Union consultation aids HR goals

Getting on the right side of union chiefs will not only aid the smooth implementation of HR strategies, but will also help in explaining details of benefits to employees, says Victoria Furness

Case study: Informa

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Industrial strife may frequently make newspaper headlines, but contrary to popular belief trade unions and employers can find common ground and even support one another on some pay and benefits issues.

However, Brendan Barber, the Trades Union Congress’ (TUC) general secretary, recently proclaimed: “On pensions we have gone backwards.” He cited the case of Rentokil Initial, the first FTSE 100 company to close its final salary pension to all employees and added: “Pensions will, therefore, continue to top the trade union agenda.”

Pensions might be the hot issue of the day – for employers, as well as unions – but it is the latest in a long line of pay and benefits issues on which unions have been consulting and negotiating with employers. Anyone who can recall the industrial disputes of the 1970s and 1980s will know that the relationship between employers and unions has traditionally been far from smooth. Yet, many now argue that employment relations in the UK have entered a less confrontational stage, particularly among private sector firms, with unions more willing to understand the commercial realities facing organisations today.

This might have something to do with changes in legislation banning the closed shop and secondary striking, as well as the fact that union representation in the workforce has declined, particularly in the private sector and among smaller employers. The Department of Trade and Industry’s Workplace employment relations survey in 2004 found that less than two-thirds of workplaces had union members (compared with 57% in 1998) and only one-in-six companies with 10-24 employees in 2004 recognised unions (compared with 28% in 1998).

Clearly, the relationship between unions and employers varies across organisations and sectors. Differences between trade unions are also stark with some taking a more militant line than others. Ben Thornton, director of HR Solutions at Aon Consulting, says: “Some unions see any changes to employees’ terms and conditions as a negative step. While others want to work with employers and understand that an employer might want to make changes, which can be a positive thing.”

Tim Page, senior policy officer at the TUC, argues that the union’s stance may often depend on an employer’s management style. “If we are working with an employer that can be aggressive, we have to defend our members by taking a tough line. Yet if we are working with an employer that wants to treat us with respect, we can talk about how we can work with the company to help improve their organisation.”

Trade unions can be a useful communication channel for disseminating key messages about pay and benefits to a large group within an employee population. John Earls, research section head at Amicus, the UK’s largest manufacturing, technical and skilled persons’ union, believes there are significant advantages in working with unions this way. “We are trusted and independent, which can be invaluable in the process of any organisational change. We also have experts, such as pensions experts, that can bring their knowledge to negotiations.”

Brokering deals In some workplaces, this expertise is being brought to the table when deciding on the finer details of an employee’s benefits package. This might not have previously been the case, but there are clearly areas where both parties share a common interest. Adrian Wilkinson, professor of HR management at Loughborough University Business School, suggests: “The issues employers are concerned about, such as work-life balance, are where the union could act as a broker between employer and employees.”

Unsurprisingly, where cuts are being made to pay or benefits, unions tend to take an opposing view. Such scepticism has also greeted the introduction of flexible benefits schemes in some organisations. “When you implement flex, there is normally resistance as employees want to know what’s the catch? Unions can start from that position and may be more vocal in voicing their opinion,” explains Aon’s Thornton.

This is why it is wise to involve union representatives throughout any change process. “Either unions take an active role – even down to being involved in the selection panel picking the supplier of the flex scheme – or they are a stakeholder and kept informed of the project’s progress in the same way as the head of another business division would be regularly consulted, without the right to veto any decisions,” says Thornton.

Historically, trade unions have not been involved in the creation or selection of financial benefits, such as share ownership schemes. “[This is] partly because a lot of the motivation behind delivering such schemes has been based on financial reasons, as much as employee motivation and HR strategy,” says Wilkinson.

Yet, trade unions could play a significant role in promoting an understanding of personal finance through the workplace. Amicus has been working with the Financial Services Authority on its strategy to improve the financial understanding of people in the UK. Earls believes it presents an opportunity for both unions and employers to highlight “some key elements in employees’ terms and conditions that they need to take into account when assessing their personal finances, such as pension arrangements, access to childcare vouchers and so on”.

The financial benefit that has attracted the most union attention in the last 18 to 24 months is, unsurprisingly, pensions. Professor Gregor Gall, director of the Centre for Research in Employment Studies at the University of Hertfordshire, observes: “Pensions have always been an issue, but they have never been so high up the bargaining agenda. It reflects the tightening of entitlements for new workers. There is also a view, more now than ever before, that pensions are deferred wages and an employer’s contributions are seen in that light as well.”

It is a trend that Steven Walters, employee relations manager at Serco Metrolink, which operates the trams in Manchester, has noticed in his dealings with the Transport and General Workers’ Union (T&G). “It is not the first time pensions have appeared on the agenda, but it is the first time, to the best of my knowledge, that the union has asked for it two years on the trot.”

Unions have shown a particular interest in employers that are closing a defined benefit (DB) pension scheme in favour of a defined contribution (DC) pension plan. Yet, discussions over pensions provision do not have to descend into dispute action as long as both sides keep talking. By ensuring a constant stream of dialogue, an employer can explain to represented unions why changes are being made to the benefits package and what replacement is being offered instead.

Alan Fergusson, director of Kudos employee benefits consultancy, has helped a new company, formed from a management buy-out, move from a DB to DC pension scheme. “The unions were involved at a very early stage in discussions about the buy-out itself, as they knew one of the emotive issues would be the discontinuation of the final salary pension scheme. We did a series of presentations to their 400 employees, sometimes through the night [as staff often worked shifts]. At each presentation a union representative was in attendance and occasionally someone from the audience would ask the representative a question. The bottom line was that the union was involved at a very early stage and knew the reasoning behind the changes, so it could form an opinion,” he explains. Consequently, when the new group personal pension plan launched, there was 100% take-up.

If offered the choice of seeing an employer discontinue its final salary pension scheme or cease trading, most unions recognise that their members would prefer to keep their jobs rather than collect their P45s. What is more, many unions are all too familiar themselves with the scenario that employers face.

Tony Clare, a partner at Deloitte, says: “You will find that a lot [of unions] are looking to move their own employees to a DC scheme, which will make it harder to fight their case. They face the same issues as everyone else: people are living longer, the cost of pensions has increased and their subscription numbers are falling.”

One employee benefits consultant admitted to having already met with a union to discuss the future of its own final salary pension scheme. On the subject of Amicus’ own arrangements, Earls says: “I’m not really in a position to comment, but Amicus very much recognises that employers have a responsibility to contribute to employees’ pension funds.” In the context of pensions, the creation of a super union – which has been mooted by T&G, Amicus and GMB – makes economic sense because it will create efficiencies and reduce costs across the three unions. Such a super union could also have implications for union willingness to co-operate with employers in making changes to the pay and benefits package.

But, Mike Emmott, adviser for employee relations at the Chartered Institute of Personnel and Development, claims a super union “will have virtually nil impact on the workplace”. Michael Sippitt, managing partner of law firm Clarks Legal, takes a different view. “Although some employers comment that the proportion of union membership in the private sector is low, unions are still powerful in the public sector and, in effect, the outsourced service sector which provides services to the public sector,” he says.

When a private company takes over the running of a public service, Transfer of Undertakings (Protection of Employment) (Tupe) regulations stipulate that workers’ terms and conditions are carried over (including pensions in the public sector). This means that a lot of private sector workforces are now unionised, with worrying potential repercussions, says Sippett. “When you examine the infrastructure of the country, you’ll find these unions have considerable power to bring the country to a halt and disrupt services,” he warns.

Obviously, this will not be a widescale problem if trade unions continue to struggle to attract new members. Future recruitment campaigns could also be hampered by the introduction of the Information and Consultation of Employees (Ice) Regulations last April. These regulations require companies of a certain size to formalise their process for consulting with staff – usually with the creation of employee forums, if 10% of the workforce request such a move.

In some workplaces, these staff forums could end up usurping trade unions as the employee representative body, particularly as many issues, such as pay and benefits, have made their way onto the agenda for discussion, despite the fact that forums were not created with this purpose in mind. “The problem with unions is that they have been ambivalent in their response to the concept of staff forums and, in some respects, are unsure how to respond. On the one hand, they realise it may negate the reason for a union, while some unions openly proclaim that they should use it as a broader forum to talk with management,” says Sippitt.

It is too early to see what effect the Ice regulations will have on trade union representation, as well as employee involvement, in organisations. As the recent protests about the closure of final salary pension schemes have demonstrated, the relationship between employer and trade union is never predictable. Yet, despite this, it can be valuable. Some unions have shown a willingness to acknowledge the commercial realities facing organisations today and are as keen as employers to boost staff morale and motivation. It might be a rough ride at times, but listening to each other’s point of view could produce a win-win situation for both employer and union.

Case study: Informa

When publishing house, Informa moved to a flexible benefits scheme two years ago, group HR director, Keith Brownlie, was keen to consult the National Union of Journalists (NUJ) on the proposed changes.

“The NUJ had to understand the pension scheme as well, because it is now part of the pot. We took the union through a series of presentations and showed it the tax benefits of putting pensions into flex,” he recalls.

Since then, Informa has also consulted with the NUJ on the options offered to staff through the scheme.

“We talked to the union about PCs, now we are talking to it about bikes, so that benefit might be there next year,” he explains.

Ice Explained

The Information and Consultation of Employees (Ice) Regulations currently apply to businesses with 150 or more employees and give staff the rights to be informed about the business’ economic situation, consulted about employment prospects, and informed and consulted about decisions likely to lead to substantial changes in work organisation or contractual relations, including redundancies and transfers.

The regulations will apply to organisations with 100 or more staff from April 2007 and organisations with 50 or more employees from April 2008.