Will the FedEx Express & FedEx Ground Merger Help or Hurt the Little Guy? Everything You Need to Know
Over the course of the last twelve months, contractors have navigated a wide range of changes. From unrest in the contractor community, to package volume downfall, the space has been full of unforeseen challenges. Recently, yet another shift was announced: FedEx stated that FedEx Express will formally be transitioning into FedEx Ground by June of 2024. This news comes as a pleasant and long awaited surprise, leaving many in the industry cautiously optimistic about its potential outcomes. One of the main questions is simply: will this increase in package volume lead to an increase in contractor pay?
Contractor pay has been on the decline in the aftermath of the COVID-19 pandemic. Rising truck prices, fuel costs, and labor rates are the main contributors to this issue. Another large cause is the significant volume decrease FedEx Ground has seen since the fall of 2021. During what normally would be the busiest time of year, also referred to as “Peak Season”, contractors received little to no increase in package volume. This was a significant financial issue for many contractors, who often make the bulk of their annual numbers in the third quarter. Since then, we have seen this pattern continue.
With the lack of density being on the forefront of everyone’s minds, a new stream of package volume could be exactly what FedEx Ground contractors are needing right now. Simultaneously, this will remove a significant level of inefficiency and overhead for FedEx Corporate. With sending only one truck out the door, contractors will have more packages to deliver and FedEx will reduce their labor force’s overhead cost. On a surface level, it appears like a win-win solution for all parties involved. While contractors and industry leaders are cautiously optimistic, it leads into the following question: will more volume equate to higher pay?
The portion of this puzzle that has yet to be revealed under the merger is likely the most important one: what will the new compensation plan look like? In previous years, contractor pay has been based on a variety of factors: number of stops and number of packages, with number of stops being the most common. Under the new model, this pay scale would not work in contractor favor. Volume density needs to be considered in addition to the number of stops each vehicle is taking per day. As new contracts are released and existing contracts are renewed, it will be incredibly interesting to see how management handles this. If FedEx does support contractors with additional from Express’ volume, the industry could see a massive positive ripple effect. More pay = better and more plentiful number of drivers. Better and more plentiful drivers = faster delivery times. Faster delivery times = happier end users. Happier end users = greater demand for FedEx Ground’s services.
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