Employment security in banking: the case of the Co-operative Bank

A job security agreement between the UK's Co-operative Bank and the banking trade union was introduced as long ago as 1983, committing the parties to explore a range of prior options before invoking compulsory redundancy as a last resort. Large-scale voluntary redundancies and a small number of compulsory redundancies in the early 1990s undermined the credibility of the agreement, as well as souring relationships between the bank and the union. The perceived need by both parties to put industrial relations on a new footing resulted in the conclusion of an innovative partnership agreement in March 1997. A central feature of the agreement is a strengthened commitment to employment security. We review the agreement as it approaches the end of its three-year term.

The results of the 1998 Workplace Employee Relations Survey (WERS 98), published in September 1999, show that job security guarantees are significantly more widespread in the financial services sector than in almost every other part of the economy. Staff in almost 40% of workplaces in financial services are covered by a job security or no-compulsory redundancy policy. This compares with just 8% of all private sector workplaces, and 21% of establishments in the public sector.

During the 1990s, the market context of financial services has undergone fundamental changes. These have transformed banking from a sector which had enjoyed steady growth and high levels of profitability, which was protected from competition from new entrants by the regulatory framework, and which therefore offered the prospect of secure employment. A combination of measures deregulating financial services and the impact of new technologies in terms of both product and process innovation, have been reflected in increasingly fierce competition as both new players and new forms of banking have entered the market.

Traditionally, the operations of the clearing banks were based on an extensive branch network, in which branches offered a banking service to both personal and corporate customers. However, the new competitive challenges have stimulated a widespread restructuring and rationalisation. The scale of the branch network has been reduced through substantial closure programmes. Increasingly, the servicing of corporate and personal customers has been separated. Back-office administration and clerical tasks, including the processing of cheques, have progressively been taken out of branches and relocated into centralised processing facilities, where work is organised along factory lines.

This restructuring and rationalisation has resulted in substantial reductions in employment. Total employment in the sector, which stood at just under 700,000 in 1990, has declined to 550,000. Although the 1980s had seen job losses via voluntary redundancy and "natural wastage", the scale of the job losses since 1990 has led some major employers to resort to compulsory redundancy, starting with NatWest in 1993. Job loss and job security have become major issues of concern for the newly unified banking union, UNIFI (UK9903193N), which has sought to conclude job security agreements with employers across the sector. In this objective, as the WERS 98 findings confirm, it has met with some success. In addition to the Co-operative Bank, Lloyds TSB, Bank of Scotland, Halifax and Unisys are amongst the organisations which have either concluded agreements or made commitments on employment security.

The Co-operative Bank

The Co-operative Bank is a medium-sized banking operation employing around 4,000 staff. Staff in the bank are organised by UNIFI, which has sole recognition rights to represent and negotiate with management on behalf of staff. With a branch network extending to around 90 branches, the bank's operations are on a smaller scale than the "big four" clearing banks. The trading position of the bank has been transformed during the 1990s, from making losses in 1990 and 1991 to recording record profits in each of the five most recent years. The same period has seen a decline in total employment from around 4,500 to the present level, together with a shift in employment from branches to centralised processing and call-centre facilities. The average branch which used to employ around 25 people, now employs just six. Thus, the 1990s have seen major upheavals in employment structure, organisation of work, job descriptions, career prospects and skill requirements.

The Co-operative Bank and the banking union BIFU (one of the three unions which merged to form UNIFI) concluded a job security agreement as long ago as 1983. This committed the bank to review jointly staffing requirements in the light of changing business circumstances and, in the event of a staffing surplus arising, to explore all possible alternatives including redeployment and retraining before resorting to compulsory redundancy. This agreement provided a framework within which the major redundancies arising from the substantial organisational changes referred to above were managed in the early 1990s. However, the scale and rapidity of the changes involved, the job losses that occurred, and the eventual resort to compulsory redundancy in a small number of cases led to tensions between management and the union.

The 1997 agreement

Growing recognition by both parties that the far-reaching changes occurring in the market for banking and financial services were likely to continue, and that there were compelling reasons for reviewing and modernising their relationship, led to the conclusion of a partnership agreement between the Co-operative Bank and BIFU in May 1997. A stronger employment security commitment is a central element of the agreement, which runs for three years. Other key features are a three-year pay deal and partnership mechanisms for dealing with a wide range of issues. For the bank, the immediate impetus for a renewed commitment to employment security came out of the need to "recommit" itself after the 1983 job security agreement had, according to a senior human resources (HR) manager, in effect been "thrown away" during the early 1990s (at the time of the major redundancy programme). The union had been keen to secure job security agreements with employers throughout the 1990s. Although the 1983 agreement was in place, according to the national officer responsible for members in the bank, it "amounted to a charter under which the company could make compulsory redundancies at the end of the process".

The strengthened commitment to employment security in the 1997 agreement involves an undertaking that no compulsory redundancy is anticipated for the duration of the agreement. The commitment to no involuntary redundancies is set in the context of a recognition by both parties of the key contribution of continuing flexibility and employee commitment to change management and business development: "we have recognised that continued flexibility and commitment by the bank's people is essential for successful management of change and business development. This enables us to agree that it is not currently anticipated that there will be any involuntary redundancies during the period of the agreement,"

The agreement further states that "redeployment, retraining and voluntary redundancy opportunities" are the agreed mechanisms for dealing with any staff surpluses that arise in delivering business changes. It also commits the bank to continue to invest in training and offer personal development opportunities to staff, so as assist their longer-term employment prospects both inside and outside the bank.

Experience to date

In practical terms, implementation of the employment security commitment has, according to a senior HR manager, required "time and management effort" and cooperation from the union in managing the consequences. In practice, change has involved small numbers of jobs at any one time, and has been relatively straightforward to cope with. Employees are declared surplus if their job goes, and the bank carries people on a surplus list. These staff are found project work, seconded to outplacements, absorbed into head office (where possible) or, ultimately, enticed to accept a voluntary severance package. Employment numbers since 1997, when the agreement was concluded, have remained roughly level.

For management, the employment security commitment is a significant element of the partnership process, which has provided a mechanism for delivering changes in working and employment practices which have underpinned the continued transformation of the bank's performance over recent years. For the union, members have received clear economic gains from the partnership agreement: there have been no compulsory redundancies; the bank is prepared to carry people on surplus lists; and pay rises above inflation have been delivered.


The employment security commitment in the 1997 partnership agreement strengthened and gave fresh credibility to the earlier job security agreement. However, this commitment is time-limited: the current agreement expires in March 2000. In late April 1999, the bank and the union concluded a statement of intent which made an ongoing commitment to the partnership process. The role of the employment security commitment in facilitating change was recognised, but its maintenance for a further period was not addressed. In determining whether or not it is renewed, much may hinge on assessments of business circumstances and the nature of anticipated changes in service provision over the coming period. The advent of internet banking (the Co-operative Bank has just launched a separate internet banking subsidiary) and continued growth of, and technological advances in, telephone banking underline the extent of the changes in products and processes that still lie ahead. The sector is also in the throes of an unprecedented period of restructuring amongst its major players. How far employment security agreements and commitments can be maintained in the face of such market and organisational turbulence, at the Co-operative Bank or elsewhere in the sector, remains to be seen. (Paul Marginson, IRRU)

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