How to Negotiate the Strongest Contract for Your FedEx Business

 Photo by Fahrul Azmi

Photo by Fahrul Azmi

Learn about the charges you will negotiate in your ISP contract

As a new FedEx 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.

You are charging FedEx for your services. You will negotiate each of the following ten charges with FedEx. 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. 

Surge Stop Charge: Every contractor has a daily stop threshold, or a contractual maximum number of stops that FedEx 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 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. 

Period Safety Incentive (PSI): This is a fixed incentive or bonus paid every four weeks. Contractors negotiate the payout with their agreement. Contractors receive 100% of the incentive it there were no safety incidents during the payout time period. If the contractor’s team had reported safety incidents (for example, truck accidents or personnel injuries), the incentive is subject to deductions. Each incident results in a tiered deduction of a percentage of the incentive.

Customer Service Incentive (CSI): This is a fixed incentive or bonus paid every four weeks. Contractors negotiate the payout with their agreement. Contractors receive 100% of the incentive it there were no service complaints or violations during the payout time period. Similar to the PSI, the incentive is subject to deductions if contractors receive customer service complaints. Each incident also results in a tiered deduction of a percentage of the incentive.

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 brand apparel. 

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

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 route, check out our FedEx routes for sale listing page for operations currently on the market.

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