FedEx commits US$3.2 billion to raise pay, expand hubs after U.S. tax overhaul

Company will also contribute US$1.5 billion to employee pension plan
By Eric M. Johnson
||Last Updated: 01/29/2018
A FedEx Express Boeing 737-45D is seen at the Chopin International Airport in Warsaw, Poland Jan. 8. REUTERS/Kacper Pempel

(Reuters) - Package delivery company FedEx Corp said on Friday it will spend more than $3.2 billion on wage increases, bonuses, pension funding and capital investment, taking advantage of the U.S. tax overhaul signed into law in December.

The Memphis, Tenn.-based company said it would invest $1.5 billion to significantly expand its hub in Indianapolis over the next seven years and modernize and enlarge its Memphis SuperHub.

The new tax code allows companies to immediately write off the full value of capital costs, which helps make projects more financially attractive, but that benefit starts to phase out in 2023. It also permanently lowers the U.S. corporate rate to 21 per cent from 35 per cent.

The announcement makes FedEx the latest U.S. company to promise higher pay for workers, citing the tax cuts.

FedEx, which said the recent tax changes would likely boost economic growth and investment in the United States, also said it would contribute $1.5 billion to an employee pension plan.

The company plans more than $200 million in higher compensation, about two-thirds of which will go to hourly employees with the remainder funding increases in performance-based incentive plans for salaried workers.

FedEx shares were down 0.3 per cent in morning trading. 

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