IMPACT ASSESSMENT
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Increased efficiencies, based on the following accelerated ultimate savings in costs p.a.
(assuming injection of private sector capital occurs in 2012):
- £860m (if fixed costs are 60% throughout)
- £3,875m (if fixed costs are 60% until the
point of sale and 40% thereafter)
- £5,975m (if fixed costs are 40% throughout)
For illustration, we here consider three areas where efficiency may be improved, although the information has not been available to estimate, in monetary terms, the scale of the potential efficiencies in each area.
19i) Automation
5.2.34 Walk-sorting is the process of sorting letters into groups which correspond to the addresses covered by a postal worker’s round. Royal Mail’s figures now show that it uses machines in its mail centres to sort 83% of letters into walks. Although this is a significant improvement compared with 50% four years ago, it is still lower than the 95% managed by leading European companies, indicating that further efficiencies could be achieved by further automation of walk-sorting.
5.2.35 Walk-sequencing is the process of putting the letters in the right order for delivery. At Royal Mail, this process is currently carried out mainly by hand, taking each postal worker 2-3 hours per working day. Royal Mail is in the process of buying and installing machines with the aim of sequencing 75% of letters automatically by 2013
.This compares to around 85% for the leading European competitors and in the past two years, Royal Mail has only achieved an increase in automated walk-sequencing to 8% of letters (up from 0%). Again, this implies there are many further efficiencies to be achieved from further automation of walk-sequencing.
ii) Working practices
5.2.36 The Hooper Review also highlighted a number of working practices which restrict Royal
Mail’s efficiency
“Early finishes. It has been common practice that postal workers go home when they have finished their round. In the summer or on certain days of the week when volumes are low, this can be up to three hours before their paid hours have ended. If, however, additional time is needed to complete a round, overtime can be claimed
or the round not completed.
“Covering for absence. Employees will on occasion not carry out a colleague’s deliveries without being paid overtime to do so, even when their own workloads are relatively light. So a postal worker who is paid until 2.00 pm and finishes his or her own route at 11.00 am may still claim overtime to cover a colleague’s deliveries,
even though they could be completed within paid hours.
“Equipment. In some locations, the CWU has instructed its members not to use new technology (such as machines for sorting larger letters and hand-held devices to track mail) until there is both a national and local agreement about their use.
“Demarcation. Employees in some mail centres have been known to refuse to work in the delivery office, for example, even though both are on the same site”.
5.2.37 In the main, these inefficient working practices have been addressed and changes are being taken forward throughout the UK. Royal Mail currently has 64 mail centres, five fewer than two years ago, and is consulting on the future of a further 17.
However, there is opposition to such closures. The Business Transformation Agreement between Royal Mail and the CWU should address any outstanding issues on working practices. This agreement is a huge step forward in industrial relations in the company but until it has been implemented over the next few years, we will not know how successful it has been in bringing about a lasting improvement in industrial relations in the company.
Indeed, some of these efficiency related issues help to explain why when compared to postal service companies across Western Europe, Royal Mail’s labour costs are still relatively high.
iii) On-going pension contributions
5.2.39 The schedule of contributions agreed as part of the Royal Mail Pension Plan (RMPP) triennial valuation is 17.1% of pensionable pay from April 2010. This reduction from 20% of pensionable pay at the time of the first Hooper Review reflects a number of reforms such as the increase of the Normal Retirement Age to 65. But this figure still remains about twice more expensive than schemes based on defined contributions
5.2.40 Royal Mail has already made changes to its pension scheme. New employees are offered a defined contribution scheme; the calculation of benefits for existing members will be based on a career average; and as noted the pensionable age has increased from 60 to 65. The Hooper Review considered that “over the next few years, these changes are expected to reduce Royal Mail’s costs associated with current service to levels that
are broadly consistent with industry averages.”
With this in mind, it is not expected that the proposed package of measures will lead to any additional benefits in terms of ongoing pension contributions, which Royal Mail will continue to fund. The proposed package of measures relates only to the historic liabilities, which is dealt with in the section below.
All other liabilities will be transferred to a new pay-as-you-go public sector scheme, with the remaining assets transferred to Government and sold over a number of years. This is the preferred option because it will address the massive deficit in the RMPP and also reduce the size of the on-going plan to a more manageable level which is sustainable for Royal Mail on an on-going basis. The creation of a new pay-as-you-go public scheme is consistent with the position in other public sector schemes and avoids Government taking on investment risk.
Don't have nightmares. Do sleep well
Totally agree FT. Still surprises me that we've got Posties that are still trying to run around a be 
All they do is make the Reserves look bad when they cover their duty and come in an hour later than the Regular, only because they're not cutting corners etc. 
How do you propose this to work Jessicar? I thought this system was already in place! It's called Part-Time contracts. RM employ people on 20hr..22.5hr..30hr..34hr..etc contacts knowing that we all need a working wage. This creates a "Work Hungry" work-force that is keen to work extra hours. Our DIM has often said "You're on a 4 hour delivery only tomorrow, but if it's heavy I'll give you a ring so that you can come in early" Cheers Arsehole...you think I'm sitting by the telephone waiting for you to call me you can Foxtrot Oscar!