As packages piled up and truck engines roared, United Parcel Service (UPS) and the Teamsters union representing 340,000 workers have finally reached a five-year labor agreement that could reshape the competitive logistics landscape. UPS Chairman Carol Tomé calls it a "win-win-win" deal - but will it truly satisfy the company, employees, and customers alike?
The "Win-Win-Win" Agreement: A New Chapter in UPS Labor Relations
United Parcel Service (UPS) expressed confidence in its new tentative five-year labor contract covering 340,000 Teamsters-represented employees, expected to be ratified by rank-and-file workers within two weeks. "We believe this contract is a win-win-win," UPS Chairman Carol Tomé told analysts during the company's Q2 earnings call. "We have the best people, and this new contract rewards them with industry-leading pay and benefits."
Tomé added that the agreement "reinforces industry-leading wages," noting that by the end of the new contract, a typical UPS full-time driver would earn about $170,000 annually in combined wages and benefits.
Significant Wage Increases Across the Board
From 2023 through 2028, both full-time and part-time UPS employees will receive larger general wage increases under the new five-year contract. Each employee who has reached seniority by August 1 will receive a total wage increase of $7.50 per hour.
Part-time wages were a major sticking point in negotiations. Under the tentative agreement, part-time employees with seniority earning less than $21/hour after general wage increases will see their pay jump to a minimum of $21/hour.
Newly hired UPS part-time workers will start at $21 per hour, increasing to $23 by August 1, 2027. Under the 2018-2023 contract, new part-time hires started at $15.50 per hour after August 1, 2022.
Rebuilding Customer Confidence After Strike Threats
"I want to thank those customers who stayed with us," Tomé said. "For those who diverted, we look forward to earning your business back."
Tomé described the negotiations as "late and loud." In the days before the official agreement was announced in late July, the Teamsters had threatened to strike against the world's largest package delivery company.
"Now it's all hands on deck" to win back shippers who diverted packages during the final days of labor talks, Tomé said. UPS saw daily volume decline by about 1.2 million pieces due to strike threats, though Tomé expects "we'll win all of that back by the end of the year."
Internal projections suggest one-third of diverted volume went to FedEx, one-third to the U.S. Postal Service, and one-third elsewhere, Tomé revealed.
Financial Impact and Operational Changes
UPS, which moves about 6% of U.S. GDP daily, has largely absorbed the financial impact of the new contract. The company reported Q2 consolidated revenue of $22.1 billion, down 10.9% from Q2 2022, with operating profit down 21.4% to $2.8 billion.
The company maintained pricing discipline during negotiations despite volume declines. UPS expects full-year revenue of about $93 billion with an 11.8% operating margin.
Operationally, the new contract will allow for increased weekend deliveries and reduced reliance on the U.S. Postal Service for SurePost deliveries. UPS will gradually increase the percentage of SurePost packages redirected to its own drivers, reaching 44% by August 1, 2024, and 50% by August 1, 2028.
Technology and Workplace Improvements
The agreement gives Teamsters greater say in technology implementations that might affect union jobs. UPS must now notify the union six months before introducing drones, platooning, or autonomous pickup/delivery vehicles and negotiate about their impact.
Additionally, all small package delivery vehicles purchased after January 1, 2024, will feature in-cab air conditioning systems as part of enhanced heat safety measures. UPS will replace at least 28,000 package cars and vans during the contract term.
"Putting the customer first is a winning strategy," Tomé concluded. "We're winning the best part of the market, and our new contract sets the foundation for the future."