US Postal Service 2011 Annual Report Download - page 25

2011 Report on Form 10-K United States Postal Service - 23 -
Retirement expenses for current employees, which
consist of accrued employer contributions to the Federal
Employees Retirement System (FERS) and Social
Security, increased by $70 million, or 1.2%, and current
employees’ health benefits expense increased $81
million, or 1.6%, from the prior year. The increase in
retirement expense was driven by an OPM mandated
increase in the FERS contribution rate from 11.2% in
2010 to 11.7% in 2011. The increase in health benefits
reflects rising healthcare premium costs. Both these
expenses increased despite the reduction of
approximately 27,000 career employees.
Beginning on June 24, 2011, management and the Board
decided to suspend employer contributions to the FERS
retirement fund as a cash-conservation measure and
because the Postal Service believes that it has
adequately met all funding obligations to the FERS at
least through September 30, 2012. Although we have
suspended the payments, we continue to accrue these
expenses. Based on advice received from the Office of
Legal Counsel at the Department of Justice, in Quarter I,
2012, the Postal Service is expected to resume the
regular biweekly payments for its FERS employer’s
contributions as well as remit all previously withheld
payments, including the $911 million accrued at
September 30, 2011. However, we continue to seek a
refund of the overfunded balance.
In 2010, total compensation and benefits expenses
declined by $1,974 million, or 3.9%, from 2009
compensation and benefit expense of $50,883 million. In
2010, compensation expenses was $37,545 million
compared to $39,160 million in 2009, a $1,615 million, or
a 4.1% decrease. The 2010 decrease in compensation
expense was driven by a 75 million work hour reduction
partially offset by a $112 million incentive expense for
approximately 7,400 APWU and NPMHU employees who
elected to retire or resign from the Postal Service in
Quarter I, 2010. In 2011, a similar incentive was paid to
approximately 1,850 administrative employees who
elected to retire in Quarter III, 2011, but the amount
accrued was not material to the total compensation
expense.
EMPLOYEE WORKFORCE
The total number of employees at September 30, 2011,
was 645,950, of which approximately 557,250 were
career employees. There has been a reduction in the total
number of career employees by 26,657, or 4.6% since
September 30, 2010. Since the end of 2008, the number
of career employees has been reduced by approximately
106,000, or 16%. These reductions have been
accomplished primarily through attrition and incentives to
retire or resign. The following graph details the decline in
numbers of our total workforce, primarily among career
employees. For the last three fiscal years, the number of
noncareer employees remained relatively stable at an
average of approximately 88,500.
WORK HOURS
Total work hours in 2011 of 1,149 million hours decreased
by 34 million, or 2.9%, from 1,183 million work hours in
2010. Work hours in 2010 and 2009 decreased by 75 and
115 million hours, respectively, from the 2009 total of
1,258 million hours, and the 2008 total of 1,373 million
hours. These reductions were driven by continued efforts
to respond to the decline in mail volume. These efforts
included streamlining area and district offices, offering the
previously mentioned incentives for employees to retire or
resign, and adjusting delivery routes.
Work hours decreased in all major functions in 2011
compared to 2010 except for rural delivery, which
remained relatively flat. City delivery declined by 9 million
hours or 2.3%; mail processing declined by 9 million hours
or 4.2%; and customer service operations declined by 10
million hours or 6.5%.
Workhours by Function
(Workhours in thousands) 2011 2010 2009
City Delivery 399,010 408,488 424,683
Mail Processing 215,221 224,645 251,200
Rural Delivery 177,384 177,152 181,090
Customer Service Operations 150,203 160,621 178,715
Postmasters 59,484 59,609 59,995
Other, including
Retail, Vehicle Services, Plant,
Operational Support, and
Administration
147,535 152,432 162,342
Total Workhours 1,148,837 1,182,947 1,258,025
Total work hours decreased in 2011 despite the addition
of approximately 636,500 delivery points. The work hour
decreases reflect delivery optimization initiatives and the
reduction in mail volume from the previous year. The
growth rate of new delivery points has slowed in recent
years due to the weak economy, with lower housing
starts.
As shown in the following chart, and consistent with last
year, in 2011 the rate of reduction in work hours exceeded
the rate of decline in mail volume in every category except
rural delivery and postmasters. Rural delivery accounts for
most of the delivery point growth while postmasters’ costs