- October 12, 2018
- Posted by: Chris Holzgraf
- Category: Buyers and Sellers Hub, Industry Insights
We will focus on the ISP model when discussing how a FedEx contractor is paid, considering most states have transitioned to this model and the remaining IC states will transition within the next year.
As a FedEx ISP owner, you are paid by FedEx in different “buckets”. The fees are broken out as follows: Annual Service Charge, Per Stop Charge, Surge Stop Charge, Per Stop Fuel Surcharge, Per Package Charge, Large Package Mix Charge, Period Safety Incentive, New Acct Startup Charge, Apparel Brand Promotion Charge, and Vehicle Brand Promotion Charge.
We will go into a few of these throughout this post, if you would like a more detailed explanation of how an ISP is paid, contact us for more information.
Fixed vs Variable Fees
Some of the rates paid by FedEx are variable such as per stop and per package fees. Other rates are fixed such as your Annual Service Charge and period safety/service incentives. The main point here is growth potential. Obviously you have more opportunity for higher revenues with variable rates. As FedEx grows, you grow. During the renegotiation period of your contract, this is something to keep in mind.
Period Safety Incentive
Paid monthly, FedEx will pay an ISP a Period Safety Incentive (PSI) which reflects the safety performance of the entity over a four-week period. PSI is calculated using the number of preventable accidents by ISP and the number of vehicles listed on Schedule B at the end of the safety period. There is a set monthly PSI stated on the ISP contract. The reduction of PSI is determined by dividing the PSI by the total number of vehicles listed on Schedule B of the ISP contract. That number is then multiplied by the number of preventable accidents during the four-week period.
Customer Service Incentive
The Customer Service Incentive (CSI) is designed to motivate contractors to provide excellent service to pick up and delivery customers. CSI is calculated using two main criteria: on-time pickups/customer complaint avoidance and inbound local service. Like the PSI, the CSI is paid per each four-week period.
The fee structure provided to ISP contractors allows for many revenue opportunities. To maximize earnings, excellent safety and service will be important factors. The ISP Agreement and weekly settlement statements will provide details about rates and how they are calculated. Your local terminal management and fellow contractors can also provide valuable insight.