Negotiating pay disputes

Change / 09 September 2010

BT managed to avoid strike action this summer, while British Airways failed to avert staff walkouts. Karen Higginbottom wonders what we can learn from them both

Pay negotiations between employer and employee can be fraught with pitfalls. Just witness the on-going saga at British Airways. The airline and Unite, which is representing cabin crew, re-started talks in early August in a bid to resolve the long-running dispute over pay and prevent further strikes. The strikes resulting from the pay dispute have, so far, cost BA £150m. Contrast that to the relatively smooth pay negotiations at British Telecom (BT), who averted strike action by reaching a deal with the Communication Workers Union (CWU) on staff pay.

Employers can learn from these two contrasting examples, says Steve Blunt, partner in employment law at law firm Clyde & Co. “The key point is that it comes down to relationships and communication and having a store of goodwill in the bank,” he says. “If trust is lost, it can take years and be costly to win back. Where it is lost or in BA's case, where it was always in short supply because BA resented the long term conditions of cabin crew, it is a much shorter route to unrest and industrial action in a dispute situation.”

A fair deal

Blunt believes that BT has worked hard over the years at being seen to be fair and react positively to union concerns - even though large scale redundancies have been effected in that time. “They will often think laterally and have good 'behind the scenes' channels of communication based on a degree of goodwill. BA's more combative approach gives a message that 'you get what you fight for' and any weakness will be taken advantage of. Not surprisingly, the union proceeds accordingly and the rest is there for us all to see.”

You need to be completely prepared and know your negotiation strategy and what your remit is as well as having information to back up your position, whether that is relating to a pay rise, pay freeze or a pay cut.

Andy Cook, CEO, Marshall James

The key lesson to learn from these two contrasting examples is to invest in working and communicating with your recognised union representatives and full-time officials, adds Blunt. “Don’t wait until you have a proposal, request or the annual pay round to communicate but rather arrange regular meetings several times a year to discuss developments and to make union representatives feel part of the process and 'buy-in' to what the company is doing.”

There are three guiding principles when it comes to organisations negotiating pay with unions, argues Andy Cook, founder and CEO of employee relations firm Marshall James. “You need to be completely prepared and know your negotiation strategy and what your remit is as well as having information to back up your position, whether that is relating to a pay rise, pay freeze or a pay cut,” he says.

The second principle is organisations must avoid the attitude of winning at all costs. “Then you’ll lose control. It’s a cliché but you’ve got to look for common ground,” he says.

The third principle is: don’t let the pay negotiations become personalised, says Cook.  “If you let it get personal, then it’s less about the organisation and employees and more about an individual battle of wills.”

Pay rises are an important tool to make employees feel valued, says Nic Hammarling, business psychologist at Pearn Kandola. “Especially if employees are aware of a clear decision-making process that is used to help determine who gets a pay rise and who doesn’t. However, pay rises become a very ineffective tool when they are consistently given every year, regardless of the amount of effort put in. In these circumstances, pay rises are no longer seen as recognition for increased expertise and value to the organisation, but simply an expected part of the employment package.”

Employers’ legal considerations when negotiating pay:

1. An employer of a unionised workforce has legal obligations when negotiating pay under the Trade Union & Labour Relations (Consolidation) Act 1992 ("TULR(C)A"). These include a qualified general duty on the employer to disclose information. 

2. In addition to the statutory rights, an employer will also have contractual obligations. These will be set out in the collective agreement. These are often heavily negotiated so the employer must be familiar with the terms and any procedures set out there under. The employer must also be mindful of whether the collective agreement or the outcome of the pay negotiations is expressly incorporated into the individual worker's contract of employment or incorporated by custom and practice.   

3. An employer of a non unionised workforce has significantly less legal obligations as it is not covered by TULRCA or the ACAS Codes of Practice. However, the annual pay round still requires the employer to comply with its own policies and procedures, any agreed process with an employee representative body, the individual worker's contract of employment or custom and practice.   

Source: Suzanne Horne, Of counsel, Morrison & Foerster (lawyers)