FedEx Corp. has reduced the base salaries of hundreds of its inside sales staff, a cost-cutting measure that could impact the company’s ability to adequately service the small to midsize customer base that it has been aggressively courting.
FedEx (NYSE: FDX) has cut salaries by $12,600 for each inside sales worker, according to Adi Karamcheti, a professional services consultant at Shipware LLC who spent nearly 13 years in FedEx’s inside sales operation. A sales employee who had been making the minimum base of $50,000 a year will now be making $38,000 a year, according to the adjusted salary levels. Base salaries for FedEx’s inside sales staff generally top out at $90,000 a year.
In addition, FedEx will no longer require its inside sales applicants to hold a college degree. Instead, applicants will be required to have a high school diploma or a GED.
Quarterly bonuses will remain in effect for inside sales staffers who hit their sales quotas, Karamchati said. However, inside sales reps don’t land the big-ticket accounts needed to move the bonus needle, he said. Ironically, reps who stand the best chance of achieving bonuses are those who suffered through a poor prior year because the bonus structure is based on year-over-year performance, he said.
Inside sales are made from within the office environment. Sales representatives don’t meet clients face-to-face. Instead, they do business over the phone, e-mail or online. At FedEx, inside sales focuses on smaller accounts that typically don’t make it to the radar screens of field and corporate sales executives. Inside sales reps sell FedEx’s three transportation business units: FedEx Express, its air and international business; FedEx Ground, its U.S. ground-delivery unit; and FedEx Freight, its LTL unit.
Those accounts are taking on increased importance at FedEx and rival UPS Inc. (NYSE: UPS) because they lack the pricing leverage of higher-volume accounts and will often utilize a wider range of the carriers’ services.
Karamchati estimates that FedEx employs between 300 and 500 inside sales reps throughout the U.S. FedEx did not respond to a request for comment.
The move had been planned for months but kicked in earlier this month after the Memphis, Tennessee-based company reported fiscal 2022 third-quarter results that were weighed down by continued weakness at its FedEx Ground unit. The other two units delivered solid results in the quarter.
FedEx’s inside sales reps are caught between a rock and a hard place, according to Karamchati. They may grow the SMB accounts only to lose them to competing field salespeople if the business becomes large and lucrative. At the same time, inside sales reps may end up taking over once-larger accounts after they’ve fallen out of favor with field and corporate sales, he said.
The salary cuts are designed to reduce costs and not headcount, Karamchati said. Yet it may lead some reps to look at other opportunities, such as with UPS. The Atlanta-based giant is aware of the changing pay structures at FedEx, said an individual close to UPS who declined to be identified.
According to the jobsite CareerBliss, the average starting salary for U.S.-based inside sales reps is $40,000 per year.