Royal Mail boosts salaries and bonus as the crisis fades

Royal Mail, the giant postal company, has reached a pay deal with its employees signaling an end of an acrimonious fight that has pushed it to a loss-making territory. The company, which is owned by International Distributions Services (LON: IDS), agreed to give its employees a 10% salary increase.

According to the Financial Times, the company will also give its workers a one-off bonus of 500 pounds. With over 100k employees, the bonus will likely cost the company over 5 million pounds. 

The 10% pay increase is broken down into pieces. There is the 2% pay increase that the applied from April last year. There is also a 6% that will apply from this month and 2% that will start in April 2024.

Additionally, the company’s workers will receive a one-off payment of 20% of its operating profit. This payment will only happen if the company turns a profit this year.

The agreement is bitter-sweet for Royal Mail, a company that has lost momentum recently as demand for both letters and mail plunged. On the negative side, it means that the loss-making company will now need to pay more wages.

At the same time, if unions agree to the deal, it means that there will be no strikes, which has led to these huge losses. 

As I wrote in this article, it is highly unlikely that a deal will save Royal Mail since the company faces structural issues. It has a bloated workforce and is limited by government regulations. For example, it is forced to deliver letters to unprofitable places Monday through Saturday.

IDS share price has jumped to the highest point since November 2022.