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Amazon to sweeten payment pot for its delivery contractors

Amazon plans to spend $450 million for rate increases for contractors

Amazon to boost driver contractors' rates (Photo: Jim Allen/FreightWaves) Inc. said Tuesday that it will spend $450 million over the next 12 months to fund rate increases to its roughly 3,500 worldwide parcel-delivery service providers, as well as to help providers defray the costs of matching their employees’ contributions to a newly created 401(k) retirement program.

In addition, Seattle-based Amazon (NASDAQ: AMZN) said it would spend up to $5,250 per year on a new program, called Next Mile, that will offer drivers who are employed by its service providers access to more than 1,700 academic programs. The program will launch in January.

Amazon said that the rate increases to providers will be used to offer “competitive pay” to the providers’ driver workforce. It did not disclose how much of the $450 million expenditure would be allocated to the effort.

The company said the cost of matching the employee contributions, as well as reimbursing all of the program’s administrative costs, will total $60 million in its first year.

Over the past two years, Amazon has spent more than $800 million in rate increases and bonuses for its contractors, according to a company spokesman.

Amazon’s delivery service provider initiative, which launched in 2018, is patterned somewhat after the nonunion model established decades ago by FedEx Ground, the ground-delivery unit of FedEx Corp. (NYSE: FDX). Both companies use delivery contractors who, in turn, hire and manage the schedules of thousands of drivers.

Under both models, contractors work under contracts with specific performance requirements. Contractors can be terminated if they are deemed not to be in compliance with those requirements.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.