UPS to Pay Majority of Wage Increases in First Year of Teamsters Contract

by Warren Seah

UPS has announced that it will pay nearly half of the annual wage increases outlined in its recently ratified five-year Teamsters contract in the first year. The Atlanta-based package-delivery company revealed this information during an investor presentation on Monday.

According to Chief Financial Officer Brian Newman, approximately 46% of the overall wage increases specified in the contract will be allocated to the first year. While this frontloaded structure will result in around $500 million in additional costs for UPS during the latter half of 2023, Newman stated that the annualized growth rate for these expenses aligns with expectations.

Under the new agreement, contract costs are projected to increase at a compound annual growth rate (CAGR) of 3.3% over the course of the five-year contract. Meanwhile, wage costs are expected to rise at a 3.5% CAGR, while health and benefits costs will see a 2.7% CAGR.

Newman emphasized that this frontloaded distribution of wage increases will enable UPS to invest in technology and reduce turnover costs. However, he also highlighted that Wall Street’s estimates for the second half of the year did not account for these additional expenses.

In terms of timing, Newman revealed that the majority of these costs would be incurred in the third quarter, contrary to Wall Street estimates assuming a spread across the third and fourth quarters.

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