Postal Service labor agreement to save $3.8 billion over four years

The U.S. Postal Service will save $3.8 billion over four years and reduce spending on employee health care under its tentative new labor contract.

The agreement achieves both short-term cost reduction and long-term structural change, Postmaster General Patrick Donahoe told reporters Monday, discussing the arrangement reached in March between USPS and the American Postal Workers Union.

"The Postal Service has been very responsible," said Donahoe. "We've stayed laser-focused on cost, and we'll continue to do that."

In addition to a 3.5 percent pay raise, the first 1 percent of which would take effect in November 2012, the agreement, which still must obtain full union support, would protect APWU employees against layoffs and limit "excessing," where employees are reassigned to different work sites based on the agency's current needs. It also includes provisions that would return to postal employees work that had been outsourced or assigned to managers.

From 2013 to 2016, there would be a slight increase in employees' share of contributions to health benefits, totaling several dollars per pay period each year.

The contract also provides more freedom to adjust the workforce to changing needs by creating noncareer flexible jobs, said Donahoe. Some clerk, maintenance and vehicle driver positions will receive lower pay than career employees but will be eligible for raises, health benefits and leave. A number of full-time workers also will adjust to more flexible schedules and will work in different locations within their craft, he added.

The new agreement would cover 205,000 workers represented by APWU, including clerks, mechanics, vehicle drivers, custodians and administrative aides. Before it can take effect, union members still have to approve the provisions, which would extend through May 20, 2015. Both APWU's rank-and-file advisory committee and its executive board have unanimously approved the contract, and ballots will be mailed to members on April 8.

"Everyone gave, and everyone gained in this," Donahoe said. He added USPS will take the same approach in negotiations with the National Association of Letter Carriers and the National Postal Mail Handlers Union, scheduled to begin this fall.

The contract won't drastically change the Postal Service's spending on its workforce, however. Labor costs account for nearly 80 percent of USPS' expenses. According to Donahoe, nearly 10 percent of that is due to the agency's obligation to prefund its retiree health benefits. Labor costs will hover around 80 percent, though the agency aims to shrink its total spending from $73 billion to $60 billion going forward, he said.

The House Oversight and Government Reform Committee on Tuesday will hold a hearing to examine postal workers' pay and benefits. Lawmakers previously have expressed concern over the USPS' labor costs.