Making flex appeal to unions

Unions state they are open minded about flex schemes, so long as they don’t negatively impact on terms and conditions. Edmund Tirbutt discovers even pension reform can be a smooth process when communicated correctly

Case Study: Prudential

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The involvement of trades unions in the implementation of flexible benefits schemes was once synonymous with confrontation. Union representatives tended to demonstrate deep-rooted suspicion towards anything new and some incidents became explosive enough to result in litigation.

But times have clearly changed and dealing with unions today is generally considered to be far more about trying to present a fair and intelligent analysis of the pros and cons of the proposed proposition than about preparing for a punch up.

Tim Roberts, managing director of employee communications and research consultancy Talking People, says: "When the first flex schemes appeared in the early 1990s, trade unions, and indeed many employers, were not sure of their long-term viability. They saw an additional complexity and wondered who was paying. But I feel the real turning point came about three years ago when organisations like Lloyds TSB and Centrica started introducing flex."

Amicus, the Transport & General Workers’ Union, the Communication Workers’ Union and the UBAC (the trade union for Bradford & Bingley staff) all declare themselves to be entirely open minded about flexible benefits schemes and say that they would deal with any cases on a horses for courses basis.

Unison and the Public and Commercial Services (PCS) Union, however, approach the subject on a more cautious note and both single out the ability to flex holiday entitlement as an issue of particular concern. But their reservations appear to be founded more on reason than simply a desire to be awkward.

Geoff Lewtas, unions national pay co-ordinator at PCS, explains: "Our general approach is that any flexibility introduced shouldn’t be detrimental to work-life balance. We therefore wouldn’t be in favour of people sacrificing leave for pay because you need leave when you’re on the treadmill. Around 70% of our members are women and have family responsibilities, so they need as much leave as they can get." The unions’ change in attitude appears to have taken place as their understanding of flex developed. Marcus Underhill, head of flexible benefits at Mercer Human Resource Consulting, says: "I find [unions to be] reasonably knowledgeable. Now you don’t have to explain the concept, but, if you go back three years, you often had to start from scratch. The three things I find they tend to ask about most are whether members’ underlying terms and conditions are affected, what impact flex will have over time and whether it weakens the union’s negotiating power. If these matters can be addressed then generally they are quite receptive and start moving on to subsidiary issues like quality and communication."

He adds: "Question number four usually tends to refer to the topical issue of salary sacrifice and pension contributions. Initially, they were suspicious but now they are really checking to see that everything is being crossed off to make sure, for example, that employees going down this route don’t lose out on state benefits."

Even switches from defined benefit (DB) to defined contribution (DC) pension schemes, which employee benefit consultants acknowledge as "a tough one", can prove surmountable if communication is effective. Unions will inevitably resist such a move on the grounds that it is likely to prove disadvantageous to employees, but if employers can demonstrate it is essential for financial reasons then the union may settle for negotiating something beneficial for their members in return.

As when conversing with unions on all other aspects of flex, those employers most likely to come unstuck are the ones that cut corners and fail to spell out the potential pitfalls involved. This could result in them having to subsequently scrap the scheme or significantly increase contribution levels once the union catches up with them. Even if an employer is able to push through a scheme without union agreement, the union could still ensure that there is a low staff take-up by not endorsing it.

"If you are going from defined benefit to defined contribution [pensions], a lot depends on whether the union has negotiating rights or whether it’s just there for consultation. If they have negotiating rights, you immediately get into whether jobs are at stake and whether there is any trade off. In all flex negotiations, you must make sure you give the right information, so you are basically as good as the proposition you are offering," explains Underhill.

Some consultants even emphasise that if employers involve trade unions at an early stage and are totally transparent with them, then they can prove to be one of the most cost-effective communication tools because members trust them and receive extensive information from them on pay and benefits.

The optimum time to involve unions is usually after a feasibility study has been conducted but before a scheme is actually implemented. A union representative is typically invited to join a project team, along with representatives from benefits consultancies that are involved and from the HR and finance departments. This team then assesses the results of a staff survey and implements the flex scheme.

If a union makes changes these will usually take the form of minor tweakings as opposed to major surgery. Prospect, a union for professionals with 104,000 members, for example, has only been involved with two flex schemes during the past couple of years.

One of these, which was phased in between January and September 2004, was for computer services provider CSC. Prospect maintained the core terms and conditions but secured slightly more generous terms for holiday entitlements and cars. Throughout last year, it was also talking to National Grid Transco about a flex scheme that hasn’t yet been implemented and is looking at the possibility of tweaking holiday, private healthcare and life assurance benefits.

Steve Jacobs, head of flexible benefits schemes at Gissings Advisory Services, says: "Consulting union representatives between the feasibility study and launch will help them feel involved. Even if they are fairly cynical and try to put a spanner in the works at the outset, careful negotiation can bring them around to approving the scheme and can allay any fears they may have.

"Unions are a hurdle which can be effectively managed through comprehensive communications. We’ve never known a flex scheme to have been significantly altered, even if it has involved a switch from a defined benefit to a defined contribution pension. "

Case Study: Prudential

Because the majority of Prudential’s 6,000 UK employees are members of Amicus, the largest private sector trade union, it inevitably had a major involvement prior to the 2002 launch of Prudential’s flexible benefits scheme.

Several representatives from Amicus were consulted on the scheme’s basic principles, the specific options to be made available, its web-based portal and its communications strategy. Andre Villaret, employee relations manager at Prudential UK and Europe, says: "We had a number of long discussions with them and bounced wordings off them. They did not make any major alterations but the benefits of broad consultation over the introduction of the scheme ensured that the final product had a broad appeal to our employees, which is borne out by our high levels of uptake. Their presence was a very positive influence, which undoubtedly helped communication."

An Amicus spokesperson reports that they cannot recall an example during recent years when the union has objected to the introduction of a flex scheme.