How Are FedEx Contractors Paid?

July 20, 2020

Category: Best Practices

Contractors are a vital part of the FedEx Ground delivery system.

These independent business owners are responsible for transporting packages from distribution hubs and local pickup and delivery stations to residential and commercial customers throughout the United States and Canada, and together they transport more than 9 million packages daily.

Becoming a FedEx contractor allows you to run your own business with the backing of a large company. It offers the freedom and flexibility of being your own boss, plus it has tremendous revenue and growth potential for individuals willing to put in the time and effort.

Before we take a look at how and when contractors are paid, let’s first review how being a FedEx contractor is different from being a franchise owner.

Contractors own routes, not franchises. (There’s a difference.)

Instead of offering franchises like some companies, FedEx utilizes independent contractors to service those routes.

Why is this important?

For starters, it requires far less risk on the part of the contractor, since FedEx routes are already well established. When you purchase a route, you are purchasing a pre-existing community of residents and businesses who reside along that route and rely on your delivery service. Plus, as the population of an area grows over time, routes grow bigger and new routes crop up to be serviced.

FedEx independent contractors also enjoy a lower overhead than franchisees, as their primary costs come from purchasing and maintaining a vehicle fleet and paying their employees. They don’t have to worry about the costs of real estate, renovation, construction, product, machinery, or even marketing.

Finally, when you run your own FedEx route, you are essentially operating as a small business and can make business decisions as you see fit. This results in more autonomy and a greater sense of control over the profitability of your business.

And speaking of profitability…

How does FedEx pay its contractors and how is that payment calculated?

The short answer:

Contractors are paid weekly via direct deposit, and compensation is calculated based on the activity from the prior week.

The longer answer:

All FedEx contractors are paid as 1099 independent contractors, according to the terms stipulated in their FedEx contract. That means contractors are not employees of the FedEx corporation, but rather owners of a corporation that services a contract with FedEx. In contrast, a FedEx contractor’s delivery drivers will typically be paid as W-2 employees of their corporation.

When calculating contractor payment, FedEx takes into account numerous different variables. These include the number of stops made and the number of packages picked-up and delivered. In addition to their weekly compensation, contractors receive bonuses for things such as customer service and safety, among other items.

From the weekly revenues paid by FedEx, contractors are then required to pay their business expenses, including employee salaries, fuel, insurance, etc.

Okay, but how much can I really make as a FedEx contractor?

Great question! Really that answer is entirely up to you and your commitment to the business. However, for those who want a closer look at the nuts and bolts, we did a quick breakdown here of the expenses involved and the revenue potential of owning your own FedEx route.