2003 Annual Review for the UK

This record reviews the main industrial relations developments in the UK during 2003.

Political developments

The Labour Party government, re-elected in June 2001 for a second term of up to five years, continued in office throughout 2003. In local council elections held in England in May, the Conservative Party and the Liberal Democrat Party gained seats at the Labour Party’s expense. Labour lost control of a significant number of councils and the Conservatives now control the largest number. Labour lost seats in the Scottish Parliament but gained them in the Welsh Assembly, remaining the largest party in each case.

Collective bargaining

As there is no system for registering collective agreements in the UK, making an accurate assessment of the number of collective agreements in force is not possible. Collective bargaining in the UK continues to be highly decentralised: most bargaining is at company or workplace level, with little multi-employer bargaining outside the public sector.

Pay

Collectively-agreed basic pay rose by an average of 3.2% during 2003 (according to the Labour Research Department[LRD], Workplace Report, November 2003), with the increase in average earnings being higher, at 3.6% (New Earnings Survey, cited by LRD).

The government generally sought lower pay increases for public service employees than in the previous two years, except where associated with major reforms in pay systems and working practices. Among the key pay awards recommended by the relevant independent pay review bodies:

• school teachers in England and Wales received a general pay rise of 2.9%, with further increases for teachers in inner London through the introduction of new pay scales (UK0302105F);

• National Health Service staff received a pay increase of 3.225%. For the majority of staff, this was the first part of an agreed (minimum) pay increase of 10% over three years. Doctors and dentists were also awarded a 3.225% increase in a one-year deal, as their negotiations over new contracts had not been completed: and

• the armed services review body recommended increases of between 3.2% and 3.7%.

The government’s preference for greater regional variation in public sector pay, driven by recruitment and retention difficulties in London and the south-east, proved controversial, drawing an angry response from trade unions (UK0306110F).

In February 2003, the government published a code of practice governing the terms and conditions of the employees of contractors providing services to local authorities (UK0302107F). This specifies that new recruits working alongside transferred, former local authority employees must be offered an employment package which is no less favourable in overall terms. The move came in response to a long-running campaign by trade unions to end the 'two-tier workforce' in local government services.

Working time

Average collectively agreed normal weekly working time in 2003 was 37.2 hours (IDS Study 760, October 2003). Average actual weekly working hours for full-time employees stood at 37.5 hours (Labour Market Trends, November 2003).

Agreements reducing working hours were not reported to be widespread during 2003, but engineering unions began to focus on further reductions in the working week. Unions secured longer holiday entitlement in some companies. New statutory rules on 'family-friendly' working arrangements (see below under 'Legislative developments'), and broader union pressure for an improved 'work-life balance' (UK0302103F), prompted agreements on flexible working at a number of manufacturing companies, providing, for example, flexible start and finish times for production workers.

Job security

No significant new employment security agreements were reported. In recent years, a number of high-profile employment security guarantees have been overtaken by closures or restructuring. More generally, unions continued to express concern at the level of job losses in manufacturing and other key sectors, including financial services, and to call for more effective consultation requirements on employers (see below under 'Employee participation').

Equal opportunities and diversity issues

New Earnings Survey statistics showed that the gap between the hourly earnings of full-time female employees and those of full-time male employees (excluding overtime) narrowed by 1 percentage point during 2003, to 18% (UK0402104F).

Measures to tackle the gender pay gap focused on the promotion of voluntary equal pay audits. While such audits have been undertaken in a number of leading companies, others have been resistant to the idea. During 2003, the Trades Union Congress (TUC) completed a pilot project, supported by the government’s Union Learning Fund, under which hundreds of workplace equal pay representatives were trained to address the gender pay gap and carry out pay reviews. An evaluation of the project suggested that it had played a significant part in pushing equal pay up the negotiating agenda and in prompting employers to agree to equal pay audits.

Training and skills development

Research published during 2003 found that collective bargaining over training is still relatively rare, but that joint project work, consultation and other forms of employee involvement in training provision are more widespread. Training was found to be more effective when management and employees were jointly involved in decision-making. Case studies also revealed tension between training for business needs and training for the wider employability of the workforce, with union-led initiatives being more likely than employer initiatives to enhance employability.

Provisions in the Employment Act 2002 enabling 'union learning representatives' to take paid time off to promote workplace training and development opportunities came into force during 2003 (UK0305102F).

Other issues

Pensions featured prominently on the industrial relations agenda during 2003. Traditionally the issue of pensions has not been linked to collective bargaining. However, as companies have increasingly closed final salary pension (FSP) schemes, in a number of instances unions have threatened or taken industrial action to prevent such a move (UK0301109F). Negotiations between employers and unions to address shortfalls in FSP schemes have also become more common. Two examples during 2003 were at Rolls-Royce (aerospace) and WH Smith (retail).

Legislative developments

During 2003, a number of significant changes to the legal framework were introduced, and proposals for further reforms published, against the background of continued concern on the part of employers’ groups over the volume and cumulative impact on businesses of employment regulation, especially from the EU (UK0310103N).

In February 2003, the UK government published a review of the Employment Relations Act 1999 and related legislation (UK0303102N). This rejected the case for extensive reform, but proposed certain relatively minor amendments, primarily to improve the operation of the statutory trade union recognition procedure. In December, after further consultation, the government published a new Employment Relations Bill containing the changes. The limited outcome of the review was welcomed by employers, but disappointed trade unions (UK0312104F).

Much attention focused on new 'family-friendly' employment rights which came into force in April 2003 (UK0304104F). Regulations made under the Employment Act 2002 gave parents of children aged under six (or of disabled children up to 18) the right to request flexible working patterns for childcare purposes, and obliged employers to give proper consideration to the request. At the same time, new rights to adoption leave and two weeks’ paid paternity leave came into force, alongside improvements in maternity leave and pay. Research published in October 2003 by the Chartered Institute of Personnel and Development found that, despite apprehension in a number of quarters, the right to request flexible working had operated smoothly, and that most employers reported no significant problems in complying with the legislation (UK0312102N).

Regulations protecting workers from discrimination and harassment at work on grounds of sexual orientation and religion or belief came into force in December 2003 (UK0312101N). The Regulations were intended to implement key elements of the 2000 EU equal treatment Directive (2000/78/EC) (UK0308106T). Although the TUC generally welcomed the new rights, it mounted a legal challenge to two aspects of the sexual orientation Regulations - those which allow pension schemes to discriminate in favour of married people and religious organisations to discriminate against gay people - arguing that they do not fully comply with the Directive.

The organisation and role of the social partners

Brendan Barber became general secretary of the TUC in May 2003 following John Monks’ appointment as general secretary of the European Trade Union Confederation. In September it was announced that Digby Jones’ term of office as director general of the Confederation of British Industry (CBI) had been extended for two further years, until the end of 2006.

The election during 2003 of left-wing candidates as the new general secretaries of two influential trade unions - the Transport and General Workers’ Union and the GMB general union - reinforced the anti-'New Labour' stance of many of the UK’s largest unions, and was seen as likely to put further strains on government-union relations (UK0306105N).

Industrial action

Provisional statistics for the first nine months of 2003 (Labour Market Trends, December 2003) showed that levels of strike activity were significantly down on the same period in 2002 on all counts - number of stoppages, number of workers involved and working days lost - representing a return to the historically low levels of the five years up to 2002.

Notable strikes in 2003 included the continuation of the fire service pay dispute which had begun in 2002. Following the rejection of a draft pay deal by a special conference of the Fire Brigades Union (FBU) in March 2003 (UK0304102N), further negotiations between the union and the local authority fire service employers produced a revised agreement which was accepted by an FBU conference in mid-June (UK0307101N). Under the agreement, firefighters were to receive staged pay increases producing a cumulative increase of 16% by July 2004, subject to the satisfactory conclusion of further negotiations. Although this figure was well short of the 40% increase originally claimed by the union, the settlement was still one of the highest in the public sector.

Elsewhere:

• members of the National Union of Rail, Maritime and Transport Workers took industrial action at nine UK train companies in March 2003 over the safety role of train guards (UK0304103F);

• an unofficial strike in July 2003 by British Airways customer services staff over a new electronic attendance-monitoring system caused major disruption at Heathrow airport(UK0308103F); and

• Royal Mail employees belonging to the Communication Workers’ Union voted against a national postal strike over pay in September 2003, but London postal workers subsequently took industrial action in pursuit of improved London weighting allowances (UK0310103N).

Employee participation

In July 2003, the government published a consultative draft of Regulations to implement the EU information and consultation Directive (2002/14/EC) (EU0204207F), based on a framework it agreed with the CBI and the TUC (UK0307106F). The final text of the Regulations will be laid before Parliament once the Employment Relations Bill reaches the statute book. The Bill will empower ministers to make regulations concerning the information and consultation of employees. Explanatory notes issued by the government stated that the powers under section 2(2) of the European Communities Act 1972, which are usually used for Regulations implementing EU Directives, are 'not considered sufficiently wide to cover all aspects of the proposed Regulations'. However, this seems unlikely to imply a major change in approach from the draft Regulations published in July 2003, nor that the final Regulations will contain more onerous information and consultation requirements than those of the Directive itself.

Also in July, the government published a discussion paper on the UK experience of European Works Councils (EWCs) (UK0308102N). Its aim was to gather information and views to help the UK government prepare for forthcoming EU-level discussions on the possibility of revising the EWCs Directive (94/45/EC). The CBI and TUC submitted sharply divergent responses. The CBI saw 'no reason for a substantial review of the Directive', and urged the government to take a 'minimal approach' to its revision, whereas the TUC argued that the Directive has 'serious shortcomings' and that its revision is 'both necessary and urgent' (UK0311101N).

In October 2003, the government issued draft Regulations to implement the employee involvement Directive (2001/86/EC) linked to the European Company Statute (ECS) (EU0206202F) and to deal with certain company law aspects of the ECS. Following consultation, revised Regulations will be laid before Parliament, coming into force in October 2004 as required. There is as yet no indication of the extent to which UK companies are likely to incorporate as European Companies.

Stress at work

In the most recent biennial TUC survey of union safety representatives, stress continued to be seen as the UK’s 'number one workplace health hazard'. In April 2003, the TUC reported that unions had launched 2,500 new stress claims against employers in the previous year. The TUC continued to press for stress to be covered by an approved code of practice (a draft code was produced by the Health and Safety Executive (HSE) in 1999 but remains unadopted), and to promote a 'stress MOT' auditing tool (launched by the TUC as part of the stress-themed European Week of Safety and Health in October 2002) to assess the causes of stress and employer responses.

CBI surveys have also identified stress as 'a notable cause of sickness absence and a costly burden on business', but the CBI believes that guidance and best practice is the best way to manage the issue, not legislation. At the European level, the CBI sees the social dialogue as 'the best route for providing the framework for action to manage work-related stress'. In the current social partner discussions on work-related stress, the CBI wants 'an agreement flexible enough to let businesses achieve compliance under current UK laws and practice'.

During 2003, the HSE piloted draft 'management standards' of good practice for tackling work-related stress, and launched a new report identifying a good practice model for tackling stress, based on the experience of 18 organisations seen as 'beacons of excellence' in stress prevention.

Undeclared work

According to national figures published in 2002 and cited in the UK's 2003 National Action Plan (NAP) for employment (UK0310106T), undeclared income amounted to about GBP 14 billion in 1999, approximately 1.5% of GDP. There are no reliable estimates of the number of workers involved. The UK government’s approach to tackling this problem, as outlined in the NAP, focuses on:

• increasing incentives to move from undeclared work into regular work;

• preventing people from joining the hidden economy;

• detecting and punishing offenders; and

• increasing public awareness of the benefits of legitimate working and the risks of undeclared working.

Specific measures include steps to counter illegal working, such as document checking requirements on employers, stronger powers to combat social security fraud, and action against collusive employers, alongside positive moves to reinforce honest behaviour, including tax-benefit reforms like the National Minimum Wage and the Working Tax Credit which help make work pay and encourage legitimate tax status.

Within government, a range of cross-departmental 'joint shadow economy teams' deal with different aspects of undeclared work. There is also an Illegal Working Steering Group, which includes representatives of the CBI and TUC. In the UK NAP, the two organisations 'condemn illegal working and support the government’s objective of tackling the problem positively and proactively'.

New forms of work

Controversy over the draft EU Directive on temporary agency work (EU0306206F) continued throughout 2003. The CBI argued that the Directive would damage labour market flexibility and destroy employment opportunities. However, trade unions supported the Directive. In November 2003, the TUC criticised a 'UK-coordinated blocking minority' of Member States for preventing progress towards the adoption of the Directive. The TUC argued that the UK government’s continuing demand that agency temps should receive equal pay and basic rights only when they have been in a job for over a year would mean that three-quarters of the UK’s estimated 800,000 agency workers would never enjoy the new rights as they do not stay in one job for over a year.

In August 2003, the government published guidance on telework agreed by the CBI, TUC and CEEP UK (UK0309102N). The move was in response to the July 2002 agreement on this issue between the EU-level social partner organisations (EU0207204F). The UK guidance is intended by the signatory parties to 'provide a useful checklist of issues to consider when implementing teleworking and explain how the text of the European agreement might best operate in the context of the UK labour market. Management and employee representatives can use this guide to draw up company-specific policies on teleworking'. However, its precise status is the subject of differing interpretations. In their introductions to the document, the leaders of both the TUC and CEEP UK referred to it as an 'agreement', whereas the CBI director general used the description 'voluntary, non-binding guidance'.

Other relevant developments

In October, as recommended by the independent Low Pay Commission (UK0304101N), the adult rate of the National Minimum Wage increased to GBP 4.50 per hour, with the rate for 18-21 year olds rising to GBP 3.80.

Outlook

The government’s priority of modernising the public services is likely to mean continuing tensions with the public sector unions. Government-union relations more generally will be influenced by the leftward shift in the leadership of the UK’s largest trade unions, and by the proximity of the next general election, expected by many commentators during 2005. In terms of the legislative agenda, UK implementation of the EU employee consultation Directive will be a major focus of attention during the coming year. Continuing controversy can be expected over the scope under current UK legislation for individual employees to opt out of the 48-hour weekly limit on average working time, with the TUC campaigning for its removal (UK0310104F) and the CBI for its retention (UK0307102N). (Mark Hall, IRRU)