ISP Conversions for FedEx Ground
Published May 17, 2017
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The new ISP conversion is coming soon and affecting thousands of FedEx Ground contractors nationwide. ISP refers to Independent Service Provider, previously referred to as a CSP or Contracted Service Provider. Each contractor company will be required to have at least 5 routes or 500 deliveries when the change is put into effect in your state.
What is ISP Conversion?
The ISP conversion by FedEx is the clear definition of all route drivers as independent contractors. This change is fueled by past legal issues disputing whether the FedEx Ground operator is an employee or a contractor. To convert to the new model and continue with FedEx Ground, each contractor company will be required to have at least 5 routes or 500 deliveries. This may require each contractor to make decisions regarding purchasing additional routes to become ISP certified, or selling to another contractor in his/her terminal.
The recent court rulings regarding this classification of FedEx independent contractor/owners and their initial plans, including the infusion of newly negotiated rates and multi-year term requirements and definitions.
What resources will I need to convert to FedEx’s ISP?
The first thing you’ll want to do is prepare for the negotiation process. The negotiation process takes about 6 weeks, all of which you will likely use. Preparation includes knowing the details of your route’s historical data. Understanding the ins and outs of how many stops and packages are typical and the reasoning behind the number will be crucial.
For example, if there are multiple rural routes that cause wear and tear on vehicles or high traffic areas that cause slower deliveries, you’ll want to make that case in negotiations. Don’t be afraid to take negotiations to Round 30 if it makes sense to get what you need out of the process. The negotiators are skilled, so bring your “A” game and make sure you hold to your goals.
Make sure that when you are negotiating your updated contracts under ISP that the cost of new vehicles and fleet improvements under the ISP requirements are paid off within a timely manner. Cost of painting trucks and fixing other issues
Is it worth it?
In the end, this is only a question that you can decide, but hopefully, we’ve given you some information to help you decide. Of course, the in house ISP expert for Transwest is Maggie Chase. You can always reach out and throw a few questions her way at 303-301-7569 or find her at maggie.chase@transwest.com.
Frequently Asked Questions:
How long will it take you to make up the amount paid in for ISP on painting vehicles, updating decals, and vehicle replacement?
Some contractors who have already made the change have estimated that it will take approximately a year to make up the amount of money put into their business to become ISP.
What is your determining factor for fixing a vehicle vs replacing with a new unit?
Is this vehicle nearing the end of its engine and/or body life? With the average total body paint job being a few years and the average engine rebuilt totaling to thousands, it is a decision on whether that money would be better spent towards a down payment on a new truck or putting money into previously owned vehicles.
Will you be forgoing the additional paid amount for FedEx decals on the units by running white trucks, and thus opening more delivery opportunities? (Amazon)
With Amazon looking to formulate a similar model to FedEx Ground, some contractors have chosen to run white units and thus deliver for both parcel moguls. Do you see this as an opportunity as you evaluate your business or a threat to future FedEx growth?
When will your state be finished with ISP?
- As you plan for when your state will be done with ISP, when will you see the benefit of the conversion as you forecast profits for the next 2-5 years?
