US Postal Service 2003 Annual Report Download - page 32

30 | 2003 annual report united states postal service
management discussion & analysis
operations
Workers’ Compensation
Our employees are covered by the Federal
Employees’ Compensation Act, administered
by the Department of Labor’s Office of
Workers’ Compensation Programs (OWCP)
which makes all decisions regarding injured
workers’ eligibility for benefits. However, we
pay all workers’ compensation claims out of
postal funds.
We record as a liability the present value of
all future payments we expect to make to
those employees receiving workers’ compen-
sation. At the end of 2003, we estimate our
total liability for future workers’ compensation
costs at $7,114 million, an increase of $589
million or 9.0%. In 2003, we recorded $1,457
million in workers’ compensation expense,
compared to the $1,511 million we recorded
in 2002. These amounts exclude Post Office
Department workers’ compensation costs, of
$17 million in 2003 and $13 million in 2002.
In the past, workers’ compensation
expenses tended to increase every year as
more and more employees received benefits.
With medical costs rising as they have in the
past several years, it remains imperative that
we reduce workplace injuries, manage current
claims and eliminate fraudulent claims.
We expect costs related to workers’
compensation to remain stable in 2004 as a
result of initiatives that will help to minimize the
impact of rising medical costs. These initiatives
include actions to increase the rigor of medical
bill reviews, increase the recovery of expenses
related to injuries sustained by employees as a
result of their own actions and a joint initiative
with the Office of Workers’ Compensation
Programs to increase the number of injured
employees returned to work.
In addition to the cost of workers’ compen-
sation claims, OWCP charges us an
administrative fee for processing claims. In
2003, the administrative fee was $45 million
compared to $37 million in 2002 and $31
million in 2001.
(See Notes 2 and 3 of the Notes to
Financial Statements for additional details.)
Productivity
We use two indicators to measure our effi-
ciency. First, we use Output per Work Hour,
which measures the change in the relation-
ship between workload (mail volume and
deliveries) and the labor resources used to do
the work. Second, we use Total Factor
Productivity (TFP), which measures the
change in the relationship between outputs,
or workload and all the resources used in
producing these outputs. Our main outputs
are mail and special services and carrier
services to an expanding delivery network.
TFP calculations include inputs for all
resources including labor, materials, trans-
portation and capital investments.
During 2003, our Output per Work Hour
grew by 2.3% and our TFP improved by
1.8%. This TFP growth is equivalent to
$1,196 million in expense reductions. This
marks our fourth consecutive year of positive
TFP growth, with equivalent expense reduc-
tions totaling over $4.4 billion over this time.
Our productivity growth continues to be driven
by substantial restraints on the resources we
use to produce our outputs. Again in 2003 we
were able to achieve positive TFP growth as
our workload declined for the third consecu-
-23 million-23 million
-78 million
-78 million
-54 million-54 million
FY 2000 FY 2001 FY 2002 FY 2003
-11 million
Year Over Year Work Hour Reductions
Cumulative Reduction from 1999
323 Million Work Hours
Year Over Year Work Hour Reductions