Union anger as Royal Mail warns of pay freeze

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Union anger as Royal Mail warns of pay freeze for all workers



Published Date: 25 April 2009
By ALAN JONES
THE Royal Mail yesterday became the latest company to warn workers face a pay freeze this year because of the recession.
The company told trade unions it did not envisage being able to increase wage rates for any staff, including postal workers, managers and directors.

It warned it was facing a "very tight financial position" and said the move will apply to all workers across the Post Office, Parcelforce and other parts of the business.

The letter invited unions to a meeting with the Royal Mail to discuss the current "financial challenges" faced by the group.

It also said the global economic turmoil had worsened the decline in postal markets in the UK and around the world.

The UK mail market is now declining at between 8 per cent and 10 per cent compared to a year ago, and for every 1 per cent decline in volume, income is reduced by £7 million.

The Communication Workers Union condemned the pay freeze as "appalling" and urged the company to reconsider.

The union's deputy general secretary, Dave Ward, said: "The Royal Mail posted its best financial results for years in December and outperformed all of its financial targets.

"The people who run Royal Mail have again misjudged an important decision. For Britain's highest paid civil servant (chief executive Adam Crozier] to impose a pay freeze on workers who earn less than the UK average wage is outrageous. This inequality will lead to strife.

"Royal Mail is attacking the public's postal service by reducing hours and services – now this is a threefold attack on services, jobs and terms and conditions which makes industrial conflict inevitable."

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Royal Mail risked a showdown with trade unions yesterday by imposing a pay freeze on its 181,000 staff, the biggest workforce to have been penalised so far in the recession.

BT has already frozen the pay of its 100,000 workers, and Unite, the union, has agreed to a temporary pay freeze for 13,500 cabin crew at British Airways. A large number of carmakers have introduced either pay freezes or cuts in income as they have reduced working hours.

However, this is thought to be the first time that the postal group has decided to freeze staff pay and unions warned that it would lead to “strife” and inevitable industrial conflict.

Two years ago Royal Mail faced its first national strike for 11 years when a dispute over pay and working conditions spiralled into the worst industrial action at the group for more than 20 years.

Jon Millidge, human resources director at Royal Mail, wrote to union leaders yesterday warning them that “the company is facing a very tight financial position and we do not envisage being able to increase pay rates for any colleagues (including all directors and managers)”. A pay review had been due this month after the expiry of the 18-month 6.9 per cent deal, that ended the last strike.

Although Royal Mail has emphasised that directors would not receive a pay increase, a spokesman refused to say whether they would waive any bonus payments. Last year bonus payments for Adam Crozier, chief executive of the state-owned postal group, caused controversy by taking his total pay package to £3 million. Mr Crozier, who has been called Britain’s best paid civil servant, received £2 million in bonus payments on top of his £1 million salary.

Royal Mail has blamed the pay freeze on the economic downturn along with a structural decline in its market as communication swings away from post to digital.

Mr Millidge’s letter says: “The global economic turmoil has exacerbated the structural decline in postal markets in the UK and around the world, with the UK mail market now declining between 8 to 10 per cent compared to last year.”

Royal Mail calculates that it loses £70 million a year for every 1 per cent drop in its business. In January it said that it had returned all its core operations to profit for the first time in 20 years. It reported that profits for nine months to December stood at £255 million compared with £162 million in the previous financial year, which had been hit by the lengthy strike action.

Dave Ward, deputy general secretary of the Communication Workers Union (CWU), said: “Royal Mail is weathering the recession well and has told staff the value of the company has significantly increased, effectively raising hopes for a decent pay rise.

“The people who run Royal Mail have again misjudged an important decision. For Britain’s highest-paid civil servant to impose a pay freeze on workers who earn less than the UK average wage is outrageous. This inequality will lead to strife.”

The CWU says that most Royal Mail workers earn £347.61 a week before tax or other deductions compared with the UK average of £438.

The clash over pay comes as the Government is pressing ahead with controversial plans to sell a stake in Royal Mail to a rival operator in an attempt to boost performance. As part of the plan being put through Parliament by Lord Mandelson, the Business Secretary, the Government will take on the responsibility for Royal Mail’s pension deficit. The growing deficit is expected to be about £7 billion when it is revalued shortly.

The sale of a stake in the postal group, expected to be about 30 per cent, has created a rift in the Labour Party with more than 140 Labour MPs signing a motion opposing the move.

Royal Mail has offered to meet unions to explain the need for a pay freeze. But Mr Ward said: “Royal Mail is attacking the public’s postal service by reducing services. Now this is a threefold attack on services, jobs and terms and conditions, which makes industrial conflict inevitable. The company must reconsider.”

The pay freeze will apply to all workers in Royal Mail, Post Office Ltd, Parcelforce and the organisation’s headquarters.

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