US Postal Service 2011 Annual Report Download - page 24

2011 Report on Form 10-K United States Postal Service - 22 -
In 2011, compensation and benefits costs of $48,310
million decreased $599 million or 1.2%, driven by the
reduction of 34 million work hours.
The reductions in compensation and benefits expenses in
2011 were not enough to offset increases in
transportation, workers’ compensation, and other
expenses. Transportation expenses increased $511
million, or 8.7%, driven by higher fuel costs. Workers’
compensation increased $106 million, or 3% driven by
higher claims in 2011 as compared to 2010. In addition,
and similar to 2010, significant changes in interest and
inflation rates during 2011 had a significant negative
impact on total workers’ compensation expense,
especially when compared to the comparable amounts
expensed for changes in inflation and discount rates in
2009. Other operating expenses were negatively
impacted by significantly higher litigation expenses
incurred in 2011 compared to 2010.
In 2010, total operating expenses of $75,426 million were
$3,596 million, or 5%, greater than 2009 operating
expenses of $71,830 million. Retiree health benefits
increased by $4,357 million in 2010 compared to 2009,
primarily due to an increase in the PSRHBF prefunding
payment to $5.5 billion, up from $1.4 billion in 2009.
Compensation and benefits expense decreased in 2010
by $1,974 million, or 3.9%, from $50,883 million in 2009 to
$48,909 million in 2010. The decrease was primarily due
to a 75 million reduction in work hours. Transportation
expenses decreased by $148 million, or 2.5%, and other
expenses increased by $18 million in 2010 compared to
2009.
COMPENSATION AND BENEFITS
Total compensation and benefits expenses of $48,310
million declined $599 million, or 1.2%, in 2011, primarily
due to the reduction of nearly 27,000 career employees
and a reduction of 34 million work hours.
Compensation expenses in 2011 decreased by $724
million, or 1.9%, from $37,545 million in 2010 to $36,821
million, due to the above-mentioned decline in the number
of employees and work hours. Partially offsetting the
savings generated by the decrease in work hours was a
1% increase in the average hourly wage as well as an
8.4% increase in the number of overtime hours worked by
employees. Since 2000, we have reduced total work
hours by a cumulative total of 477 million work hours,
equivalent to a reduction in annual expense of $20 billion.
We are beginning to reach the limits of the reductions that
can be accomplished within the existing network structure
and service standards. Accordingly, in 2012, we are
proposing a major realignment of our mail processing and
distribution network that will allow us to achieve
significantly greater reductions.
Compensation and Benefits Expenses
(Dollars in millions)
Compensation $ 36,821 $ 37,545 $ 39,160
Retirement 5,879 5,809 5,917
Health Benefits 5,222 5,141 5,294
Other 388 414 512
Total Compensation and
Benefits Expenses
$ 48,310 $ 48,909 $ 50,883
2011 2010 2009
The contracts (the NRLCA contract, as previously noted,
has expired) with the four labor unions representing the
majority of our employees currently include provisions
granting Cost–of-Living Adjustments (COLA), which are
linked to the Consumer Price Index – Urban Wage
Earners and Clerical Workers (CPI-W). The most recent
COLA effective in September 2011 conferred an annual
pay increase of approximately $980 on each eligible
employee covered by NPMHU and NALC collective
bargaining agreements with an overall annual financial
impact of approximately $300 million. The new APWU
contract included no COLA increases in 2011. There were
no COLA increases in 2010 or 2009. Because the
NRLCA contract expired on November 20, 2010,
employees covered by that agreement received no COLA
increases in 2011.
Nonbargaining unit employees may receive pay increases
through a pay-for-performance program that makes
meaningful distinctions in performance. Nonbargaining
salary rates were frozen in 2011, meaning that
nonbargaining employees will not receive pay increases in
2012. These employees do not receive automatic salary
increases, nor do they receive COLAs or locality pay.