Variable pay is a big part of your FedEx contract. It is crucial in determining your total earnings. Let us delve into how these variable components work within the FedEx system.
Understanding the Contractual Landscape
For Independent Service Providers (ISPs), the scope of work includes all package pickup and delivery. This happens in a designated service area called a Contract Service Area or CSA. A CSA typically comprises one or more Zip codes. It grants the ISP exclusive rights to service those Zip codes.
The Key Variable Component: Stops
The primary variable component in an ISP’s contract is called a “stop.” It is essential to clarify that, in contracts, a stop is a pickup or delivery location. ISPs receive compensation for each delivery location serviced daily. Stops can be categorized into two types: Commercial and Residential. These two types have very distinct pay rates.
Commercial vs. Residential Stops
- Commercial stops are also known as Non-Ecommerce or Ground Stops. They make up a portion of total stop volume for most ISPs. Despite being fewer in number, ground stops command higher pay than residential stops. This is due to the increased complexity and difficulty of a commercial stop.
- Residential stops are known as E-commerce or Home Delivery stops. They are the more common stop type and often make up the largest pay component in the ISP’s contract, though there are exceptions to this rule. Residential deliveries are generally considered to be easier compared to commercial deliveries and, consequently, pay less.
The Package Factor: Understanding Compensation
It is crucial to differentiate between stops and packages when understanding variable pay. ISP’s also get paid for each package at a stop. While the pay rate remains consistent for both commercial and residential packages, larger or heavier packages, warrant extra compensation.
Comparing Stop Pay Vs. Package Pay
It is worth noting that the variable pay for packages is inherently lower than the pay for stops. To illustrate the synergy between packages and stops, let us consider an example.
Suppose an ISP regularly delivers to a hardware store, constituting a commercial stop. Each day, the ISP delivers tools or parts to the store. At the same time, they also pick up any packages designated for delivery by the hardware store. The ISP will be compensated for the stop at the hardware store. They will also be paid for each package picked up or delivered during the visit. If one of the packages is large or heavy, the ISP will receive extra compensation.
Video Reference
Gain additional insight about the variable pay component of a FedEx contract by watching the short video, FedEx Contract – Variable Pay.
Looking Ahead: Fuel Component
In our next article, we will dive into the intricacies of the Fuel Stop Charge in the FedEx contract. A review of this component will help you, the ISP, to better understand the role fuel plays in generating revenue.
