Royal Mail labour agreement a strategic issue in growing internet retailing market

The Communication Workers Union and the newly privatised mail provider stated yesterday (Wednesday 4/12/2013) that they had reached “a negotiators agreement in principle…on pay, legal protections, industrial stability and pensions”. However the details of the agreement will only be made public when the trade union presents the proposal to its members in order to gain their approval through a vote.

According to press reports the new deal includes a commitment to an increase in pay of over 8% and possibly guarantees on security of employment. Both have previously been issues of dispute between the two sides and the trade union was given in October some limited support by its membership to organise strikes over the issue.

This latest agreement must be significant for the future of Royal Mail particularly in terms of its cost base. Whilst the pay increase is substantial, it is likely to be spread over three-years. However the issues around employment may be more important especially if they effect the flexibility of the work force or the ability of Royal Mail to reduce its size.

Royal Mail’s CEO Moya Green last week commented that she was very keen that the short-term threat of strikes be avoided not least because the uncertainty that it caused was deterring customers for online-retail services from using the Royal Mail. Yet the long-term issue of how to adapt the company to the reality of the new market must be pressing and wage costs and manning levels are a key element in this. Striking a balance between the need to sustain stability in services with the long-term need to tackle effective business processes is one of Moya Green’s biggest tasks. e-commerce volumes are growing at an impressive rate and the danger is that Royal Mail’s market-share will shrink if it cannot offer competitive costs and services.