UPS is cutting 12,000 jobs as CEO cites soft demand and high labor costs following historic contract deal

• UPS announced that it will cut 12,000 jobs in 2024.
• CEO Carol Tomé is seeking to offset high labor costs and low package demand.
• UPS drivers received a pay bump up to $170,000 in total compensation in 2023.

The job cuts in 2024 are continuing.

UPS is set to reduce its headcount by 12,000 jobs in 2024 following a historic pay agreement with its drivers.

UPS CEO Carol Tomé cited soft demand and the recent labor contract as reasons for missing analysts' expectations on a Tuesday earnings call. The subsequent moves are a part of the company's "fit to serve" initiative, and Tomé said it will save UPS $1 billion in 2024.

Three-quarters of the layoffs will take place in the first half of the year. About 14% of the shipping giant's 85,000 managers will be impacted by the reduction.

UPS also told analysts that its employees are expected to work in the office five days a week.

The company reported a revenue of $24.9 billion for the fourth quarter of 2023 — down 7.8% year-over-year from Q4 of 2022. Tomé told analysts that expected revenue for 2024 would be between $92 billion and $94.5 billion.

Tomé said: "2023 was a unique and difficult year and through it all we remained focused on controlling what we could control, stayed on strategy and strengthened our foundation for future growth."

In August, UPS ratified a historic contract with the Teamsters union that saw its drivers receive a total compensation package of $170,000.

Tomé hinted at how UPS might try to offset the costs of such a deal in a September interview with CNBC.

"Because we know what our labor costs are over the next five years, we can put together plans to mitigate that cost, plans to drive productivity inside of our business through automation, which, oh by the way, we retained the ability to do so," Tomé said during the interview.