US Postal Service 2015 Annual Report Download - page 21

2015 Report on Form 10-K United States Postal Service 19
consolidated and 15 were completely consolidated during the year. In order to further assess operational considerations and
to ensure that we continue to provide prompt, reliable and predictable service consistent with our published service standards,
we have deferred further consolidations until 2016. We anticipate that the remainder of the consolidations associated with this
phase of our realignment plan may impact the 21 partially-consolidated facilities plus an additional 44 processing facilities
that have been unaffected so far. We will not fully realize the projected cost savings of this consolidation effort until we are
able to fully implement it as planned.
We have utilized Voluntary Early Retirement (“VER”) and continue to leverage employee attrition and utilization of non-
career employees to the maximum extent permitted by our labor contracts, as more fully described below in Separation
Incentives under Compensation Expense.
Compensation and Benefits
Our compensation and benefits expenses represented approximately 64%, 63% and 65% of our total operating expenses for
the years ended September 30, 2015, 2014 and 2013 and consist of costs related to our active career and non-career employees.
The following table provides the components of compensation and benefits expense for active employees as of September 30,
2015, 2014 and 2013:
(in millions) 2015 2014 2013
Compensation $ 35,931 $ 35,113 $ 35,639
Retirement 6,480 5,758 5,738
Employee health benefits 4,774 4,804 4,951
Other 334 325 380
Total compensation and benefits expense $ 47,519 $ 46,000 $ 46,708
Compensation Expense
2015 compensation expense increased $818 million, or 2.3%, from 2014. The increase was attributable to contractually-
obligated salary escalations and additional work hours associated in part with the growth in the more labor-intensive Shipping
and Packages business. This increase in compensation was offset in part by new employees earning lowers wages. Total work
hours increased by approximately 21 million, or 1.9%, compared to the same period last year.
During 2015, we converted approximately 35,000 employees from non-career to career status, as dictated by our operational
needs and contractual provisions. These conversions were necessary to offset attrition of career employees, primarily through
retirement. Although recently converted career employees are more costly than non-career, they represent a significant savings
relative to the career employees they replace.
2014 compensation expense decreased $526 million, or 1.5%, from 2013. The decrease was attributable to effective utilization
of non-career employees, which resulted from changes in our collective bargaining agreements and our effective management
of work hours and staffing levels. Work hours decreased by approximately 3 million, or 0.3%.
Workforce Composition
The composition of our workforce is a significant factor of our compensation expense. As of September 30, 2015, our workforce
consisted of approximately 622,000 career and non-career employees, a relatively minor increase of 4,000, compared to last
year. This increase is the result, in part, of an increase in career employees needed to support the continuing growth in our
Shipping and Packages business and the continuing growth in the delivery network.
The number of total employees remained essentially unchanged from 2013 to 2014. Beginning in 2013 our labor contracts
permitted greater numbers of non-career employees, which allowed us to reduce career employee work hours and substitute
non-career work hours at reduced rates.