As members of the Teamsters union vote on a new contract with UPS, the company provided investors with an update on how much the agreement could cost the company.
During Tuesday's earnings call, UPS CEO Carol B. Tomé said the agreement was a "win-win-win" for all involved, saying the new agreement provides employees with the best pay and benefits in the industry.
During the call, Tomé revealed that the average full-time driver would make around $170,000 a year in pay and benefits by the end of the five-year contract, which is up from $145,000 now.
She added that part-timers who are currently employed at UPS would make at least $25.75 an hour and will get full health care and benefits by the end of the contract. The company has also added Martin Luther King Jr. Day as a paid holiday.
The new contract came as Teamsters previously authorized a strike if leaders could not reach an agreement.
SEE MORE: The surge of labor strikes as workers demand fairness and change
Tomé said UPS agreed to "front-load" some of the wage inflation, which she said puts some pressure on profits in the second half of 2023.
She said the win for customers and shareholders was the agreement prevented a work stoppage, which could have been disruptive to the entire U.S. economy.
"For our country, as you know, we move 6% of the U.S. GDP every day, and there was no place for this volume to go. So we avoided a disruption to the economy with this handshake agreement," Tomé said.
Despite the increase in pay and benefits, some of the costs will be partially offset by adjustments the company made earlier in the year.
"The union wage rate increases included in our new labor agreement for the first year are higher than we originally planned," said UPS CFO Brian Newman. "We started to accrue for the terms of the tentative agreement on Aug. 1, while the contract is out for ratification."
UPS leaders noted that fear of a strike was likely what caused its revenue to drop 6.9% in the second quarter of 2023. The company said package volume declined 9.9% from April to June.
The new contract has perhaps sparked interest among potential employees. In data released to Bloomberg, searches for UPS on employment site Indeed have increased 50% in recent weeks.
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