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Fedex Is Rerouting 600K Packages A Day Due To Worker Shortage

FedEx Crop (NYSE: FDX)’s Ground network is rerouting more than 600,000 packages a day due to a shortage of workers.

What Happened: The staffing problems at FedEx are occurring even as the company has increased the hourly pay for package handlers in its ground division by 16%. Workers in FedEx’s express division has seen an hourly pay increase of 25% from previous levels.

A lack of workers is causing “widespread inefficiencies in our operations,” said FedEx Chief Operating Officer Rajesh Subramaniam, who adds that the labor shortages had a $450 million impact on the company’s quarterly results. “The competition for talent, particularly for our frontline workers, have driven wage rates higher and pay premiums higher.”

The company spent around $7.8 billion on employee salaries and benefits in the quarter, up 13% from the same period last year. FedEx Ground handled an average of 9.3 million packages a day in the quarter.

Why It’s Important: Ahead of the holiday season, FedEx plans to hire 90,000 frontline workers, with incentives like targeted pay premiums and increased tuition reimbursement.

Meanwhile, United Parcel Service Inc (NYSE: UPS) wants to hire more than 100,000 workers for the holiday season. In many cases the company is issuing a job offer within 30 minutes of application in an effort to prevent potential employees from going elsewhere.

Photo: Courtesy of Unsplash

© 2021 Benzinga does not provide investment advice. All rights reserved.

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