Royal Mail reveals staff bonus of up to £500 as half-year losses mount

More than 100,000 frontline workers at Royal Mail are in line for a bonus worth up to £500 each if they hit targets over Christmas as the group presses ahead with turnaround efforts in the face of mounting losses.

Royal Mail said the one-off payment will be made to staff at the start of the new year, based on whether they hit weekly quality targets over the peak season.

The move – which will cost Royal Mail around £61 million – comes as the new boss of owner International Distributions Services (IDS) is pushing on with an overhaul to address poor service performance and widening losses.

Earlier this week, Royal Mail was fined £5.6 million by regulator Ofcom for a “significant” failure to meet its postal delivery targets on first and second class mail in 2022-23.

IDS revealed on Thursday that Royal Mail tumbled deeper into the red with underlying losses of £319 million for the six months to September 24, against losses of £219 million a year earlier.

The wider group cut its full-year earnings guidance after the Royal Mail losses pushed it deeper into the red with overall operating losses of £243 million against losses of £157 million a year earlier.

IDS said it is now expecting to roughly break even over the full year to March, having said in July that it would make an underlying operating profit, sending shares down 3% in Thursday morning trading.

Recently hired chief executive Martin Seidenberg said the group is focusing on boosting quality through a “stable” workforce to help turn around Royal Mail’s fortunes as it seeks to put crippling strike action and performance issues behind it.

He said: “My top priority now is improving quality. From experience, I know that quality is key for customer satisfaction and sustainable growth, so we are pulling out all the stops to deliver Christmas for our customers.

“This includes recruiting 16,000 seasonal workers, opening five temporary sorting centres, and launching an incentive scheme for operational employees worth up to £500 each for hitting local and national quality targets.”

The group has hired 7,000 more permanent employees as it shifts away from agency workers and has also set up a quality control centre as part of its revamp.

But Mr Seidenberg said it is “too early” to say if these efforts will help see it meet first and second class targets in 2023-24.

He called for regulator Ofcom and the Government to “move ahead quickly” with the review of the Universal Service obligation, which requires Royal Mail to deliver six days a week.

He said: “It’s simply not sustainable to maintain a network built for 20 billion letters when we’re now only delivering seven billion.

“The UK is not immune to the trends that we see across the world.

“Many other comparable countries have already reformed their Universal Service, and the UK is getting left behind.

“We welcome the fact that Ofcom will be reviewing options for the Universal Service, but the need for reform is urgent.”