Arriana McCLymore

NEW YORK (Reuters) – Higher labor costs may impact profits during the holiday pandemic. United Parcel Service (NYSE :), one of the largest global package delivery companies, is expected to release quarterly earnings Tuesday.

The company’s unionized delivery workers will have a significant impact on the margins of investors. Investors should be keeping an eye out for this. UPS employed nearly 100,000 employees for the Holiday Season and will keep some of these workers.

It stated that the average worker’s pay increased to $18/hour in certain areas, up from $15 in June.

UPS driver, sort centre worker and pack loader union pay and benefits are generally higher than those at other non-union shops such as Amazon.com (NASDAQ): UPS is the largest customer of UPS and an increasing delivery competitor.

Analysts expect a 8.7% rise in year-over-year revenues to $27.1 Billion for the fourth-quarter. These higher volumes, surcharges and a spike in COVID-19 patients due to the Omicron variant of Omicron led to more people shopping online. According to data from Refinitiv, they expect earnings per share at $3.10, an increase of %16.5 over a year ago.

From FedEx (NYSE:) to DHL to the United States Postal Service, delivery companies “are having to cough up money” to hire and keep workers, said Cathy Morrow Roberson, president of consultancy Logistics Trends & Insights.

According to her, “UPS had to raise the salaries in certain parts of the country to draw some workers,” she stated.

UPS executives stated that they didn’t feel so much stress after FedEx had a turnover problem and there was a shortage of Ground workers last year. This resulted not only in delays in deliveries, but also in inefficient work flow and additional costs of hundreds of millions.

UPS had lower labor costs due to its unionized workforce. FedEx has a smaller number of contractors who are less compensated in its Ground operations. These ground operations handle many electronic commerce deliveries.

Roberson stated that UPS has been able to attract workers with greater union protections than its rivals through COVID-19.

Investors still want to know more about automation and how it will increase efficiency, as well as reduce costs.

Since 2020, UPS has made more investments in automation technology to improve its fulfillment processes. Helane Becker, Cowen analyst, stated that UPS beat FedEx and USPS by nearly 97% in on-time delivery during holiday season. This was due to ample staffing, mild temperatures, and the spread of “peak” holidays over more days.

Analysts now focus on how the impact of these technologies, wage rises, and price hikes is on profit margins.

Senior analyst with Third Bridge Group, Donnelly said that “I believe we will see leaders put more emphasis on automation capabilities within sorting plants.” “It will over time insulate them from near-term labour dynamics.