2005 Annual Review for the UK

This record reviews the main industrial relations developments in the UK during 2005.

Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

1. Political data

At the general election held in May 2005, the Labour government was re-elected for a third term in office of up to five years, with a substantially reduced majority in the House of Commons. Tony Blair announced that he would stand down as prime minister and Labour Party leader before the next election.

2. Collective bargaining update

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. 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.

First findings from the 2004 Workplace Employment Relations Survey, published in July 2005 (UK0509105F), showed that fewer workplaces recognised trade unions, and collective bargaining was less widespread, than in 1999 when the previous survey took place. A little over a quarter (27%) of workplaces recognised trade unions for at least some of their workforce, compared with 33% in 1998. These workplaces accounted for 48% of employees, down from 53% in 1998. Unions are recognised in 16% of private, but 90% of public sector workplaces. Recognition does not necessarily mean that negotiations over terms and conditions take place: negotiation was most widespread over pay (61% of workplaces recognising unions), hours (53%), holidays (52%) and pensions (36%). Overall, in 2004, 22% of workplaces reported that the pay of at least some of the workforce was determined by collective bargaining, and 35% of employees had their pay set by a collective agreement. The corresponding figures in 1998 were 30% and 38% respectively.

Pay

Collectively-agreed basic pay rose by an average of 3.4% in the year to November 2005 (Labour Research Department (LRD), Workplace Report, December 2005). The increase in average earnings was lower at 2.9% (Office of National Statistics (ONS) average earnings index, year to October 2005, reported in IDS Pay Report 944, January 2006).

Working time

Average collectively agreed normal weekly working time in 2005 was 37.2 hours (IDS HR Study 808, October 2005). Average actual weekly working hours for full-time employees was 39.4 hours (ONS Annual Survey of Hours and Earnings (ASHE)). There were few reports of new agreements reducing working hours. Flexible working time arrangements aimed at increasing productivity in periods of high demand are particularly prevalent in the automotive industry (UK0502104F).

Job security

No major new employment security agreements were reported. In recent years, a number of high-profile employment security guarantees have been overtaken by closures or restructuring, as at Rover (UK0505103F; UK0510108F) and Jaguar, whose Browns Lane plant in Coventry ceased production during 2005. Significant job losses were announced in the banking (UK0505106F) and automotive (UK0504103N) sectors, among others.

Equal opportunities and diversity issues

The gender pay gap narrowed during 2005. Official statistics showed that in April 2005 the gender pay gap for full-time employees based on average hourly earnings was 17.2% compared to 17.8% in 2004 (ASHE, cited in IDS Pay Report 942, December 2005). However the gender pay gap varies widely between sectors, with the widest being in the finance sector - an average of over 41%. The gender pay gap in the public sector - 13.3% on average - is almost half that of the private sector, which is 22.5% (IDS Pay Report 944, January 2006).

The Trades Union Congress (TUC) continued to call for mandatory equal pay audits. According to the Equal Opportunities Commission (EOC), two thirds of employers have no plans to conduct equal pay audits, and the EOC too urged the government to introduce a requirement on the private sector to promote sex equality and eliminate sex discrimination. The Women and Work Commission, the government taskforce set up to look at the pay gap between men and women, published an interim report in February 2005 and was due to issue its final recommendations in January 2006.

Training and skills development

Traditionally, collective bargaining over training has been relatively rare, but research suggests that joint project work, consultation and other forms of employee involvement in training provision are becoming more widespread. The TUC reported that the number of union learning representatives ULRs present in British workplaces had grown to almost 12,000 in 2005, and that this had been paralleled by an increase in the number of learning agreements with employers.

Other issues

Pensions issues were prominent during 2005. As companies have increasingly closed final salary pension (FSP) schemes, unions have increasingly been involved in negotiations and industrial action over the issue. At British Gas, for example, service engineers belonging to the GMB union held the first of a series of planned one-day strikes over the closure of the company’s FSP scheme to new entrants before winning certain concessions from the company through negotiation. Public service unions campaigned strongly against proposed changes to public service pension schemes involving increased pension ages, moves away from FSP schemes and reduced benefits. The threat of a concerted 24-hour strike in March (UK0502102N) led to renewed negotiations (UK0504104N), and in October the government and public sector trade unions agreed a framework for the reform of pension schemes in the health sector, education and civil service (UK0511101N).

3. Legislative developments

During 2005, a number of 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, especially from the EU (UK0510102F).

Key provisions of the Employment Relations Act 2004 came into force in April 2005. These included:

• amendments to various aspects of the statutory trade union recognition procedure; and

• extending the protection against dismissal for workers taking official, lawfully-organised industrial action from eight to 12 weeks.

The Act also provided for the establishment of a Union Modernisation Fund to provide financial assistance to trade unions to support projects designed to improve their organisational effectiveness. This was launched in July 2005 (UK0509104N).

Other parts of the Act, prohibiting unfair practices by employers during recognition and derecognition ballots and amending the rules governing industrial action ballots held by unions, came into force in October, along with supplementary codes of practice.

In July, the government published draft Employment Equality (Age) Regulations for consultation (UK0508101N). The Regulations are intended to implement the age discrimination provisions of the EU framework equal treatment Directive, and are due to come into force in October 2006. The draft Regulations set a default retirement age of 65. Employers will be free to continue employing people beyond the default age, but retirement ages below 65 will in general be outlawed, unless they can be objectively justified. The draft Regulations also included a new duty on employers to consider an employee’s request to continue working beyond retirement.

In October 2005, new Employment Equality (Sex Discrimination) Regulations came into force, aimed at preventing sexual harassment in the workplace. The Work and Families Bill began its passage through Parliament (UK0511102F). The bill will enable the government to introduce a range of new family-friendly employment rights, including longer paid maternity leave, paid paternity leave for fathers if the mother returns to work before the end of her maternity leave period, and a new right for carers to request flexible working.

EU-level discussion over proposed amendments to the working time Directive was mirrored within the UK, with the TUC and Confederation of British Industry (CBI) on opposite sides of the debate over the future of the individual opt-out from the 48-hour limit on average weekly working time (UK0506104F).

4. The organisation and role of the social partners

In April 2005, the government published its annual statistical report on trade union membership (UK0505101N), based on Labour Force Survey data for autumn 2004. This showed an estimated 6.78 million people in employment in the UK belonged to a trade union. This was a decrease of 0.5% or approximately 36,000 people, compared with levels recorded in autumn 2003. As a result, the rate of union membership (union density) fell by 0.6% from 26.6% to 26.0% of all people in employment. Union density for women employees overtook that of men for the first time (UK0504105F).

Merger talks between Amicus, the Transport and General Workers’ Union (TGWU) and the GMB took place during the year with a view to forming a new super-union with a combined membership of some 2.7 million. Members of the Association of University Teachers and the National Association of Teachers in Further and Higher Education voted to support proposals for a merger between the two organisations to create a single new union to represent academic and related staff in universities and colleges in England and Wales.

5. Industrial action

The latest available official statistics - for the 12 months to October 2005 (Labour Market Trends, January 2006) - showed that levels of strike activity were lower than for the 12 months to October 2004 in respect of the number of stoppages (114 compared to 141) and working days lost (238,220 compared to 884,900) but that more workers were involved (193,900 compared to 176,800).

Notable strikes in 2005 included:

• a dispute at airline catering supplier Gate Gourmet which escalated as British Airways ground staff took unofficial strike action in support of workers dismissed by the company (UK0509106F; UK0510105N);

  • a one-day strike by three unions at the BBC affecting news coverage and other live programmes, held in protest at 4,000 threatened job cuts;
  • two one-day strikes by cleaners at the Houses of Parliament over low pay; and
  • a one-day strike by 6,000 magistrates court staff, also over pay.

6. Employee participation

The Information and Consultation of Employees (ICE) Regulations, which implement the EU information and consultation Directive, came into force in April 2005. The new legislation will initially apply to undertakings with at least 150 employees. Undertakings with 100 or more employees will be covered as from April 2007, and those with at least 50 from April 2008. The Regulations apply to Great Britain. Separate but similar Regulations apply in Northern Ireland. In December 2005, the Central Arbitration Committee (CAC) issued its first decision under the Regulations, upholding an employee complaint that a pre-existing agreement relied on by Moray Council did not satisfy the necessary conditions specified by the Regulations.

EWC agreements signed in 2005 at British Airways and the Wincanton logistics and distribution group were seen by commentators as the most innovative or advanced to have been agreed by UK-based companies to date. Schering-Plough Clinical Trials SE became the first and so far only reported European Company to be established in the UK under the European Company Statute. However, it does not have any employees and was reportedly created to comply with an EU Directive that requires a legal representative in the EU for clinical trials conducted there.

7. Labour migration

Following EU enlargement in May 2004, in contrast to most other EU member states, the UK government did not directly restrict the rights of workers from the eight accession countries other than Malta and Cyprus (the A8) to seek employment in the UK from May 2004. It did, however, introduce a Worker Registration Scheme (WRS) to monitor the impact of A8 nationals’ participation in the labour market, and restrict their access to tax-funded welfare benefits. In February 2005, a government report (UK0504108F) showed that:

• there had been 133,000 applicants to the WRS during May-December 2004, and 123,000 were issued with registration cards and certificates;

• a majority of the applicants were Polish (56%), followed by Lithuanian (15%), Slovak (10%), Czech (7%) and Latvian (7%); and

• the top 10 occupations in which registered workers were employed were process operatives, kitchen and catering assistants, packers, waiters/waitresses, cleaners (domestic staff), warehouse operatives, room attendants (hotels), farm workers, sales (retail assistants) and care assistants.

Employers’ bodies and trade unions share a broad consensus on the valuable contribution made by migrant workers to the UK economy, whether from the EU or elsewhere. However, unions are increasingly vocal about the need for more effective measures to protect migrant workers from exploitation. In November 2005, the TGWU wrote to the Polish prime minister, who was visiting London, urging him to raise with the British government the issue of the reported abuse of Polish migrant workers in the UK by unscrupulous employers (UK0512103N).

The 2005 annual conference of the TUC reaffirmed its opposition to the draft Bolkestein Directive on services in the internal market, arguing that it threatens to undermine decent public services, wages, conditions and social protection across the EU. The CBI is supporting the Directive, most especially for the country of origin principle, allowing businesses to operate by the rules of their home state, and for the better regulation/deregulation aspects of the text.

8. Corporate social responsibility

The issue of corporate social responsibility (CSR) received considerable attention in the UK during the year. The UK government’s approach is to encourage and incentivise the adoption and reporting of CSR through best practice guidance, and, where appropriate, intelligent regulation and fiscal incentives. It maintains a CSR website and supports a CSR Academy which promotes CSR learning through a CSR competency framework. In October 2005, a Chartered Institute of Personnel and Development report examined how HR managers had contributed to the effectiveness of CSR initiatives undertaken by a number of leading organisations. In December, the UK’s EU presidency hosted a major conference on CSR and the finance sector.

The CBI sees CSR as a market-driven process which, if it is to develop successfully, should remain voluntary and business-led. The CBI has warned against imposing regulations or legislation to promote CSR. In its view, this would only stifle the debate and establish a set of minimum standards beyond which companies may see no need to venture.

9. New forms of work

In February 2005, an EOC report highlighted that women are hardest hit by the penalty of low pay and poor prospects that is frequently associated with part-time working. More than three-quarters (78%) of the UK’s 7.4 million part-time workers are women. The report argued that because of their need to balance work with child care responsibilities, and a lack of flexibility in working hours and patterns, many women have no alternative but to take up part-time work.

Disagreement between employers and unions over the desirability of the draft EU Directive on temporary agency work continued throughout 2005. The CBI argued that the Directive would damage labour market flexibility and destroy employment opportunities. However, the TUC continued to call for the adoption of the Directive, and urged the UK government to use its EU presidency during the second half of 2005 to seek agreement on the Directive.

10. Other relevant developments

In October 2005, the adult rate of the national minimum wage (NMW) increased from GBP 4.85 to GBP 5.05 per hour, increasing the pay of more than 1 million low-paid workers (UK0510104N). The development rate, paid to 18-21 year-olds, went up from GBP 4.10 per hour to GBP 4.25. The rate for 16-17 year old workers remains at GBP 3.00 an hour, but will be reviewed by the independent Low Pay Commission (LPC) in its next report to the government in February 2006. The government also provisionally accepted the LPC’s recommendation that the NMW should be further increased to GBP 5.35 (adult) and GBP 4.45 (development) in October 2006, subject to further review.

Towards the end of the year, the government-appointed Pensions Commission published its final report (UK0512104F). The Commission recommended raising the state pension age from 65 to 68, linking the state pension to increases in wages rather than prices and setting up a National Pension Savings Scheme, involving employee, employer and government contributions, for workers not covered by adequate occupational pension arrangements.

11. Outlook

Pensions will remain high on the industrial relations agenda, with unions seeking to defend existing occupational pension schemes and debate continuing over the Turner report’s proposals for reforming the UK’s pension system more generally. The government’s manifesto commitments in the area of enhanced employment rights are likely to be unpopular with employers’ groups concerned about the impact of regulation on competitiveness while key elements of its agenda for the modernisation of public services can be expected to meet continuing opposition from trade unions. If a merger is agreed between Amicus, the TGWU and the GMB, it would form a union with over one-third of the TUC’s membership, raising questions over the TUC’s future role and resourcing as well as concerns over the influence that the new organisation would exert within the Labour Party’s policymaking processes. (Mark Hall, IRRU)

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