January 26, 2018 1:00 PM, EST

FedEx to Spend $3.2 Billion in Tax Reform Savings on Staff, Operations

FedEx Worker Patrick T. Fallon/Bloomberg

FedEx Corp. ramped up staff pay boosts and corporate investments arising from the December passage of the U.S. Tax Cuts and Jobs Act, saying it would spend more than $3.2 billion to increase employee compensation, bulk up the company’s pension plan and invest in several of its hubs.

The package delivery giant joins firms including Wal-Mart Stores Inc. and Old Dominion Freight Line Inc. in paying out bonuses to staff and investing in their operations after the act lowered the corporate tax rate to 21%, proving a windfall to many companies.

In a three-part plan, FedEx said it would make a $1.5 billion contribution to the FedEx pension plan to ensure its funding, and invest $1.5 billion to expand its Indianapolis hub over the next seven years and modernize and enlarge its Memphis superhub.

Also, FedEx will dedicate more than $200 million to increased compensation for its staff, with about two-thirds of the money going to hourly workers. Plans call for speeding up 2018 annual pay increases by six months to April 1 from the typical October date. The rest of the money will go to increases in performance-based incentives for salaried staff.

FedEx joins a number of companies in broadcasting how it plans to spend some of its tax savings. As of Jan. 26, more than 260 companies have announced “wage and salary increases, bonuses or 401(k) match increases” going to at least 3 million Americans due to the tax reform bill, according to advocacy group Americans for Tax Reform.

Wal-Mart announced it would raise in February its starting salaries for new workers to $11 an hour from the current $9. Wal-Mart CEO Doug McMillon said, “We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders.”

The company also funded a one-time, sliding-scale cash bonus program that rewarded staff with 20 years of experience with $1,000, falling to $250 for workers with two years or less with the retailer.

Several carriers also have announced staff payouts. Old Dominion is giving $500 to all 22,000 employees. Old Dominion ranks No. 11 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

In a note to staff, CEO David Congdon wrote, “The president has signed a historic tax reform bill that should reduce OD’s taxes and also generate growth for the U.S. economy. We expect that the anticipated improvement in the economy will create additional opportunities for use to WIN market share and grow our company more than originally anticipated.”