Why is UPS laying off 12,000 people?

UPS layoffs by taking significant step on Tuesday by announcing the elimination of 12,000 jobs, marking a strategic move aimed at achieving a substantial cost-saving goal of US$1 billion. The majority of the layoffs will affect managerial and contractor positions. This decision comes in the wake of a less-than-optimistic sales outlook for the current year, with UPS projecting global revenue between $92 billion and $94.5 billion—below the expectations of analysts who foresaw revenue reaching at least $95.6 billion.

Facing a dip in revenue last year, UPS grappled with customers diverting shipments to rival carriers like FedEx due to concerns about a potential strike by the Teamsters. Although UPS anticipates regaining most of that business, it has only managed to recover around 60% of the lost clientele. The company experienced record-breaking business levels in the initial three years of the pandemic, driven by the surge in online shopping, reaching a sales milestone of over $100 billion in 2022. However, 2023 saw a significant decline of over 9% in revenue, prompting UPS CEO Carol Tome to express her disappointment during a conference call with investors on Tuesday.

How Did UPS Navigate Challenges in 2023?

The setback in performance in 2023 was attributed partly to the macro environment and disruptions related to labor contract negotiations, along with increased costs associated with the new contract, as stated by Carol Tome. The company’s stock (UPS) witnessed a 7% decline on Tuesday in response to these developments.

While UPS had increased its employee headcount to approximately 540,000 during the surge in business, it managed to reduce it to around 495,000 by the end of last year through attrition and reduced flying hours, avoiding layoffs. However, the company now faces challenges, including a forecasted growth of less than 1% in the overall US small package market (excluding Amazon) for 2024 and a 12.1% increase in union wage rates. As part of its cost-cutting strategy, trimming salaried staff has become a major focus.

With about 85,000 managers in its global workforce of nearly 500,000 employees and more than 300,000 hourly US workers represented by the Teamsters union, UPS emphasized that this move is a fundamental shift in its operational approach. UPS CFO Brian Newman highlighted that the changes are indicative of a transformation in the company’s working dynamics, suggesting that as volume returns to the system, these job cuts are not expected to be reversed, signaling a lasting change in operational efficiency.

Severance pay for UPS’s employees

In Canada, UPS employees not part of a union are entitled to receive their full severance pay in the event of job loss due to downsizing or corporate restructuring. Various factor can impact a severance package, potentially spanning up to 24 months of pay. In case of mass layoffs of 50 people or more in Ontario, employees may be entitled to a greater severance package. Those not receiving their complete severance amount have the right to pursue compensation. We advise seeking legal counsel to ensure individuals facing layoffs at UPS receive their entitled compensation.

At Whitten & Lublin, we understand the challenges associated with job loss or termination, recognizing it as a stressful experience. Our team of experienced employment lawyers will guide you through the available legal avenues. This ensures you receive the rightful compensation owed to you. We encourage those affected by recent layoffs in Canada to reach out to us for a consultation, accessible through our online portal or by phone at (647) 951-7460 today.