FedEx says it wants to keep seasonal workers past the holidays and that pandemic wage increases are 'here to stay'

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FedEx says it wants to keep seasonal workers past the holidays and that pandemic wage increases are 'here to stay'
A FedEx driver delivers a cart of packages, Thursday, May 6, 2021, in New York.AP Photo/Mark Lennihan
  • Labor challenges have been a $470 million headache for FedEx this year, its earnings revealed.
  • But higher pay is bringing a flood of workers, the company said, and the wage increases are "here to stay."
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FedEx may have been listening to President Joe Biden when he shout-whispered, "Pay them more."

Its wage increases are making it a standout among companies solving the labor shortage, and its CFO Mike Lenz says higher pay is "here to stay."

With holiday deliveries running at full-tilt, the company said in its earnings call that it managed to staff up over the last three months to the tune of 10,000 to 12,000 workers per week.

The labor situation did exact a toll on the company with $470 million in additional costs due in roughly equal measure to higher wages and operational inefficiencies.

In other words, it's expensive for the shipping giant when it doesn't have enough people, but if you pay them, they will work for you.

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It's well documented that now is a tough time in the logistics industry, and a lot of prices are expected to begin coming back down once the widespread supply chain bottlenecks are resolved.

FedEx CFO Mike Lenz gave his outlook on the wage situation on the earnings call.

"We're not assuming any reduction in the base pay rates, as it were, of labor from the market because I think that's well documented that's here to stay, and we're managing to that going forward," he said.

In addition to offering higher pay, FedEx improved its benefits package, increasing paid time off and tuition reimbursement for workers. The company also expanded scheduling flexibility to a system that it says is less "binary" than full-time or part-time.

Those changes could help FedEx keep a larger share of its seasonal workforce, which it says will be essential to tackle rapidly growing demand, which is expected to reach 134 million parcels per day in the US across all carriers. Ecommerce will drive 90% of that, the company said.

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"Our objective here is to make sure that these team members stay with us post-peak and that we have the labor situations to make our networks more efficient," President and COO Raj Subramaniam said.

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