Union reps face battle to win better standard of living

Over the past year, retail price inflation (RPI) had been on a downward trend until September, but it has been above 3.0% since then. Meanwhile, consumer price inflation (CPI) has remained stubbornly above the 2% target set by the Treasury and has been stuck at 2.7% for the final three months of 2012.

UK Economy

Union reps and officials are almost unanimous (88%) that that RPI inflation will be around 3% (64%) or higher (24%). One local government rep predicted that it will “fluctuate between 2-4%”, putting a strain on the bargaining environment. But with domestic bills, bus, train fare and fuel increases, members’ expectations will be “higher than the rate of RPI inflation”, a bus industry official predicted. Even if the headline rate does fall, staple goods that make up the bulk of workers’ outgoings, such as food, fares and energy, will “continue to rise ahead of the official indices”.

The UK economy seems to be ending 2012 where it started and there are fears of a triple-dip recession. And union reps and officials are a more uncertain about the health of the economy than a year ago. Three out of five (61%) are expecting it to be weaker than in 2012, including 38% predicting a return to recession. This time last year the proportions were 84% and 49% respectively.

A further 35% think the economy will be “about the same” as last year, so majority union opinion seems to lie somewhere between an economy that is “flat-lining” and the “triple-dip” recession. As one car components company rep put it: “No cars being bought = no profit being made = no pay rise”.

There is as small but more optimistic minority who see the economy “starting to move”. A rep from Visteon Engineering Services predicted that the UK economy would grow by 1% in 2013, but with GDP and consumer spending not returning to pre-recession levels before the second half of 2014 or early in 2015.

Worries about European and global uncertainties have eased only a little over the last 12 months but they are still influencing the UK workforce.

Over half of the reps (55%) believe the employer could be adversely affected by the Euro crisis, although some highlight overseas trade as a strength.

A union official whose remit includes manufacturing said: “I am already seeing worse offers being put forward and employers using the issue of the euro”. Taken together with concerns about the US economy, the government’s stated aim of an export-led recovery “appears to be totally unrealistic”.

Employer activity

Almost two-thirds of reps (65%) say the employer they deal with is either “cutting back its activities” (41%) or “marking time”, waiting for the economy to pick up” (24%).

They quote examples from the insurance industry (facing “gender neutral” pricing and other issues), the media (redundancies continue), and the water industry (“struggling” to meet conditions set by the regulator). Profitability concerns, increases in shareholder dividends, cost-cutting and an unwillingness to invest are all part of the picture.

But on a more positive note, just over a quarter (26%) said the employer is “expanding or getting ready to expand its activities”, including almost half of the manufacturing employers in the survey. Other expanding sectors included half of the transport employers and a sprinkling of communications, finance, and retail wholesale or repair employers.

Expansion even seems to be on the cards at some colleges and in the voluntary sector, although employers may simply be “treading water” (for example, bidding for contracts to replace those they expect to lose). But, like the food company making large investments, they may still be expecting the workforce to submit to changes “with the only reward being security of employment”.

Impact of public spending cuts

With no let up in the coalition government’s public spending cuts, almost three-quarters (72%) say workers they represent will be affected “at work”, 47% directly, 25% indirectly. That’s almost identical to last year’s survey.

Big cuts in the public sector can’t be overlooked. For example, the London Fire and Emergency Planning Authority is committed to £65.8 million cuts over the next two years, which will lead to job losses, station closures and attacks on pay and conditions.

Cuts like these at local authorities, colleges and other institutions are producing what one union rep described as a “culture of fear”, leading staff to accept greater workloads “that they may have felt confident about refusing in the past”.

And they’re rippling through to other sectors like housing. Local authorities may be promoting the Living Wage, “but when they put services out to tender, they expect the private/3rd sector to pay minimum wages”, a rep from Nottingham Community Housing Association complained.

But cuts aren’t just a public sector or voluntary sector problem. Nearly half (47%) of reps and officers from the private sector said the workers they represent will be affected at work, including 14% “directly” affected. Public authorities have less to spend on external goods and services and, as a rep from Macmillan Publishers pointed out, benefit cuts in April will reduce the “limited purchasing power” of those claiming.

Bargaining priorities

Taking these varying factors into account, it will come as no surprise to that almost two-thirds of reps and officials (64%) say the bargaining environment in 2013 will be tougher than last year. Apart from the factors already mentioned, and concerns in the public sector about their bargaining machinery, they point to the coalition government’s attack on employment rights.

Pay and jobs are equally likely to be unions’ main bargaining priorities in 2013, both options attracting 43% of the responses. That makes pay a stronger union priority than last year (when the verdict was pay 37%, jobs 51%). But there is a clear divide between public sector priorities (60% jobs) and private sector priorities (60% pay).

Job-related priorities include out-sourcing, redundancy pay and recruitment. Pay-related priorities include allowances, performance-related pay, the Living Wage, pay transparency, grading and job evaluation.

And this year there is again a minority (14%) who have other priorities. Many of these mention terms and conditions including sick pay/capability, hours of work, pensions, agency/casual work, training and apprentices and union facilities.

Pay expectations

Among the majority not affected by public sector pay restraint a below-inflation increase is most likely in 2013 but a pay rise equal to inflation is the next most likely result. As noted above most see inflation running at 3% or higher.

A minority are hoping for an inflation-linked deal (25% think there’s a medium chance of this, 6% a high chance) while almost one in five think there could be a pay rise above inflation.

Few anticipate a pay cut but freezes will be part of the landscape again this year: 17% think there is a high chance, 19% more a medium chance, confirming that things are still far from being “back to normal”.

Three out of 10 think that there is a medium chance of a bigger increase for the lowest paid (7% say a high chance) and half think the Living Wage has either a medium or high chance of being part of the 2013 deal.

A majority expect a consolidated increase and large minorities see a high or medium chance of performance-related bonuses and pay progression or increments.

Where details of the 2013 settlement were already known at the time of the survey almost half had a pay rise below inflation, almost a third a pay rise equal to inflation and one in six a pay rise above inflation. Rises of around 2% to 3% seem to confirm the trend will be higher than the 1% cap imposed on most of the public sector.

Prior to the survey, the only hard evidence about private sector settlements in 2013 was the value of pre-agreed long-term deals. If November’s 3% increase in retail price inflation (RPI) carries over into 2013, 100 such deals on Labour Research Department’s Payline database would give a midpoint (median) pay rise of 3%, with half worth between 2.5% and 3.0%.

However, these deals are unlikely to be representative of the overall trend.

With the threat of a triple-dip recession, some reps and officials are inevitably asking how far their members can and should go to win higher wages. For some strike action is “the only chance we’ll have of a decent pay rise” and the momentum built up in the November 2011 pension strikes should be “put to the test” on pay.

But for others – given the spending cuts and pressure for redundancies — the prospect of industrial action seemed more remote. “Budget cutbacks and the employer using the economic downturn as an opportunity to drive down wages continue to leave workers jittery,” a manufacturing rep said.

Nevertheless, John Taylor, chief executive of the advisory service ACAS, did recently warn that pressure on employers to keep wage costs under control could clash with the desire by employees to catch up with the cost of living.

“If inflation and interest rates rise then this will increase wage demands,” he said. “If the private sector meets these demands through increases in the level of pay settlements then the public sector could see pressure for their pay to catch up after periods of restraint”.

Public sector pay restraint

Pay restraint imposed by the government affects four out of five public sector employers in the survey. In these cases a 1% cap will be a little more widespread this year that a general pay freeze and/or £250 for the lowest-paid. Some parts of the public sector not directly covered by the 1% cap (like the National Assembly for Wales and Scottish local authorities) look like they’ll be following it. So too do local government employers in England and Wales.

While a specific £250 payment for the lowest paid (part of the initial phase of pay restraint) will be less common this year, union reps think the Living Wage (a voluntary agreement to apply recognised minimum pay levels) has a high or medium chance of being part of the settlement in six out of ten cases. The chances of a pay cut are seen as low but not non-existent.

The format of pay rises under pay restraint policy became a significant issue. This year reps think pay rises are a more likely to take the form of a consolidated increase (money being added to individual pay levels) than an increase in salary scales, performance-related bonuses or lump sum payments. It also seems that there’ll be a low chance of pay progression or increments in up to half of these deals, even though it would normally be part and parcel of most public sector pay systems.

Workforce size

When it comes to assessing the bargaining environment, workforce trends can be indicative. Job insecurity is still a major concern, with half (51%) of those surveyed expecting the size of the workforce they represent to reduce this year; just over a third (36%) expect no change, while just 13% think that it is likely to increase, very similar to last year.

Private sector respondents were more confident than those in the public sector but even so, 37% were expecting a workforce reduction, 50% no change and only 13% an increase.

Among those expecting a workforce reduction, four of five (80%) predict redundancies, over half (54%) a re-organisation leading to a transfer of jobs and 42% some sort of outsourcing.

Almost three out of five (57%) predict natural wastage/frozen vacancies which may be less traumatic, although at the Welsh Ambulance Services NHS Trust it led to “dangerous understaffing” and the need to recruit. Jobs are being lost through contracting out and outsourcing in the Probation Service, but through a cut in agency workers at Eaton Electric.

The threat of redundancies may be muted if there are job gains at the same time. At the Department for Work and Pensions the introduction of Universal Credit is likely to offset staff reductions in other areas, while the University of Aberdeen is re-recruiting after significant voluntary severance two years ago.

Job growth, where it comes, is welcome and could help strengthen the bargaining environment in 2013. At Land Rover, the workforce will increase as new starters join through an agency, becoming employees after 12 months. And at Taunton Deane Borough Council staff are being TUPE-transferred back in to the council workforce from a private landscaping contractor.

But jobs growth can also mean more part-time work on lower salaries, or a more casualised workforce as at Manchester Metropolitan University.

Overtime

Overtime levels can indicate how much demand there is for an organisation’s goods and services, which will have a bearing on the bargaining climate.

“Significant overtime working” in 2012 was reported by two out of five of reps (40%). Of these, a fifth (20%) thought that there could be more overtime in 2013, just over a quarter (27%) less and just over half (53%) the same.

Together with 8% with “no significant overtime” in 2012 who said there’d be more this year, these results suggest no real change. However, the survey also threw up cases of workers having to work longer hours without extra pay, due either to staff shortages or the employer’s abuse of time off in lieu arrangements.

Lay-offs and shutdowns

Lay-offs and shutdowns were widely used in the 2008-09 recession and may have helped keep unemployment down. These measures are anticipated at one in five workplaces (21%) in 2013, a much higher proportion than in last year’s survey (5%). The respondents came from the private sector as well as the public sector and so reflect the fears about a return to recession.

Working hours

Very few in the survey anticipate either a reduction in basic hours (5%) or an increase (8%). However, cases of unpaid work and long hours coupled with those respondents anticipating a rise in basic hours suggest that some employers are demanding and getting more from their workers.

The survey confirms increasing use of part-timers and shorter than normal-hours contracts: 36% said that the employer made significant use of arrangements like these in 2012 and over a third of those (38%) think they’ll be used more in 2013. Together with those who thought short-hours workers would be introduced this year, nearly 18% flagged this up as a rising trend.

In most cases this will involve part-time workers but 23% of all respondents anticipate that the employer will be using “zero hours” workers (who have no guaranteed hours); 9% foresee the use of short shifts; and 8% the use of other short-hours contracts. This issue will be covered in more detail in the February issue of Workplace Report.

Use of agency, casual and fixed-term workers

Almost two-thirds of reps (65%) reported “significant” use of agency, casual or fixed-term workers in 2012. In a quarter of these cases, the employer is expected to do this even more this year, but in an equal number of cases, less, suggesting no overall change.

Agency workers are used most widely, followed by fixed-term contract workers and (much less frequently) casual workers. “Uncertainty” and re-structuring are two of the reasons given for these insecure forms of employment, alongside more ‘traditional’ peaks in demand or ‘supply’ teaching). At one food company, agency workers were “on the books” full time and expected to work 60-plus hours, with little notice of weekend working.

Pensions

A third of all union reps and officers in the survey expect pension changes in 2013, mainly an increase in member contributions and auto-enrolment.

Rising pension contributions detract from the value of pay rises, which therefore has a bearing on pay negotiations. In some cases unions will be seeking higher employer contributions but others say auto-enrolment may mean a reduction in employer contributions.

Conditions of service

Concerns about conditions of service underline the bargaining difficulties unions still face with just 5% expecting improvements, but 40% expecting conditions to get worse. Respondents identified problems in particular with sick pay as well as pay structures, allowances, protection, increments, performance-related pay, shift allowances, standby and callout, overtime and car user allowances.

They highlighted working time issues like overtime/hours banking/annual hours, shifts, flexible working, leave, time off and time off in lieu.

And they flagged up a wide range of other issues, including harmonisation, discipline and dismissal, appraisal and pensions.

In short, they have a lot on their hands beside the annual pay rise, and face a busy year ahead.