US Postal Service 2014 Annual Report Download - page 24

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2014 Report on Form 10-K United States Postal Service 20
Operating Expenses
In an effort to align Postal Service resources with anticipated types of services and volume, during the year ended September
30, 2014, the Postal Service has continued its network realignment plans that have included a reduction in both capital
expenditures and operating expenditures which are under management’s control.
Compensation and Benefits
The following table provides the components of compensation and benefits expense for current employees as of September 30,
2014, 2013 and 2012:
(in millions)
2014
2013
2012
Compensation
$
35,113
$
35,639
$
36,279
Retirement
5,758
5,738
5,854
Employee health benefits
4,804
4,951
5,187
Other
325
380
369
Total compensation and benefits expense
$
46,000
$
46,708
$
47,689
Total compensation and benefits expense decreased $708 million, or 1.5%, from 2013 to 2014 and $981 million, or 2.1%, from
2012 to 2013. The decreases experienced in total compensation and benefits over the last two years were driven primarily by
continued effective utilization of non-career employees, a flexibility gained through recent changes in our collective bargaining
agreements and our effective management of work hours and staffing levels. This transition in our workforce composition has
yielded significant cost savings, resulting in decreases of 1.2% and 0.7% in average hourly compensation rates in 2014 and
2013, respectively.
Our continued efforts to manage work hours have resulted in 3 million, 12 million and 27 million work hour reduction in 2014,
2013 and 2012, respectively. These work hour reductions were achieved primarily due to significant operational initiatives to
improve efficiency and reduce costs. These initiatives included adjustments to our mail processing and transportation networks;
adjustments to the hours of operation of retail units; and delivery changes, such as the consolidation of delivery units and
adjustments to delivery routes.
Partially offsetting these savings were contractual wage increases and COLAs which are discussed further in conjunction with
our collective bargaining agreements, as well as increases in the number of deliveries and growth in packages, which are more
costly to process and deliver.
Workforce Composition
The most significant component of the decrease in compensation expense in 2014 and 2013 has been the change in our staffing
composition, which utilized a greater number of non-career employees. Beginning in 2013, our labor contracts permitted greater
numbers of non-career employees. This has allowed us to reduce career employee work hours and substitute non-career work
hours at a reduced expense. We make every effort to utilize non-career employees to the maximum extent allowed by our
collective bargaining agreements.
As of September 30, 2014, the number of career employees has decreased by approximately 40,000, or 7.6% from 2012, while
the number of non-career employees has risen by approximately 29,000, or 29%, as shown in the table below:
2014
2013
2012
Career employees
488,000
491,000
528,000
Non-career employees
130,000
127,000
101,000
Total employees
618,000
618,000
629,000
These reductions in the career employee workforce have been accomplished almost exclusively through attrition and incentives
to retire or resign.