REFLECTIONS & INSIGHT

LPO’s UNDERPAID BY OVER $50 Million Per Annum!

ASHCROFT 2013

REFLECTIONS & INSIGHT -  NEWSLETTER FOR LPOs

KEY POINTS

1. Inflation figures from January 1993 until December 2012, as per the National CPI, show inflation running at 69% over the 20 years.

2. Payments to Licensees for private boxes, delivery payments and outward mail processing payments have been pegged to the basic postage rate (the BPR). The BPR has increased from 45 cents in 1993, to 60 cents including GST in 2012, but a comparable rate of 54.54 cents (excluding GST) an increase over this period of only 33.34%, less than half the inflation rate! If the basic stamp had kept pace with inflation, it would now be 76.05 cents comparable rate (excluding GST) or 83.66 cents with GST. On the other side, Australia Post parcel and prepaid satchels have increased in price between 100 to 207% over the same period, with four price rises alone for some of these products in the last 12 months or so. Overseas parcels have skyrocketed in some cases, increasing well over 200% since 1993. However, as pre paid Satchels and parcel rates through retail outlets have increased significantly, on- line products and bulk parcel contracts have been priced much more competitively, moving a lot of postage sales away from retail outlets (like LPOs) to on-line and larger parcel contracts direct with AP, to the significant disadvantage of Licensees.

3. National Bill payment fees have increased from 60 cents each transaction in 1993, to 83 cents each (excluding GST) in December 2012, an increase of 38%.

4. Payment for card banking in 1993 was 83 cents per transaction, and 20 years later, it is 99.7 cents net GST, an increase of only 20% over the 20 years.

5. Retail customer payments to Australia Post for annual private box rentals, back in 1993, were $37 pa for a small box, $65 pa for a medium box and $100 pa for large boxes. Today, December 2012, the rate charged by AP for a small PO box (excluding GST) is $89.09 an increase of 140.8%. The rate for a medium box is $129.09 (ex GST) an increase of 98.6%, and the rate for a large box is $207.27 (ex GST) an increase of 107.27%. Based on the average private box configuration of 100 small, 20 medium and five large, the average Australia Post increase on private box rentals, to the retail public, over the twenty years is 132.71%. Compare these rises with what has been paid to licensees. Back in 1993 licensees were paid an annual fee of $50 pa for small boxes, $13 more than the retail customer paid AP, $73 pa for medium boxes, $8 more than the customer paid AP and $113 pa for large boxes, again being $13 more that the customer paid AP. December 2012 has licensees being paid 33.34% more for private boxes after 20 years, at $66.67 pa for small PO boxes (ex GST), $97.34 (ex GST) for medium boxes and $150.67 (ex GST) for large boxes. These payments are now well below what AP receives from the retail customers.

6. Street addressed carded articles payment, as per the agreement back in 1993, entitled licensees to be paid an annual fee of $260, for up to 25 articles per week, with the average across most LPOs being around 10 articles per week. Delivery of more than 25 articles per week was at a negotiated rate per article, based on section 3.2.3 of the LPO manual. In 1993 there was no scanning in or out, with 80% of street addressed carded articles being ordinary items and about 20% being signature items, with most items and parcels being quite small. Today, 20 years on, street addressed carded articles have exploded! Along with the number and the size (they are big), 90% of these carded articles, if not more, are now signature items. Licensees have to scan in and out, and or record and capture customer and article data, with the fee paid today being $381.82 pa, a rise of just 33.4% since 1993 (excluding GST) based on up to 25 per week. AP is refusing to recognise the extra work involved and is refusing to negotiate a rate per article in excess of their nominated rate of 29.3 cents per article (inclusive of GST). This rate of 29.3c is considered, in most cases, to be $2 per article less than the costs to licensee to provide the service.

7. Wages for counter assistants and general mail staff in LPOs and corporate shops alike have increased by just under 100% between 1993 and December 2012. While senior executive salary packages of Corporate Australia Post have increased between 120% to up to 250%. As the CEO of Australia Post, Ahmed Farour’s total income package increased from $2.2 million in 2011, to just over $2.77 million in 2012, an increase of 25% in one year alone. A component of this amount was an $874,000 cash incentive, and if you relate this amount to the increase in Australia Posts net return, it amounts to 2.13% of the increased profit. Christine Corbett’s salary package was reported in 2011 as $1.3 million, we do not know what it was in 2012 as AP no longer report it, but we do know that a total of 6 of AP’s top executives now earn over $1,000,000 per year.

8. Mail Service Payment is paid to licensees who are required by AP to perform mail work outside normal working hours, or where tight service schedules require additional staff within normal hours. This payment was pegged at the equivalent to time and a half at the top increment for a Postal Delivery office in 1993. The rate was $11.20 per hour, and today it is $22.38 per hour. The rate paid to Licensees in 1993 was $16.80 per hour, while the rate today is $33.58 cents per hour (ex GST), just under 100% increase on 1993. Little wonder that in recent times Australia Post has moved back delivery times of mail to some Licensees in an apparent attempt to save this expense. This move of late delivery of mail has caused a significant increase of costs to Licensees in order to meet delivery standards. Licensees are having to employ more staff for periods, in some cases only 1 or 1.5 hours, to meet delivery times, noting that casual staff want to be employed for at least 3 hours. AP saves a little but at the same time imposes much higher costs on the Licensee in order to meet AP imposed delivery standards.

9. Licensees lead the way with passport photos from the beginning in 1993, and it took AP just over a decade to catch up and copy. AP introduced their passport camera deal in 2004, leasing a camera to Licensees in return for a monthly fee, then $10, and a royalty paid to Australia Post of just under 40% of the photo charge to the customer, with the Licensee picking up the film costs. The deal stinks! Licensees can use their own camera and pick up the full fee, with the other major benefit being that they can reduce their price per photo to match competition in this area from the likes of Chemists and Photo shops. AP took the idea and then sought to exploit a profit from Licensees.

10. Reflex copy paper - Australia Post buys this on contract, I am reliably informed, for $3.86 per ream, on sells it to Licensees at a large profit, and leaves Licensees a small margin when AP promotes the special retail price of $4.99. I have just been informed AP have negotiated a significantly lower bulk purchase price now than the $3.86 per ream

11. Rural LPOs have become particularly disadvantaged in recent years if they have local mail runs originating from their office. They do not even get a street addressed carded article fee, instead the mail management fee paid to Licensees for each delivery point includes payment for this service! Take a minute to realise that back in 1993, when the rate was struck, there were very few carded articles. These were the days before Ebay etc. Now rural offices are swamped with more and more people in the bush buying on line. One licensee, in a small country town in the Central West, reports that one local grazier has discovered he could Christmas shop on line, with the result being 96 small to large parcels arriving within three days, just for him alone, with the Licensee advising me that his office is not a free freight depot. City licensees ought to also understand that a lot of these rural offices have up to, and in some cases, over 2000 delivery points. Private delivery points over 1000 are paid at the rate of $11.37 each pa (inclusive of GST) and bear in mind also that there are some rural Licensees not doing the primary sort (AP pays the contractor or the PDO officer does it) and the licensee only get 20% of this amount, being $2.27 per year, which is an absolute insult for the work required. The Licensee in such an office would not want the grazier who got 96 items at Christmas in three days.

12. On a similar note Licensees should look at carded items to their private boxes as these are covered by the mail management fee as well. Again back in1993, there were very few carded articles to PO boxes. Today that little old lady in say PO Box 25, can get 5 articles per week alone off Ebay, with Licensees now being well and truly short changed here as well.

Note: since 1993 the work has increased dramatically, the payment by only 33.34% with inflation of 69% and wages having doubled.

13. In more recent years slippery AP has reduced the rate paid on bulk mail rates down 2 cents from 60 cents to 58 cents, in order to stop licensees putting stamps on letters. Most customers preferred stamps over bulk because it was more personal, as long as it was at the same rate. However with a discount, the customer will tend to opt for bulk leaving the licensee with a 5.5% profit and 0.65% ompf, instead of 13.2% profit and 1.65% ompf.

14. Australia Post pays most of its senior staff a salary plus an incentive bonus, in the most part, based on keeping costs down and under budget. With tight budgets to meet, most of these staff have a significant financial incentive to keep the lid on costs as well as reviewing current payments to LPO’s, like counter delivery points and mail service payments. It is easy to win money back from licensees for AP if you put back PO box mail delivery times in order to reduce or cut out this payment, or perhaps redefine how counter delivery points are calculated, that one usually insures a decreased number with savings to AP. Or when asked for an increased payment for street addressed carded articles, the answer is ‘let us do a review’ (the numbers but not the payment). The licensee may ask ‘why are you not negotiating a rate’? The answer from AP is that is being done with POAAL (they have been at that for years) or the agreement does not allow us (this is not true). Result is, save money, reduce costs, bonus to the AP manager. Conclusion here is pay people to be bastards and that is what you get, and the incentive not to be fair goes all the way to the top. Personal financial incentives paid by AP to management helps promote growth of the business, but in many cases it promotes theft of business from one part of AP by the other.

WE SHOULD ALL BE GETTING THE PICTURE NOW.

Is it not the old Midnight Oil song that says the ‘rich get richer and the poor get the picture!

I suppose we should write to Peter Garret and get his take on this.

CONCLUSION LICENSEES ARE AND HAVE BEEN COLLECTIVELY DUDED !

In summary inflation has increased over 20 years by 69%, wages by just on 100% with rent and other costs increasing beyond inflation, and do not forget about electricity. AP demands you do much more, for much less, because it is in the businesses interest (they call this productivity, but most of you see it as exploitation). Meanwhile AP has not sat on its hands, over the last 20 years, with their PO box charges increasing by 132.71%, some postage up to 207%, and some senior salary packages increased up to 250%. Over the last 20 years Licensees have received increases as low as 20%, but mostly 33.34%, and only one payment, the Mail Service Payment, has gone up 99%. But hey, AP is winding that back by delivering your mail later in order to avoid this payment to you.

Not very good comparative terms of trade after 20 years.

SO WHAT SHAPE IS AP IN NOW?

Pretty good they just made a 281 million dollar profit after tax, and announced that they are spending $2,000,000,000 in the next four years, with not much to be spent on you, or on assets that will benefit licensees directly.

Retail in general is facing a difficult sales environment and AP’s 2012 net profit is not considered fantastic compared with the past. The last three years has seen AP cut nearly half of its administration staff, and then hire expensive consultants. AP is losing money in handling the flood of incoming overseas originating parcels, as a result of the high Australian dollar with virtually no GST included, also driving offshore demand. All retailers, including AP and Licensees, are in fact, suffering from the high Australian dollar through postage sales with regards to parcels originating from overseas. The sale of product originates overseas, when in the past with a lower Aussie dollar, the product was sold here and AP got the postage sales as well as Licensees jointly. These facts aside licensees are, and have been treated very unfairly by Australia Post. Parcel and express post rates have gone up on four occasions in the last year, with the last rise on express post seeing some bulk discounts reduced further, eroding this product’s appeal offered from LPOs. AP on the other hand has gone all out on- line, with free delivery of stamps, express post and satchel purchases, not to mention ebay satchels, which have taken a significant amount of sales of parcel, parcel satchels and express post away from retail and Licensees.

Bulk parcel customers like Grays on Line, Deals Direct, OZ SALE etc on the other hand, get deals that defy belief with rates on offer showing only a small profit on AP’s cost of providing the service. The reason they get such great direct deals is that these customers have massive buying clout and AP does not want to let in a competitor like Toll or TNT etc. So in fact, it can be assumed that the high rates paid by retail customers for postage products in your LPO, can be seen as subsidising these big contract customers of Australia Post, but at the same time making the postage products that Licensees sell less competitive and therefore pushing medium and larger users to turn to AP direct for a better deal. Stinks you might think. Overall, AP is making very good money out of parcels, and the growth of parcels, but AP’s higher profits on your postage counter sales is helping keeping its bulk parcel rates low.

Also, if not more so, the gross underpayment of licensees for the carded article services is a major subsidy to Australia Post, enabling AP to continue to offer very low rates to big users, with especially country LPO’s being the most underpaid in this area. 2809 LPOs form the bulk of AP’s retail network, with AP paying them next to nothing, up to 29.3 cents per carded article, and Australia Post is profiting by up to $30,000,000 pa plus, through its conscious decision to continue this underpayment. AP’s cost of carded article services outside the LPO network, through corporate Post Offices, is estimated at about $2.20 or more each article, and the parcel locker solution is a very expensive option, with very serious security risks, and will never takeover from over the counter services in the near or foreseeable future, especially if licensee’s are still being paid 29.3 cents per street addressed carded article or just about nothing as paid in the mail management fee.

HOW DO WE BRING FAIRNESS BACK INTO THE EQUATION?

Australia Post’s past and present policy has been to cut costs, improve efficiency and say ‘no’ to all requests for increased fees from licensees! It has increased its margins in areas like private boxes and limited licensee’s returns by keeping this area pegged to the base rate stamp increase. At the same time AP has increased the work demanded for handling mail items through scanning etc and are fully aware that parcel numbers have exploded the growth of carded articles and relied on the old mail management fee to cover a vastly increased work load 20 years on. The mail management fee was never ever meant, or expected, to compensate licensees to handle the work level AP requires you to do today in this area. Australia Post is making large windfall profits while it delays reviewing payments in this area alone, and in the mean time you are losing money in providing the service, if you look at all your costs and pay yourself a modest wage.

The main principal of the LPO Agreement is that your payment is incentive based and the cornerstone is the commitment by both parties to mutual benefit and this does not mean you loose and AP profits.

AP’s Community Service Obligations are AP’s, not Licensee’s, and you do not have to pay for or subsidise them. AP has made your loss their profit and it is not reasonable.

It is an undeniable fact that a staving horse cannot continue to pull the sulky, as my father use to advise me, ‘feed it, care for it and treat it well and that horse will give you loyal and dedicated service, but if you starve it, beat it, disrespect it, it can turn on you or die, either way you will never profit as much by such treatment and in the end such treatment will bring you undone’ and AP needs to learn this lesson. You cannot ride a dead horse! AP cannot continue to ride on licensees collective backs for too long without feeding you. If it does not, you will collapse, and therefore AP as well. Remember mutual benefit, that is what it is all about. Give licensees incentive and they will give back to AP much, much more in profits.

WHAT NEEDS TO HAPPEN.

Make no mistake Australia Post management knows full well that Licensees are grossly underpaid for carded articles, and most payments generally. They fully understand that in providing the carded article services you are losing money if you pay yourself a fair wage, and that by not revising payment in this area, and being unfair, they know full well they are exploiting this situation and AP’s current position of power. If AP was fair dinkum, and honoured its obligation under clause 11d of the LPO Agreement, they would at least pay an increased interim rate for these services up until the time they completed negotiations with POAAL, but they choose not to and reap a continuing large windfall profit.

1. The LPO Agreement in many areas is outdated as well as the LPO Payment Scheme they both need total revision now! Such revision cannot be undertaken where Licensees have no bargaining power as is the case now. The LPO Agreement needs to be updated and revised along with the Payment Scheme.

2. Licensees can only receive just payment if negotiations are conducted from a position of licensee strength, not weakness, as is the position now. Licensees do not need mediation behind closed doors, they need arbitration in an open forum, with the independent arbitrator or panel ruling on what is fair and equitable, as at the moment AP dictates rather than negotiates.

3. The current Franchise Code of Conduct Legislation has no teeth or penalties for breaches, and franchisors have exploited this situation by continuing to breach the code in dealing with their franchisees, knowing there is no penalty for their breach. This Legislation needs to be strengthened and proper penalties put in place that can protect all franchisees, including LPO Licensees from breaches and exploitation.

4. All Licensees of Australia Post, POAAL and business agents like myself, are ultimately responsible for letting Australia Post get away with the current state of reduced incentive and underpayments within the LPO Payment Scheme, and AP’s recent reinterpretation of licensees eligibility for payment under that payment scheme. By saying nothing, and doing nothing, we are all sending a clear message that we are happy with what we are being paid and how we are being treated. Time is well and truly on AP’s side, as every day of delay puts most licensees further behind financially, with the savings going only one way. I have set out this year to wake all licensees up to the fact that the LPO Agreement needs revision, and what you are paid, and how you are paid, needs revision in order to provide the incentive both financial and personally in order to drive you and Australia Post’s business forward for another 20 years. To do this we all collectively need to raise the issues that concern us all, write in protest to The Minister Senator Stephen Conroy, the Shadow Minister Malcolm Turnbull, Senator Eric Abetz (a good friend and champion of the LPO cause), POAAL, Australia Post, your local Federal Member of Parliament and tell them what you think, and what you want done. I think I can speak for the vast majority of licensees in that licensees want to be treated fairly and honestly by Australia Post, they don’t want to be exploited, they will always work hard based on incentive, however all Licensees need to be respected for what Licensees do for Australia Post, and the community at large. If you do not feed the horse it will die!

Licensees need to demand reform and fair treatment and fair payment.

AP calls their Licensed Post Office administration and management staff Retail Partnership managers and it is about time they put meaning back into the word partnership. I think we are at a turning point, ahead of us is more of the same on the one hand, or a new change and opportunity. If you want a fair go, if you want fair payment and incentive and if you want a future please speak up and write as I suggest. If you don’t, expect more of the same and look in the mirror as to who is responsible for your circumstance.

FAIR & REASONABLE ?

Implied but not written in the LPO Agreement is the principal of being Fair and being Reasonable. This implied commitment of both parties can be drawn on the basis of the mutual benefit clauses. Throughout 2012 when asked, AP refuses to confirm when negotiating in disputes and requests for increased payment with Licensees, that AP will act with the intention of being both fair and reasonable. When AP refuses to acknowledge that their intention in trying to resolve an issue or agree to a payment, is to be Fair and Reasonable we can only assume that AP’s intention is to keep the option of being Unfair and Unreasonable and we have seen AP revert to being Unfair and Unreasonable more and more. AP has demonstrated in recent times that it is committed to being, and has been, Unfair and Unreasonable in disputes with Licensees, negotiations over payment and procedures with POAAL, and even with regards to AP’s own staff as demonstrated by the reduction of the $500 Christmas staff bonus last year, down to $100 this year, after an increase in net profit of $41 million dollars in 2012. A commitment to the principal of being Fair and Reasonable is essential in any revision of the LPO Agreement as this principal creates an obligation on both parties (outside the legal technicalities that have been used by AP so often to dud Licensees) to be fair and reasonable. The test of what is Fair and Reasonable is what the majority of an independent review would consider in the circumstances to be. Example: how many people would consider fair, an increase in AP’s PO Box rentals of 132.71% over 20 years compared to the increase of only 33.34% to Licensees over the same period, or the rate paid by AP for street addressed carded articles of 29.3 cents, an amount less than 18% of the cost of providing the service, without a Licensee receiving a profit or net benefit.

WHY HAS AP BEEN UNFAIR & UNREASONABLE?

Two main reasons for its unfairness

1. Australia Post has profited by being Unfair so the main answer is money! AP gives its senior managers and staff bonuses for increasing profits and making savings, so there is a direct financial incentive to these people to be unfair and unreasonable, especially when it comes to money paid to Licensees and the work expected by AP to be performed by Licensees.

2. The second reason that AP appears to be Unfair and Unreasonable is the fact that it can and it can get away with it. AP has power in its own wealth in that you may take AP to court but AP can outspend you, and it can delay matters legally and force you to incur costs until you run out of money and are forced to take what you can get. It is the old I have no choice result, you may be legally and morally right but you cannot go on.

WHAT CAN LICENSEES DO?

Your fate is really in your own hands.  Whenever you enter into any correspondence with AP, you should request that AP confirm to you in writing that AP and the Manager you are dealing with, will commit to the principle of being both Fair and Reasonable in dealing with the matter. This is a great starting point, you need to make this commitment to AP, and it is only Fair & Reasonable that AP reciprocates. If AP will not make this commitment then AP’s intention is clear. You can write to POAAL, and your local Federal Member, the Minister, and the Shadow Minister, and request a change to the LPO Agreement in order to enshrine this principal. The second thing you can do is also demand that the revision of the LPO Agreement provides for independent arbitration, and remember to request the upgrade of the Franchise Code of Conduct which should provide penalties for breaches of the code by Franchisors like Australia Post. This would be a good start.

CHRISTMAS CHEER & THANK YOU FROM AP.

Carrying on from my Fair and Reasonable point, Licensees should have all received a Thank You message from AP’s National Retail chief, which is more than justified in line with AP’s increased net profit to $281 million, and the sacrifices and hard work put in by Licensees and corporate staff alike. But take a minute and reflect on how AP expresses its sincere thanks. Licensees got a nice DVD with the thank you message and little else. Licensees used to get a cash bonus at Christmas that then became a gift, being left over picnic sets, then in more recent years - nothing. But spare a thought for corporate Australia Post staff, both full time and part time, over 33,000 of them. Last year they received a welcomed Christmas bonus of $500, not a lot but very handy at Christmas time for workers that really do not earn a lot of money. This money put presents under the tree and turkey on the table, or perhaps went to that new push bike for the eldest child or paid part of the costs of a modest holiday. This year AP’s workers got a Christmas bonus haircut in return for their loyal service and increased productivity with the reduction of their bonus from $500 to $100, with the sting being they had to spend this within AP’s shops. You might point out to your official staff colleagues that the bosses of AP in cutting the Christmas bonus by $400, may have saved AP $13,388,800 this current financial year alone, based on the 2011 full and part time staff numbers of AP in 2011 (the last I could find) of 33,472 X $400. That is a big saving for this Fin Year and this amount represents just on 32.65% of last year’s increased AP profit of $41 million. Good job hey, but AP are dealing here with people, their incentive to work and serve and their staffs well being at Christmas and that of their family. Now look at how AP treats its most senior executives with AP’s CEO increasing his remuneration package from $2.22 million in 2011 to $2.77 million in 2012, an increase in this year alone of 25%. Your CEO in the 2012 financial year received what is reported as a cash incentive of $874,000 included in this amount of $2.77 million. We can only assume by this that the CEO will profit significantly from making this $13 million plus saving in Christmas bonuses to staff, and we can only speculate on what the cash incentive based on this saving alone this financial year will be, $50,000, $200,000 or more? Now the CEO is not the only fat cat in the cubby house, as it has been reported that there is a total of 6 AP senior executives earning over $1 million dollars per year, with the AP National head of retail, Christine Corbett, being reported as earning $1.3 million dollars in 2011. With changed reporting provisions in the 2012 AP financials obscuring what amount was paid in the 2012 year. Do not forget that the top bosses at AP have a B card benefit on top of the salaries as a nice corporate credit card allowance for (expenses!!!!!) It’s always a big help. AP staff are disappointed and senior executive should have a good look at themselves and their reasons for this bonus reduction. Do not forget the 2012 AP Olympic trip for senior executives, and their valued customers and friends, just google it and read the reports.

This newsletter was prepared and distributed to all NSW Licensees by

Terry Ashcroft

of

Harold A Ashcroft

Licensed Business & Real Estate Agent

The newsletter has been posted on this website with his permission for the benefit of Licensees across Australia.