Audit Report – HR-MA-15-001 – 12/02/2014
In fiscal year (FY) 2013, the U.S. Postal Service paid $21.7 billion in carrier compensation — $15.5 billion for city carriers and $6.2 billion for rural carriers. Carriers represent about 48 percent of 491,000 career postal employees and are the largest personnel expense for the Postal Service.
Compensation for city and rural carriers is determined very differently. City carriers are generally full-time employees and are guaranteed 40 hours per week, 8 hours per day. Conversely, rural carriers are compensated based on a predetermined rate per route. That rate takes into account mail volume, daily miles traveled, number of mailboxes served, and fixed or variable time allowances. In addition, city carriers are paid overtime for work performed over 40 hours in a week, whereas rural carriers are typically paid overtime when they work more than 2,080 hours annually.
Carrier compensation has been discussed for many years, with studies on compensation costs conducted by the Postal Regulatory Commission dating back to 1992. Postal Service management is currently studying rural carrier time standards, which may impact the current rural carrier compensation system. This study, estimated to be completed in May 2015, will also focus on ensuring delivery time frames are fair and reasonable tasks are assigned to carriers.
Our objective was to assess city carrier management and associated compensation. This report is a follow-up to our Postal Service Work Rules and Compensation Systems audit report, dated September 19, 2011.
What the OIG Found
The Postal Service implemented a number of tools to track and manage city carrier operations; however it remains challenging to supervise city carriers. Also, the Postal Service continues to experience excessive supervisory, overtime and grievance costs related to city carriers.
Specifically, supervisors have more activities to manage for city carriers compared to rural carriers, such as managing daily workhours and work load activity. In addition, for each 100 bargaining employees, supervisory costs for city carriers, including salary and benefits, were about $440,000 in FY 2013, compared to rural carrier supervisory costs of $220,000. In addition, the Postal Service paid about $1.2 million for city carrier overtime, per 100 bargaining employees; however, overtime for rural carriers was only $236,000 per 100 bargaining employees. Furthermore, management handled about [redacted] grievances with payouts totaling [redacted] for city carriers for every 100 bargaining employees, compared to [redacted] grievances totaling [redacted] each for every 100 rural carriers. These costs are evidence that it is more costly and difficult to supervise city carriers in every neighborhood.
Furthermore, compensation costs per delivery are significantly higher for city carriers than for rural carriers – in FY 2013, city carriers’ compensation costs averaged 58 cents per delivery point, while rural carriers’ averaged 49 cents. There are about 133 million delivery points nationwide.
In addition to the higher overall administrative and compensation costs associated with city carriers, there is little incentive for carriers to be more productive and finish routes faster because they are paid hourly. Because of changes in the Postal Service’s business environment, including an increase in the number of package deliveries and the adjustment of delivery routes, the Postal Service has an increasing need for carrier efficiency.
Developing a compensation system for city carriers based on time standards for specific tasks rather than hours worked would allow management to reduce supervisory costs, grievance payouts, and administrative costs, while increasing overall efficiency. Paying city carriers hourly results into longer workhours; whereas, a different compensation system could incentivize higher productivity. Therefore, such changes could reduce compensation costs by at least $1.3 billion in FY 2015.
What the OIG Recommended
We recommended the chief human resources officer and executive vice president develop a city carrier compensation system based on time standards for specific tasks completed by a carrier.