Pay bargaining agenda 2012: private-sector services

Author: Adam Geldman

According to those negotiating pay awards in the services sector, 2012 is likely to present another tough year for wage bargaining.

Key points

Our in-house team of reward specialists has sought the opinions of key decision-makers among employers and trade unions regarding the likely course of pay-setting in private sector services. Their thoughts on the forthcoming wage round are presented below.

The sectors covered in this article are:

• charities;
• finance;
• retail and wholesale; and
• transport and communication.

An accompanying article considers similar issues in the manufacturing and production sector.

XpertHR has also recently examined the pattern of pay awards over the past year and looked at each sector of the economy in turn.

Charities: funding remains the key

By common consent, it has been a difficult year for charities. The key issue has been, and is likely to remain, one of finance. Cuts in public spending have had a knock-on effect on many voluntary organisations, particularly those reliant, at least in part, on local authority funding. Other charities have not escaped unscathed, with donations falling. This squeeze comes at a time when demands on the sector are likely to increase.

According to Unite, a lack of funding has led to the imposition of wage freezes in many organisations and, in some instances, pay cuts, over the past 12 months. Indeed, our latest analysis of settlement trends in the charities sector finds that the median basic pay award in the year to the end of August 2011 was nil.

Wage standstills have triggered anger among Unite's members, the union says, and there have been industrial action ballots in a handful of charities. "This is something that would have been unheard of a couple of years ago. But many workers are now at the end of their tethers," it states.

With the funding situation unlikely to improve in the foreseeable future, Unite does not anticipate any great change, certainly not for the better, over the next bargaining round: "Despite our best efforts, members will continue to see an erosion of their living standards," it predicts.

Indeed, the latest voluntary sector salary survey from XpertHR found that employers in the sector are anticipating a median 2% pay award over the next year, well below [Article:111000/.aspx#no-let-up "forecast retail prices index (RPI) inflation of 3.5%"].

Finance: settlement levels to rise

Unite has around 130,000 members within finance, claiming a strong presence at Barclays Bank, HSBC and the Lloyds Banking Group, as well as at several high-profile insurance companies including Aviva and Prudential. The union says that the sector has faced considerable upheaval since the financial crisis of 2008, with many employers trying to reduce costs, particularly by shedding labour. The latest bout of economic uncertainty will do nothing to allay members' fears.

Despite the uncertainty over the future course of RPI inflation, Unite will continue to use this inflation yardstick as a starting point for pay claims, even though a number of employers have been pushing to bargain around the consumer prices index. As well as looking to secure cost-of-living increases, the union says that it will seek to raise pay-band minimums and maximums. It will also be applying pressure on firms to tackle equality issues by pushing for pay audits, as well as seeking more transparency in performance-related pay arrangements.

Unite says it remains optimistic that salary increases will be slightly higher than 2010/11, when XpertHR recorded them clustered around the 2% mark.

However, the union has claimed that in previous years there has been something of a "wage cartel" operated by employers and that an analysis of 2011 finance awards tend to confirm this, with deals - barring one or two notable exceptions - bunching around 2.5%. This is striking, Unite says, because negotiations have resulted in pretty much the same settlement irrespective of whether the company was making a profit or a loss. It remains to be seen whether this will continue into 2012 or if the cycle will be broken.

Retail and wholesale: keeping pace with inflation is union priority

Usdaw is the main retail trade union, boasting a membership in excess of 400,000, many of whom are in low-paid occupations. Over the coming 12 months it will be focusing its efforts on securing pay settlements that will at least match headline inflation, rather than improving the non-pay elements of reward. However, it recognises that many employers will be reluctant to concede such increases during what are tough times on the high street. Nevertheless, Usdaw anticipates that, on average, retail and wholesale pay awards in 2012 will at least match those in 2011 - around 2.4%.

Transport and communication: increases to centre on 3%

XpertHR spoke to Andy Kerr, deputy general secretary of the Communication Workers Union (CWU), about the prospects for the 2011/12 bargaining year. The CWU is the largest union in the telecommunications sector, with more than 200,000 members working in Royal Mail, the Post Office, BT and O2, among other organisations.

The CWU cites a number of factors likely to influence negotiations in the coming wage round. Key among them will be the parlous state of the economy which, it says, will place significant downward pressure on pay awards, particularly among firms experiencing financial difficulties. "An employer's business performance will have a significant bearing on the settlement realistically achievable," it says.

In many cases, this could make it difficult for members to secure deals that exceed, or even match, headline inflation. This is critical as the CWU, in common with other unions, is committed to protecting its members' living standards. If previous awards in a particular company have been comparatively low, or where there have been pay freezes, the need for a settlement that at least matches the cost of living will be even more pressing, it states.

The CWU says that executive pay awards remain generous, even in companies that are performing badly, and it will use this argument when pursuing wage claims. In firms that are doing well, "there is every reason to expect deals to meet, or exceed, headline RPI", it says. The union will also consider settlement trends in the wider economy, particularly in similar-sized firms to those where it bargains, with these deals also acting as a yardstick in what it predicts is likely to be a tough negotiating climate.

The Connect sector of the Prospect trade union represents employees in more than 600 communications firms, with its 19,000 members working on fixed-line telephony, mobile networks, Wi-Fi and information technology. According to the union, deals in communications ranged between 2% and 3% this year, only slightly higher than in 2010.

Given continued uncertainty over the economy, Connect does not anticipate a pay explosion in the coming months and it predicts that settlement levels in telecommunications will again be pitched below headline RPI.

The trade union Unite organises in the transport part of this diverse sector, including buses, road haulage, aviation and rail, as well as docks and waterways. It says that pay settlements averaged 3.2% in 2010/11 and predicts that deals will come in slightly ahead of this figure in the next 12 months.