Alex Washburn / AP file photo

Postal Service Exaggerated the Savings It Collected From Cutting Employee Compensation, Audit Finds

The agency hasn’t accounted for the costs associated with cutting pay and reducing benefits, GAO says.

The U.S. Postal Service has overestimated how much it saves from cutting employee compensation, according to a new audit, because it has failed to include new costs associated with high turnover and increased overtime. 

As a result of cutting pay for new employees and offering an increasing number of workers non-career positions that earn less generous benefits, USPS has reported about $10 billion in savings between fiscal years 2016 and 2018. The Government Accountability Office, however, could only substantiate $8 billion of that total and found even that amount likely overstates the actual savings. Without a better read on the true impact of its personnel cost cutting, the auditors said, the Postal Service will be ill-informed as it makes future financial decisions. 

USPS had 77,000 fewer employees in 2018 than it did 10 years earlier, though most of its job cuts came in the first half of that period. The agency has mostly added jobs in recent years due to an increase in delivery points and more labor-intensive package delivery. It has slashed a total of 300,000 jobs since 1999. 

In addition to the job cuts, USPS has sought to reduce compensation costs by lowering pay for new career employees. Under new collective bargaining agreements, for example, a new city letter carrier hired in 2016 would see a starting salary of $37,000, compared to $48,000 for someone hired previously. Wage growth has also slowed to 1% per year for postal employees, compared to 2.3% in the private sector. GAO said it was unable to verify $2.3 billion of the savings USPS claimed from the pay reductions due to insufficient data. 

The Postal Service has also hired more non-career employees who can be more easily laid off, face less certainty in their schedules and receive less generous benefits. They now make up 20% of the USPS workforce, up from a 10% cap under previous labor agreements. Postal management has claimed $8.2 billion in savings from this change between 2016 and 2018, but GAO said that number was actually $6.6 billion. 

USPS’ third method of cutting personnel costs stemmed from reducing its share of employees’ health insurance premiums from around 84% to around 74%. The Postal Service said it achieved $1.6 billion in savings from that reduction, but GAO said it was $1.4 billion.  

Postal management failed to consider several factors in determining its savings, GAO said. Non-career employees generally work more hours than their career counterparts, the auditors found, including more overtime and premium pay hours like Sundays. Lower-paid career workers also worked more and in many cases performed more overtime. USPS also compared the average pay for new non-career employees to median pay for career employees at all levels, rather than the career employees' starting salaries. USPS therefore estimated a gap of $25 per hour between career and non-career employee pay, whereas GAO said the difference was actually closer to $8 per hour when accounting for all factors. 

Some stakeholders, such as union officials, told GAO the less attractive non-career positions have created recruiting difficulties and the less experienced workers are less productive. Postal management, however, denied those assertions. GAO found USPS was struggling with turnover, with 3% of employees leaving each month. The Postal Service denied that pay rates were affecting turnover, but GAO found in fiscal 2018 that 4.2% of workers at the lower pay rate left each month compared to 0.36% of those at the previous, higher rate. A USPS inspector general report found the Postal Service spent $30 million on non-career employee turnover costs in fiscal 2017. 

GAO warned the errors could lead to poor decision making. 

“Given that USPS regularly evaluates and manages employee compensation in its labor negotiation, as well as overall budget planning, without guidance on what factors are necessary to consider when developing employee compensation cost estimates, USPS risks making ill-informed decisions about whether to maintain, or make additional, changes to compensation,” they auditors said.

Postal management disagreed that the agency had exaggerated its savings, but agreed to incorporate more factors into calculations going forward. The GAO report follows 2018 findings from the USPS inspector general that found the agency realized just 5% of its projected savings by eliminating overnight delivery of regular, first-class mail and pushing back some of its two-day delivery to a three-day window. The Postal Service, which advocated the changes to enable the closure or consolidation of nearly 200 processing plants, estimated it would save $1.6 billion but instead saw just $90 million. 

NEXT STORY: Your 2020 To-Do List

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.