Workers at major manufacturing company agree to cut hours and pay to save jobs

In late October 2008, members of the GMB general trade union at JCB, the international construction equipment manufacturer, voted in favour of reducing their working hours and pay. The move will prevent 350 out of 500 job losses planned by the company in light of falling sales due to the global financial crisis. Some commentators have suggested that sacrificing pay to save jobs might become a more widespread response by trade unions and workers to the current deteriorating economic climate.

Company background

JCB, headquartered in the UK, is the world’s third-largest manufacturer of construction equipment. At the end of 2007, the company had 18 plants and 9,000 employees worldwide, including 11 factories and a workforce of almost 6,000 people in the UK.

Falling sales lead to redundancies

The sales and workforce of JCB had been rising strongly until the end of 2007. However, in 2008, the company has experienced a sharp decline in sales. JCB’s products are used mostly in the construction sector, which has been badly affected by the global credit crunch and rising costs of raw material. Sales have fallen around the world because of reduced construction activity, mainly in the house building and commercial property sectors.

Against this background, in July 2008 JCB launched a redundancy programme to align employment levels to a 20% reduction in its forecast production schedule for the remainder of the year. This programme involved the loss of approximately 500 manufacturing jobs in JCB’s UK factories, in addition to a proportional number of redundancies among white-collar staff.

In October, management announced that it needed to reduce output at its UK factories by 19%, owing to a continuing fall in orders due to low business confidence and the deepening financial crisis. This would potentially involve a further cut of 500 jobs.

Ballot approves cut in working hours

JCB management opened discussions over its latest workforce-reduction plans with the GMB general trade union, which represents a high proportion of the company’s manufacturing workforce. The talks led to the union’s members voting on a ballot which gave them the choice between:

• maintaining full working hours and accepting the loss of 500 manufacturing jobs; or

• cutting their weekly working time from 39 to 34 hours and thereby saving around 350 of the 500 threatened jobs.

GMB recommended that members vote for the second option. On 23 October, it was announced that GMB members had voted by a majority of more than two to one to accept the trade union recommendation to opt for a shorter weekly working time.

Provisions of agreement

The decision affects over 2,500 GMB members at seven JCB plants in Cheadle (three sites), Rocester, Rudgley and Uttoxeter all situated in England’s West Midlands’ region of Staffordshire, along with its plant in Wrexham in northern Wales. It means that, from the beginning of November 2008 for a minimum of six months, the manufacturing workforce at these sites will work 34 hours over four days a week, from Monday to Thursday. This amounts to a reduction in weekly hours of about 13%. The workers will lose an average of GBP 50 (€61 as at 10 November 2008) in weekly pay, although this will be partially compensated by statutory ‘guarantee payments’ for employees placed on short-time work.

GMB officials expressed hopes that white-collar staff at JCB would now accept a similar reduction in their working hours.

Reactions to ballot result

The Chief Executive of JCB, Matthew Taylor, commented:

The ballot result shows the tremendous unity amongst the JCB workforce and a great team spirit, which I applaud. They have looked after the needs of one another rather than the needs of the individual and that is to be commended. From a JCB perspective, this is very positive because it means we retain the skills of a wider workforce who have contributed to the success this company has enjoyed over many years. It means we retain the fundamental strength of our workforce, and this is very welcome news as it puts us in a very strong position to take advantage quickly of the upturn in the market when it comes.

The GMB regional organiser, Keith Hodgkinson, outlined:

I am delighted that we have been able to save 350 jobs. The vote shows the social solidarity of trade union members in action. The short time is part of a worsening recession and these GMB members expect the government and the Bank of England to take the necessary steps to begin large-scale public works to at least slow the recession down and prevent it getting too deep.

Commentary

The agreement by JCB workers to cut their working hours and pay to prevent redundancies has attracted considerable attention in the media. Negotiated – as distinct from imposed – short-time working arrangements are uncommon in the UK. However, it has been suggested by commentators that sacrificing pay to save jobs might become a more widespread response by trade unions and workers to the current deteriorating economic climate.

Mark Carley, SPIRE Associates/IRRU, University of Warwick