Industrial relations in the postal sector — UK
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This is the UK contribution to the comparative analytical report on Industrial relations in the postal sector
The study
This study aims to gather information on industrial relations in the postal sector in the EU, acceding and candidate countries and Norway, paying particular attention to the impact of liberalisation and restructuring processes on employment, terms and conditions and the relationships between the social partners over the past decade.
Currently the postal sector is characterised by a varied presence of both public and private operators, providing a broad range of services and products. After a brief overview of the main features of the sector in its broadest sense, the study will focus on the developments regarding the mail services sector. In particular it will gather:
- information on the present structure of the mail service sector;
- data on industrial relations in the mail service sector.
1. The postal sector in general: basic data and trends
Keeping in mind the postal sector in its more general and inclusive definition (that is including any kind of services provided by postal operators, such as financial or insurance services), please indicate:
a) Current structure and services in the sector
1. The current structure of the sector in its broader definition: which is the range of services provided by postal operators? Has some kind of functional specialisation between providers been introduced?
The sector is dominated by Royal Mail Group, which is a public limited company (plc) wholly owned by the government via the Department of Trade and Industry. Royal Mail Holdings (the parent) became a plc on 26 March 2001, following the Postal Services Act that created a more commercially focused company. The Act also established a new regulatory regime with an independent regulator, Postcomm, and a reformed consumer body, Postwatch (see below). The Group’s principal operating units in the UK are Royal Mail, Post Office Limited, and Parcelforce Worldwide. It also owns General Logistics B.V which is a pan-European parcel and logistics company, and which in 2006 saw a 37% increase in profits to GBP 100 million..
Royal Mail is engaged in mail deliveries, sorting and distribution. It collects and delivers over 84 million letters and packages to 27 million addresses every day, in line with its unique Universal Service Obligation (i.e. ‘one price goes anywhere’). Royal Mail has a market share of more than 96% and contributes 75.7% of group revenue. It is now a competing operator, licensed and regulated by Postcomm, and employs 174,202 people. These are based in 70 mail centres, which conduct primary sorting, and 1,400 delivery offices. (In 2003 there were around 92,000 delivery workers based in 1,200 delivery offices, and 80 mail centres, involving 42,000 workers; Beale, 2003). Distribution is mainly concerned with the road transport of mail between sites. The mail centres in particular have received significant investment in new technology. Operating profits increased by 17.5% to GBP 355 million in 2006 (Annual Report). Current challenges include investment (estimated at GBP 2 billion) in new mail sorting technology to upgrade and streamline operations. Against a backdrop of a pension deficit of GBP 5.6 billion that could well absorb GBP 750 million a year, Postcomm has permitted some price increases in order to raise revenues.
The Post Office has a network of 14,300 branches in the UK, used by 28 million customers each week. As well as providing postal services, the Post Office offers 170 products and services, including financial and banking services, travel services, telephony products, bill payment, postal orders and gift vouchers, licence applications and lottery products. The 480 ‘Crown’ post offices are managed directly by Post Office Ltd. and employ 11,327 people. Crown offices conduct a fifth of all Post office Ltd business; in 2005 they lost GBP million and were expected to lose GBP 70 million in 2006. Current plans by the company are to transfer around a third of these to franchisees, such as the retailer WH Smith. The union opposes this, not least since Transfer of Undertakings (TUPE) regulations do not automatically apply. The remaining, mainly smaller and rural branches, are managed on an agency basis either by private businesses acting as sub-postmasters, or franchise partners. The company estimates more than 80% of the rural network is unprofitable, and that on a purely commercial basis the network as a whole would consist only of 3,600-4,000 offices. The Post office contributes 9.3% Group revenue. It made an operating loss of GBP 111 million in 2006 but this was an improvement of GBP 12 million on the preceding year.
Parcelforce Worldwide provides an express and time-guaranteed parcels delivery service, almost wholly (90%) to business customers. It contributes 3.5% group revenue and made its first ever profit, of GBP 17 million, in 2006.
Developments in Royal Mail are explored in more detail in the sections covering postal services below. Here it is worth briefly noting the pressures and challenges relating to the counter network. The Post Office was highly profitable in the 1980s and 1980s but the situation has changed dramatically in recent years. The current post office network consists of 14,300 offices (from a peak of 25,000 in the mid 1960s) but a DTI consultation document on ‘The Post Office Network’, published in December 2006, anticipates up to 2,500 closures over an 18 month period from summer 2007. A similar number were closed between 2002 and 2005. The review document stated that:
‘Post Offices play an important social and economic role in the communities they serve. With new technology, changing lifestyles and a wider choice of accessing services, people are visiting post offices less. The networks losses have risen to almost GBP4 million a week this year and it unsustainable in its present form. But it remains the Government’s priority to maintain a national post office network with national coverage’.
The closures are a response to falling customer numbers, not least since the introduction on cost and anti-fraud grounds of direct benefit transfers to bank account in 2003. This meant that 4 million fewer customers visited a post office branch in 2006 than 2 years earlier, as well as resulting in a direct loss of governmental revenue of GBP 168 million. The government pledged to continue to support the development of new business, including savings and insurance, and to modernise the network of flagship Crown post offices. Since 1999, it has invested more than GBP 2 billion in the network, including GBP 500 million to introduce computers in support of new product development. The new computer system supports banking services, which takes two forms: ‘universal banking’ to combat financial exclusion, and agreements with the major banks to offer the branch network for their customers to access their accounts. However, the Post office card account (POCA) contract ends in March 2010 (though in January 2007 the government committed to a revised scheme). This is a basic account for the payment and withdrawal of benefits, pension and tax credits, and compensated the Post office to some degree for the decision to shift to direct payment. There are currently over 4 million POCA customers, including 2.3 million pensioners. Payments may also be made to standard bank accounts, however. The government also subsidises the rural network by GBP 150 million a year, but this subsidy is due to be withdrawn in 2008.
2. The number and characteristics of companies operating in the sector at large, distinguishing them according to their size, legal and property status (state-owned/ public limited/ private companies, etc.), the kind of services provided, their market share.
In terms of market overall, core post office business is in decline, but has been partly-compensated by diversification into e.g. financial services. The letters sector has experienced long-term growth as a result of increasing volumes of business and direct mail, though letters are in decline and Royal Mail suffered a downturn of volume exacerbated in 2006 as some bulk customers switched to lower price services; similarly, parcels has benefited from the recent growth of internet shopping. In terms of competition, there are now 20 licensed operators for mail services, including Royal Mail and major private courier/ logistics companies such as ANC, DHL, Lynx Mail, Securicor and TNT. New operators carried more than 39 million items end-to-end, providing collection, sorting and delivery in 2005-06, but Royal Mail still dominates postal services, accounting for 97% of the regulated addressed letters market in 2005-06 (source: Postcomm). Several companies have also signed ‘access agreements’ with Royal Mail, allowing mail they have collected and sorted to be fed into Royal Mail's network for final delivery. Royal Mail made 1.2 billion access deliveries in 2005-06, compared to 87 million the year before. In the seven months to October 2006, access volumes continued to grow, and latest figures show that access now accounts for 10.8% of Royal Mail’s total letters volume (source: Postcomm, with data from Royal Mail).
b) Trends and developments in the sector since 1980s
3. If and when there have been legislative reforms affecting the traditional postal services sector since the 1980s and the main impact of these changes.
These have related to Royal Mail; see below
4. If and when the sector has been involved in liberalisation processes putting an end to monopoly positions since the 1980s and the main impact of these processes.
These have related to Royal Mail; see below
5. The evolution of employment in the sector, globally and according to the main relevant subdivisions in which the sector is articulated, since the mid-90s and the expected future prospects.
For current figures, see above. Employment is likely to decrease in Royal mail as a product of automation (see below) and in Post Office Limited as a result of branch closures.
6. Any relevant other change affecting the industrial relations in the sector.
2. The mail services sector: structure and change
Focusing now on the core business of the postal sector (that is on the activities related to the collection, classification, transport and distribution of postal items, NACE 64.1, rev. 1.1 2002), NCs should provide a brief account of the present situation of the sector and of any recent changes which have affected it. In particular, please illustrate:
1. If and when the sector has been involved in privatisation processes or in the contractualisation of employment relationships (that is the shift from public law employment contracts to private law employment contracts and collective bargaining coverage) since the 1980s and the main impact of these processes.
The Postal Services Act 2000 transferred Royal Mail to a plc. Since then it has been subject to independent regulation and increased competition, thus exposing it to commercial disciplines comparable to private sector companies, albeit ownership is retained by the government. Hence, although the company operates as a commercial business, it remains in the public sector, and the current government was elected on a manifesto commitment to ‘a successful, publicly owned Royal Mail’. The union has said it will ‘fiercely resist’ any attempt to change the ownership structure, including through a proposed employee share ownership plan which it sees as amounting to privatisation (a reversal of its position under previous leadership, UK9709166N).
The government has adopted an ‘arm’s length’ relationship to the company in order to allow the Board more freedom to run the business. The Postal Services (EC Directive) Regulations 2002 transposed the European Postal Directive (2002/39/EC), effectively reducing the reserved (universal) area of the postal services sector to items less than 100 grams or costing 80 pence or less, from 1 January 2003, and a further reduction to 50 grams or 65p from 1 January 2006. Royal Mail has been facing full competition since that date as new operators licensed by Postcomm can now collect and deliver any mail, thus ending the statutory monopoly that Royal Mail had held for 350 years.
2. If and when the sector has been involved in restructuring processes (offices closures, automation, reorganisation of production, outsourcing and contracting out, etc.) since the 1980s and the main consequences of these processes on employment (redundancies, recourse to different kind of contracts, etc.) and on work organisation (changes in the skills levels required, training; recourse to functional flexibility, longer operating hours, shift work, etc.).
Restructuring has been a slow and ongoing process given workers’ strong union organisation and disruptive capacity, plus relatively low basic pay which means workers’ earnings depend on overtime and other allowances that may not accurately reflect actual work demands. Hence central agreements may still meet opposition locally. The process has accelerated since full competition (see below). Royal mail wants to invest heavily in automation, possibly cutting up to 40,000 jobs, introduce teamwork and convert many jobs to part-time.
3. The current structure of the mail services sector: the number and characteristics of companies operating in the sector, distinguishing them according to their size, legal and property status (state-owned/ public limited/ private companies, etc.), the kind of services provided, their market share.
See section one, question 2.
4. The sectoral employment levels and developments (possibly broken down by gender, education and skill level) since the mid-90s.
It was not possible to obtain disaggregated official statistics for mail and courier services (they are usually combined with telecoms, under communications, or with other public corporations, under public sector). Overall employment figures in Royal Mail are 174,202. One important development to note is that casual employment has been massively reduced in Royal Mail, partly to improve motivation and service, but also in response to customer concerns about the integrity of the mail. There is now around 500 casual staff compared to almost 20,000 in 2004.
5. The legal status of employees.
No different to others.
6. The sectoral pay levels and developments compared to national averages, inflation and productivity growth (distinguishing between public and private operators) since the mid-90s.
Labour costs in Royal Mail are 68.3% of total costs. Basic pay is relatively low at around GBP 320 a week, some GBP 70 less than the average, according to the union. Overtime and a plethora of allowances improve earnings however. There have also been new bonuses. A bonus scheme was introduced by the incoming chairman, Allan Leighton, in 2002 to support the 3-year Renewal Plan designed to return the Group to profitability at a time when it was losing well over GBP 1 million a day. Its successful completion in 2005, with profits of GBP537 million, resulted in a payout of GBP 1,074 per employee (at a total cost of GBP 218 million). A new ‘Share in Success’ scheme, now also paid to sub-postmasters, paid GBP 418 in 2006 (GBP 91 million). In addition, a productivity scheme was agreed with the union in March 2006 linking pay to increased efficiency over and above the annually agreed increase in pensionable pay.
7. The presence of any regulatory authorities or agencies with a brief explanation of their entitlements (price setting, issue of licenses, etc.).
Postcomm (the Postal Services Commission) is the independent regulator for postal services in the UK. It was set up by the Postal Services Act 2000 and is classified as a non-ministerial government department. Its work is steered by eight commissioners, including the Chairman and Chief Executive. Its primary duty is to maintain a universal postal service and also promote effective competition. It licenses postal operators dealing with mail costing less than GBP1 to deliver and weighing less than 350 grams, and regulates Royal Mail’s quality of service and its prices. Price control applies to 90% of Royal Mail’s letters revenues and this is set periodically by Postcomm in the form of a cap on the average price of a basket of products. It can also reprimand or fine the company if it finds any breach of licence conditions (for example, in September 2003 it fined Royal Mail GBP7.5 million for failing to reach license targets on first class business mail). Postcomm does not regulate Post Offices or make decision about closures, but it does advise the DTI on developments within the network. There is also a consumer body called Postwatch, with information-gathering powers, along the lines of the privatized utilities. It was set up by the 2000 Act and replaced the Post Office Users National Council..The involvement of the social partners in the sectoral regulatory framework (social partners’ representatives sitting in observatories, committees which oversee the management and developments of public utilities, etc).
The social partners submit statements and evidence to governmental consultation exercises; to the relevant parliamentary select committees (e.g. public accounts, trade and industry); and to Postcomm; otherwise there is no overall sectoral regulatory framework as such.
8. Any other feature important to seize the peculiarities and the main problems to be solved in the sector.
3. Industrial relations in the mail service sector
Continuing to concentrate on the core businesses of the postal sector (NACE 64.1, rev. 1.1 2002), NCs should provide an overview of industrial relations in the mail service sector. In particular, please indicate:
1. Possible limitations or peculiarities with respect to the right to association, collective bargaining and strike.
Same as for other emplolyees.
2. The structure of trade union representation: number and characteristics of the unions which operate in the sector, union density. In particular: is union representation fragmented? Are there rivalries between the trade unions? Are there differences between public and private operators?
There is one main union, the Communication Workers’ Union (CWU). It has almost 250,000 members, with 70,000 in telecommunications (primarily BT) and 160,000 members across the Royal Mail Group and other business units. The ‘Postal Department’ is divided into six sections: postal, indoor (mail centres, distribution centres etc.); outdoor (mainly deliveries and collections); technical and central services (engineering and vehicles); parcels, logistics and quadrant (Parcelforce, logistics, Quadrant); clerical and cash handling (Post Office Ltd, Royal Mail administrative grades). Density is approaching 100% for uniformed staff, and it has 16,000 managerial members. Royal Mail also recognises the Communication Managers Association (CMA) for junior and middle managerial staff. This became an autonomous section of the white-collar union MSF in 1998, which in turn later became part of the general union Amicus. It has around 11.000 members overall.
In Royal Mail, CWU priorities are to raise the status and value of the postal workers’ job by higher basic pay, including sharing in agreed savings from job cuts and increased efficiency; better work-life balance (through shorter hours and increased leave as well as ‘family-friendly’ policies); maximising job security; defending full-time employment from conversion to part-time whilst also improving rights for part-time staff; maintaining national bargaining; and better training and equipment.
3. The structure of employer representation: are there sectoral employer/trade associations? What is the number of companies affiliated to these associations, and the number of employees of the affiliated companies? Has there been any major reorganisation of employers’ associations as a consequence of the changes affecting the sector?
No sectoral associations.
4. The structure of collective bargaining: at what level are collective agreements concluded? National/sectoral? Decentralised? Both, with different scope? Other? Are there differences between public and private operators?
There is national-level collective bargaining over terms and conditions of employment, though these may differ (e.g. over issues like maternity leave) between the various businesses of the Royal Mail Group. Any collective bargaining in the private operators is likely to occur at company level.
5. The coverage of collective bargaining in terms of companies and employees. Are there non-union companies or cases of opting out from employers’ association and multi-employer bargaining? Other? Are there differences between public and private operators?
The dominance of Royal Mail means that bargaining coverage is extremely high in the sector. It is not possible to collect data on the private operators without consulting each of them directly.
6. Issues dealt with in collective bargaining: working time, training and career developments, equal opportunities, performance-related pay, conciliation between work and personal life, others. Are there differences between public and private operators.
Collective bargaining refers to all such issues. Restructuring is currently one of the biggest issues. Settlement of the 2006 pay dispute (see below) led to a new commitment from the company and the union to work together, including negotiating and implementing new working practices. The CWU described the ‘Shape the Future’ deal as a ‘defining moment in the relationship between the company and the union’. The union recognises that developments such as the mechanisation of sorting could lead to job losses, but is aware of the need to modernise work organisation given increased competition. The 2006 agreement commits the parties ‘to work together to ensure that we become the most efficient, customer-focused and flexible company in the market place, and at the same time raise the value and status of postal workers’. April 2007 was set as a date ‘to reach an agreement that takes these issues forward’, following trials of the new technology. According to the independent research organisation IRS, ‘The full implementation of the agreement will lead to a complete overhaul of industrial relations’. The Royal mail’s business plan forecasts up to 40,000 job losses as a result of its desired changes; the union has secured a guarantee of no compulsory redundancies.
The new agreement echoes the ‘Sawyer Review’ of industrial relations in 2001 (http://www.psc.gov.uk/postcomm/live/policy-and-consultations/documents-by-date/2001/sawyer.pdf), which called for a partnership approach between the company and CWU. The Report condemned a bullying ‘post-war management style’, and said that ‘mail centres are run like old-fashioned factories where people have to put up their hand to go to the toilet’. It blamed a lack of trust both on ‘high-handed or insensitive management behaviour’ and local union militancy, recommending the creation of local and national ‘partnership boards’ and greater trade union discipline. The review was instigated at the joint invitation of the company and CWU following a wave of unofficial strikes The union soon withdrew from the partnership process however when the company announced its intention to introduce an employee share scheme which it saw as vital to encourage employee support for restructuring.
7. The impact of outsourcing/contracting out on collective bargaining coverage and working conditions.
No data.
8. The recourse to industrial conflict: data on number of strikes, worker participation and day lost over the last decade. Has recourse to conflict intensified as a consequence of the changes affecting the sector? Are there conflict resolution practices specific to the sector or to individual companies? Are there differences between public and private operators?
The Royal Mail’s letters business recently imposed a pay award, i.e. without union agreement, which increased national pay rates by 2.9% with effect from 3 April 2006. Following the threat of national industrial action a wide-ranging settlement was eventually reached (see 6 above). A ballot for national strike action (over company proposals to link what it said was a pay rise worth 14.5% over 18 months to work re-organisation and job losses) was narrowly defeated by 48,038 to 46,391 votes. A national strike would have been the first since 1996, when there were six one-day stoppages. Before that, there was a major strike in 1988. However, industrial relations have been far from stable, with a large number of local, often unofficial, strikes in between. The most significant recently was in October 2003 when workers in the South East of England walked off the job in protest at management pans to enforce new working practices, at an estimated cost to the company of GBP 40 million (when Royal Mail losses to spring 2003 were already GBP 611 million). And in 200/2001 over half the working days lost due to strikes in the UK were due to action by postal workers; of these 57,000 postal days lost, 55,000 were unofficial. Recent significant local disputes include a ballot for industrial action was conducted in December 2006 in the regional centre Bristol, over the terms of introducing new sorting machines; a similar dispute was also ongoing in Birmingham.
According to one review (Gall, in IRS Employment Trends February 2004), there were national or semi-national strikes in 1988, 1996, 2001 and 2003, and major regional strikes in 1994, 1995, 2000 and 2001, making Royal mail ‘the single most strike-prone organization-cum-industry in Britain’. In 2000-2001, a period of heightened strike activity, less than 1% of working days were lost (the typical Royal Mail week involves around a million working days), but the significance of the industrial action is its immediate visibility and impact. These unofficial strikes led both parties to approach Lord Sawyer, a former senior Labour Party and trade union official, to head an independent review of their industrial relations (see above). Local unofficial disputes are regular (if generally short-lived) for many reasons (e.g. supporting disciplined colleagues; working time; work organisation…), reflecting a very high level of local union organisation and relative militancy (Beale, 2003). By their very nature they are difficult to monitor statistically.
| Year | Working days lost (000) |
| 1984/85 | 90 |
| 1985/86 | 74 |
| 1986/87 | 50 |
| 1987/88 | 64 |
| 1988/89 | 1100 |
| 1989/90 | 30 |
| 1990/91 | 18.75 |
| 1991/92 | 12.5 |
| 1992/93 | 37.5 |
| 1993/94 | 17.5 |
| 1994/95 | 42 |
| 1995/96 | 63 |
| 1996/97 | 811 |
| 1997/98 | 50 |
| 1998/99 | 16 |
| 1999/00 | 22 |
| 2000/01 | 66 |
| 2001/02 | 53 |
| 2002/03 | 5.8 |
| 2003/04 | 85 |
Source: Gall, G. 2003. The Meaning of Militancy. Two most recent figures from Royal Mail.
9. The presence of participatory practices at workplace level, either through the involvement of employees’ representatives or trade unions, or the implementation of direct participation. Instances of financial participation (ESOP). Are there differences between public and private operators?
Partnership boards have been implemented locally and nationally, following the Sawyer report, and recently seem to have been reinvigorated following resolution of the 1996 pay dispute (see above). ESOP is a controversial topic. The chairman, Alan Leighton, had implemented a similar programme when previously running the supermarket chain Asda and proposed it in 2001, meeting with union opposition. The government is currently reviewing the proposal, which attracted the opposition of 199 Labour MPS in a House of Commons motion in late 2006. The union believes that the current profit-share scheme is sufficient to help improve performance. The government is believed to be sympathetic to company proposals that have been rumoured to have been made in the latest investment round, against union opposition which sees it as amount to privatisation. In the 2006 annual report, the Chairman Allan Leighton said ‘We know taking our people with us is central to our plans. We believe giving them a stake in the company would be a huge incentive for our people to achieve the efficiency gains essential if we are to compete successfully to retain and win customers in the face of tough competition and importantly we know this is something they want and would respond to’. Mr Leighton is believed to favour placing a majority stake of the state-owned business in a trust held on behalf of employees. Ina communication to members (April 2006), the CWU said it views ‘all talk of shares as a stage-managed distraction from the crucial issues of your basic pay, pensions and Royal Mail’s plans for your future jobs’. Shares would be a short-term financial gain but would likely be eliminated by e.g. increases in pension contributions.
10. Any instances of social dialogue at sectoral level, like the conclusion of agreements or the presence of tri- bipartite bodies concerned with employment and labour relations issues.
No.
11. The membership of national actors in European-level cross-industry and sectoral organisations.
CWU is affiliated to Union Network International. Royal Mail – no data.
Commentary by the NC
It is particularly important that each NC gives its own comments on the issues covered by this study, paying particular attention on the consequences of the changes affecting the sector over the last decade and on the differences between public and private providers. Please provide any additional information that you consider important to better understand the current situation and recent developments in the sector covered by this study in your country.
The shift to full competition seems to be providing a sufficient shock for Royal Mail and the unions to seek to accelerate the restructuring process, recognising that agreement is the best way to proceed. This will require difficult changes for both parties: a more pluralist and inclusive management approach (for example recognising that share ownership is not the only or best way that employees can be incentivised and rewarded; protecting pay and conditions of transferred Post Office counter staff) and greater union control over local activists. Job losses, increased part-time employment and revisions to pay structures are all difficult issues to address, and are likely to lead to disagreement and conflict, though the scale of this will depend on the scope and pace of reform.
Additional References
IRS, 2006 ‘Trade Unions’, Pay and Benefits, IRS Employment Review, 20 October.
DTI, 2006. The Post Office Network. London. December
Beale, D. 2003. ‘Engaged in battle: Exploring the sources of workplace union militancy at Royal Mail’, Industrial Relations Journal, 34:1. March.
Royal Mail Group plc, 2006. Annual Report.