful in 2017 in Pennsylvania and North Carolina. The only other unionized FedEx employees are their pilots, who voted to form a union in 1993.
A FedEx location in New Jersey voted to unionize in 2014, only to voluntarily cede representation in 2017 after FedEx fought in court with the National Labor Relations Board (NLRB) for years over which workers should be included in the bargaining unit. Several FedEx warehouses around the US voted against unionizing between 2014 and 2018, while other locations didn’t get that far in the union organizing process due to company pushback.

“They told me, ‘either you’re a team player, or you’re a problem and we will do everything to eliminate problems,’” said Greg Barfuss, a FedEx driver for seven years who was laid off in December 2015 after openly supporting unionization of his Gardena, California, based FedEx warehouse. “They first tried to intimidate me. When that didn’t work they fired me, and that scared other drivers from trying any more.”

He filed unfair labor practice charges with the NLRB, and a settlement was reached with FedEx in May 2016 for one of the charges.
FedEx rejected Barfuss’s claim that he was fired for union organizing and noted the NLRB did not rule in favor of Barfuss on the charge of being fired in retaliation for union activity. “To avoid the time and expense of litigation, FedEx Freight chose to resolve one of the claims and did so without payment of money or admission of liability,” a spokesperson for FedEx told the Guardian in an email.

As FedEx heavily opposed
unionization efforts among its employees, the company aggressively lobbied in favor of the 2017 Trump tax cut bill, which decreased FedEx’s taxes from over $1.5bn in 2017 to zero in 2018. Despite the significant tax savings, the New York Times reported in November 2019 that FedEx did not fulfill promises of using the tax windfall to reinvest in equipment and other assets, while spending about $3.6bn on stock buybacks in 2018 and 2019. FedEx’s CEO, Fred Smith, claimed the story was “distorted”, without citing specific examples, and challenged the New York Times publisher to a debate in response.

Workers at FedEx experienced cuts to bonuses in 2019 and a FedEx driver in Texas, who requested to remain anonymous for fear of retaliation, said this year workers essentially received a pay cut due to increases in healthcare costs.

“They decided for 2020 that if your spouse can get insurance at their employer and you keep them with Fedex’s insurer, they’re going to charge you $150 a month to keep your spouse on it. The pay raise amounted to $30 a week because we received $0.75 an hour raise so it doesn’t cover the spousal surcharge,” they said.
FedEx is also changing its pension plan in 2020, eliminating it for new hires who will be offered a 401k plan instead, while giving current employees the choice to keep their current plans or opt in to the 401k.

The FedEx driver explained the pension plan was one of the driving forces for union organizing at FedEx.

He said: “Our retirement is bad when you compare it to UPS. A UPS worker gets $100 a month for every year of service, somewhere around there. So 20 years in you’ll get a $2,000-per-month pension. I have 20 years here. If you project my pension, in another 10 years my projected income will be $300 a month with almost 30 years in. What am I going to do with $300 a month?”

A FedEx spokesperson said the company was changing retirement benefits program to ensure the benefits “remain competitive”.

The spokesperson added in an email to the Guardian: “While FedEx Freight respects the right of our team members to decide for themselves if they want to be part of a union, the law does not require us to remain neutral and protects our right to provide facts and opinions about unions so that our employees may make a fully informed decision