The Need-to-Know Updates To Your FedEx Ground ISP Contracts

Photo by Fahrul Azmi

We updated this post in July 2019 to reflect the ever-evolving financial landscape for FedEx Ground contractors. Continue to read our weekly Insights to get the latest news and industry details.

Learn about the charges you will negotiate in your ISP contract

As a new FedEx Ground contractor, you may find contract negotiations overwhelming. There are a lot of moving pieces to the puzzle! 

Following is a quick overview of the charges you will negotiate as part of your Independent Service Provider (ISP) contract. 

Contract Charges

When we talk about charges here we are talking about charges from you, the ISP, to FedEx Ground.

You are charging FedEx Ground for your services. You will negotiate each of the following charges with FedEx Ground. All of these charges combined account for money flowing into your business.

It’s critical you understand how and when those charges occur. And how you can increase your cash flow!

Service Charge: This is a fixed amount of money that is paid every week. Think of this like your base pay. 

Stop Charge: This is a variable component that is the base amount paid per stop that each driver makes. 

Density Stop Charge: This is a separate line item on your statement that reflects payment for SmartPost stops.

Surge Stop Charge: Every contractor has a daily stop threshold, or a contractual maximum number of stops that FedEx Ground says that you (their ISP) agree to make per day. Any stops your team makes above your daily stop threshold earn your an extra charge, on top of the regular stop charge. Contractors negotiate the surge stop charge with their agreement.

Per Stop Fuel Surcharge: FedEx Ground helps subsidize fuel costs. This variable charge is paid per stop and fluctuates with current fuel prices. 

Package Charge: This is a charge that is paid per package delivered; you negotiate what that charge will be per package as part of your contract. 

Large Package Surcharge: FedEx Ground specializes in large packages (sometimes these are known as incompatible packages). If your operation delivers a package that falls into the large package category, determined based on weight and dimensions, a surcharge applies.

New Account Startup Charge: This is a fixed charge for every new account opened. New accounts may be businesses along your route who want to establish pickup/delivery services. 

Apparel Brand Promo Charge: ISP contractors receive a flat rate amount per pay cycle to encourage their team to wear appropriate FedEx Ground brand apparel. 

Vehicle Brand Charge: ISP contractors receive a flat rate amount per pay cycle for every vehicle they operate that has a FedEx Ground logo on it.

Period Safety Incentive (PSI) & Customer Service Incentive (CSI): While these charges may still exist in some historical contracts, FedEx Ground is in the process of phasing these “bonuses” out of ISP contracts. The phase out will complete by June 2020.

Future Contract Charges

We expect to see E-Commerce Stop Charges and E-Commerce Package Charges replace Density Stop Charge in the next six to twelve months.

Our expectation is that contractors will negotiate their rates for these new E-Commerce charges as part of their next ISP contract negotiation.

Need help understanding your contract?

We have extensive experience navigating contract negotiations. We can help you understand the contract terms and the negotiation process overall. 

Contact us for consulting or more information about our services. 

If you are interested in buying a new or additional FedEx Ground route, check out our FedEx Ground routes for sale listing page for operations currently on the market.