2002 Annual Review for the UK

This record reviews the main industrial relations developments in the UK during 2002.

Political developments

The Labour government, re-elected in June 2001 for a second five-year term, continued in office throughout 2002. At local council elections held in England in May, the Conservative Party and the Liberal Democrat Party made modest gains at the Labour Party’s expense, but Labour continued to control the largest number of councils.

Collective bargaining

As there is no system for registering collective agreements in the UK, making an accurate assessment of the number of collective agreements in force is not possible. Collective bargaining in the UK continues to be highly decentralised: most bargaining is at company or workplace level, with little multi-employer bargaining outside the public sector.

Pay

Collectively-agreed basic pay rose by an average of 3.0% during 2002 ( according to the Labour Research Department, Bargaining Report, November 2002), with the increase in average earnings being higher at 4.2% (according to the Office for National Statistics).

In the public sector, for the fourth year running, the government accepted in full the pay awards recommended by the independent pay review bodies for more than 1 million public sector workers. Most groups received above-inflation increases. For example, school teachers in England and Wales received a general pay rise of 3.5% (UK0203102F). National Health Service staff received a minimum of 3.6% (UK0201172F). Particular groups, including newly qualified staff, were awarded substantially higher increases, reflecting severe recruitment and retention problems. In some other parts of the public sector, growing pay pressures led to national strikes, as reported elsewhere in this review.

During the year, the trend towards long-term pay deals (lasting two years or more) increased. The Labour Research Department reported nearly 200 long-term pay deals in 2002 (Bargaining Report, September 2002), primarily in the construction, energy and water, engineering, transport, communications and chemicals sectors. Though less prevalent than in the private sector, long-term agreements were increasingly introduced in the public sector, particularly in government departments, to provide a basis for the modernisation of working practices and service provision.

Working time

Average collectively agreed normal weekly working time in 2002 was 37.2 hours (according to IDS Study 736, September 2002). Average actual weekly working hours for full-time employees was 37.8 hours (according to Labour Market Trends, December 2002).

In February 2002, the Trades Union Congress (TUC) published a report showing that nearly 4 million UK employees (16% of the total) worked over 48 hours per week, and calling for an end to the provision in the EU working time Directive (93/104/EC) enabling individual employees to opt out of the 48-hour limit on average weekly working hours (UK0202102F). In April, it was reported that, following a complaint from the trade union Amicus, the European Commission had taken the first steps towards initiating legal proceedings against the UK over alleged inadequacies in implementing the Directive, including the scope under UK law for workers to work additional, unmeasured hours voluntarily without records being kept (UK0205102N).

Agreements reducing working hours were not reported to be widespread over 2002. Agreements on flexible working time and on 'family-friendly' working arrangements (in advance of new statutory provisions due in April 2003) were reached at a number of companies, including leading vehicle manufacturers. In February 2002, the car manufacturer Peugeot announced an agreement to end the traditional summer shutdown at its Ryton plant near Coventry and to recruit up to 700 temporary workers to enable existing staff to take flexible holidays (UK0204102N).

Job security

No significant new employment security agreements were reported. In recent years, a number of high-profile employment security guarantees have been overtaken by closures or other major restructuring exercises. However, in vehicle manufacturing, the closure of Ford’s Dagenham plant and Vauxhall’s Luton plant, with the loss of 3,000 jobs, took place without compulsory redundancies (UK0205104F). More generally, unions continued to express concern at the level of redundancies in manufacturing, for example in the telecommunications sector (UK0203103F), and called for more government support for manufacturing and more effective consultation requirements on employers (see below under 'Employee participation').

Equal opportunities and diversity issues

New Earnings Survey statistics for 2002 showed that female employees working full time earned on average 81.2% of the average hourly earnings of male full-time employees, compared with 81.5% in 2001. In December 2002, the Equal Opportunities Commission began a consultation on a revised version of its code of practice on equal pay, which gives guidance on the steps employers should take to close the pay gap between women and men, including how to carry out an equal pay review.

During 2002, the TUC undertook an equal pay project, supported by the government’s Union Learning Fund, aimed at training workplace equal pay representatives and union full-time officers to address the gender pay gap and carry out pay reviews. In April 2002, a TUC report, Black and underpaid, highlighted racial inequalities in pay (UK0204101F).

The TUC also asked its affiliated unions to carry out an equality audit designed to cover all aspects of equality, including collective bargaining activity.

Other issues

The issue of pensions rose up the industrial relations agenda during 2002 (UK0301109F). Trade unions have increasingly been prepared to threaten or take industrial action to prevent the closure of final salary pension (FSP) schemes. The Caparo Group reached agreement with the ISTC steel union to reopen its FSP scheme for existing members following a series of strikes over its closure. A one-day strike by Transport and General Workers’ Union (TGWU) members over the planned closure of the FSP scheme at Yuasa Automotive Batteries led to the establishment of a working party to develop alternative proposals. Elsewhere, collective agreements have introduced changes to pension provision, including increased employee pension contributions, eg at Ford and Jaguar Cars, as companies seek to maintain the value of their schemes.

Legislative developments

During 2002, a number of significant changes to the legal framework were introduced, and proposals for further reforms published, against the background of continued concern on the part of employers’ groups over the volume and cumulative impact on businesses of employment regulation (UK0206102N).

The main legislative development was the Employment Act 2002, which reached the statute book in July (UK0210103F). Its main objectives are: the enhancement of statutory rights designed to help parents balance work and family commitments; and the reform of employment tribunal procedures and workplace dispute resolution mechanisms in response to the rising number and cost of employment tribunal claims in recent years. It also includes provisions on a range of other issues, including time off for trade union learning representatives, and equal treatment for fixed-term employees (regulations on which came into force in October 2002). The remainder of the Act, and several sets of associated regulations, will be implemented in a number of phases over the coming year.

Most attention focussed on the Act’s package of new 'family-friendly' employment rights. The Act gives parents of children aged under six (or disabled children up to the age of 18) the right to request flexible working patterns for childcare purposes, and places a duty on employers to give proper consideration to the request. Following a consultation exercise, regulations giving effect to this new right were laid before Parliament in December 2002 and are due to come into operation in April 2003. At the same time, new rights to adoption leave and two weeks’ paid paternity leave will be brought into force, alongside improvements in maternity leave and pay.

During the year, consultation continued on government proposals for new anti-discrimination legislation (UK0201117N) to implement EU Directives 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (EU0006256F) and Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation (EU0102295F). A further consultation document, Equality and diversity: the way ahead, was published in October 2002, along with draft regulations covering the areas of sexual orientation, religion, disability, equal pay and race. A separate consultation document, Equality and diversity: making it happen, set out a range of options for the reform of the institutional framework, including a single equality commission.

In July, the government initiated a review of the Employment Relations Act 1999, particularly its provisions on statutory trade union recognition (UK0201171F and UK0202101N). The TUC subsequently put forward proposals for wide-ranging amendments to the law (UK0211103N). While unions attach considerable importance to the review and hope that it will lead to significant legislative change, the employers’ organisation, the Confederation of British Industry (CBI), has argued that the review should be confined to looking at whether there is any need to improve the way current provisions operate.

At the end of October, the Department of Trade and Industry (DTI) initiated a three-month consultation exercise on draft legislation to extend the provisions of the Working Time Regulations 1998 to workers in sectors currently excluded from the legislation, as required by EU law (UK0212102N).

The organisation and role of the social partners

On 1 January 2002, the merger between the Amalgamated Engineering and Electrical Union and the technical union Manufacturing Science Finance took effect with the creation of Amicus. With around 1 million members, the new union is the second-largest affiliate of the TUC, behind the public services union Unison, and is the largest affiliate of the Labour Party. Annual figures published by the TUC in July showed that its total membership had fallen by 37,000 to 6,685,000, due mainly to job losses in the manufacturing sector. In December 2002, Brendan Barber was elected as the next general secretary of the TUC. He will take over from John Monks in May 2003 when the latter becomes general secretary of the European Trade Union Confederation (UK0205101N).

On the employers’ side, financial problems at the British Chambers of Commerce led to senior management changes and extensive staff cuts, and prompted speculation that some major regional chambers might defect to the higher-profile CBI.

Industrial action

Strikes were rarely out of the UK headlines throughout 2002. During the first 10 months of the year, the number of strikes remained historically low, particularly in private manufacturing, but the number of workers involved was dramatically higher than in recent years due to certain national disputes in the public sector or public services. As a result, the number of working days lost through strikes in the first ten months of 2002 was, at 935,000, much higher than in recent years (UK0301104F). Major disputes in 2002 included a series of nationwide strikes in:

• the rail sector in January over pay levels and differentials (UK0201169F);

• local government in July in pursuit of a 6% pay claim (UK0208102N and UK0209101N); and

• the fire service beginning in November in support of a 40% pay claim (UK0211107F, UK0211107F and UK0212103N).

Employee participation

During the course of 2002, the government began the process of consulting over the UK implementation of the new EU Directive (2002/14/EC) on informing and consulting employees (EU0204207F). In July, it published a discussion paper, High performance workplaces: the role of employee involvement in a modern economy (UK0208101N). The government indicated that it would take account of responses to the discussion paper when preparing a consultation document and draft legislation to implement the Directive, expected to be published during 2003. In their responses, employers’ groups tended towards a 'minimalist' approach to implementation, whereas the TUC called for robust legislation to ensure effective transposition of the Directive (UK0210101N).

The government intends to consult during the course of 2003 on regulations to implement the EU Directive (2001/86/EC) on employee involvement linked to the European Company Statute (ECS) (EU0206202F). There is as yet no indication of the extent to which companies headquartered in the UK are likely to use the ECS to incorporate as European companies.

Figures published by the European Trade Union Institute showed that, of the 232 UK-headquartered companies thought to be covered by the European Works Councils (EWCs) Directive (94/45/EC), 93 (40%) had set up EWCs as of October 2002.

Telework

During the year, the CBI, TUC and CEEP UK agreed to discussions about a joint voluntary code of practice on teleworking, in the light of the EU-level social partners’ July 2002 agreement on this issue (EU0207204F), which is to be implemented by the national social partners in the Member States. A review of teleworking trends published by the DTI in June 2002 found that the number of teleworkers in the UK had risen by 65%-70% over the period 1997-2001, totalling 2.2 million or about 7.4% of all in employment. About two-thirds of all teleworkers are men, reflecting the fact that a high proportion of teleworkers are self-employed, and most self-employed workers are men. The CBI’s 2002 employment trends survey (UK0210102N) found that 16% of companies used teleworking and 15% were considering its introduction, but that 67% had no plans to do so.

Vocational training

The Learning and Skills Council (LSC), which includes senior CBI and TUC figures among its membership, has responsibility for the funding and planning of all post-16 vocational education and training. Among other initiatives during the year, the LSC continued to coordinate the development, promotion and delivery of 'modern apprenticeships', intended to expand and revitalise the apprenticeship system in England (UK0210105F). In August 2002, the government began the process of developing a new UK-wide network of employer-led sector skills councils intended to lead a drive to improve skills, productivity and competitiveness (UK0211105F).

Research suggests that collective bargaining over training is still relatively rare, but that joint project work, consultation and other forms of employee involvement in training provision are more widespread. Legislative innovations may stimulate developments in this area. In particular, the Employment Act 2002 will enable 'union learning representatives' to take paid time off to promote training and development opportunities in the workplace.

An initial meeting between CBI and TUC officials discussed the preparation of a UK report in response to the 'joint framework of actions for the lifelong development of competencies and qualifications ' agreed by the EU-level social partners in March 2002 (EU0204210F).

In November, the CBI and TUC issued a joint report on the basic skills challenge facing the UK, highlighting the 'national disgrace' that one in five adults does not have the literacy or numeracy skills of most children starting secondary school. The report suggested that employers can assist by providing 'sign-posting', counselling and training other staff as basic skills mentors, while union learning representatives can help colleagues overcome anxieties, and work with employers to develop ways of helping improve basic skills.

New forms of work

In February 2002, employers’ groups and the UK government voiced concern at the prospect of an EU Directive regulating temporary agency work, warning that the Commission’s proposals (EU0204205F) could cut across UK practice and damage labour market flexibility (UK0203101N). In November, coinciding with the European Parliament’s first reading vote on the draft Directive, the CBI renewed its attack on the proposed measure, arguing that its adoption would destroy employment opportunities (UK0212101N). However, trade unions support the proposals, and the TUC lobbied and prepared briefings for MEPs with the aim of ensuring that the Directive is not 'watered down' during the legislative process.

In July, as a separate exercise, the government published a revised draft of the Conduct of Employment Agencies and Employment Business Regulations for consultation. The new legislation is intended to update existing standards for the conduct of employment agencies which date back to 1973.

Also in July, the government began consultations on extending existing statutory employment rights to categories of 'atypical' workers who are not legally classified as 'employees' and who may therefore excluded from some statutory protections. The TUC wants employment rights to be extended to all workers, including casual workers, agency workers, home workers, freelancers and those on 'zero hours' contracts, but the CBI considers such proposals would be 'totally impractical' and would 'undermine flexible working'.

According to the CBI’s 2002 employment trends survey (UK0210102N), flexible working is an issue that 35% of companies expect will grow in importance. The great majority of respondents reported using at least one flexible working option and 60% used at least three. Part-time work was the most commonly reported flexible working practice (80%), followed by job sharing (38%), flexitime (30%) and career breaks/sabbaticals (20%).

Other relevant developments

In June 2002, the government appointed former CBI leader Adair Turner to chair the Low Pay Commission. With effect from October 2002, the government increased the main adult rate of the national minimum wage (NMW) from GBP 4.10 per hour to GBP 4.20. At the same time, the 'development rate' of the NMW for workers aged 18-21 rose from GBP 3.50 to GBP 3.60 (UK0207102N). In October, both the CBI and TUC submitted evidence to the Commission on the impact of the NMW and proposals for revised rates (UK0211104F). The Commission is due to make recommendations to ministers about further changes in the NMW in early 2003.

Outlook

The political priority the government attaches to the modernisation of the public services is likely to result in continuing tensions with the public sector unions. The outcome of elections for new general secretaries in two of the UK’s most influential unions - the TGWU and the GMB general union - will have significant implications for government-union relations, following the election of left-wing leaders in a number of major unions over the past few years. Debate about whether the UK should join the European single currency is set to intensify during 2003, and is likely to highlight differences over the issue within both the CBI and TUC (UK0201115N). In terms of the legislative agenda, the way in which the UK implements the EU employee consultation Directive will be a major focus of attention during the coming year. (Mark Hall, IRRU)