Employment relations – back with a bang (and how to avoid an explosion)

As we exit the pandemic – and the impact of Brexit bites – the UK labour market has been shaken and stirred. The balance of bargaining power is shifting. For now, at least, workers have the upper hand in a way not seen for many years.

Recruiting and retaining staff has rarely been more challenging. There are serious staff shortages in many sectors, increasing the bargaining power of those who remain. This includes traditionally non-unionised sectors such as hospitality and social care. Wages are growing at their fastest rate in years. Signing on bonuses for transport drivers are just one sign of employers now fishing in a shrunken pool.

The number of job vacancies is now at a record high of 1.1 million, an increase of 318,000 from the start of the pandemic. No wonder the CBI says most if its members are most worried about labour shortages.

There is a substantial mismatch between the skills required for many jobs and the skills available in the UK population – this has been true for years, but these chickens have now come home to roost. There is no overarching government plan to understand the scale of the problem, just a series of short term emergency measures.

Nor is this simply about pay. Employees are becoming more confident in their demands about how, when and where they want to work. Demands for remote and flexible working are no longer the exception. In addition, we see employees looking for meaning, purpose and fairness at work and increasingly willing to walk away from toxic cultures.

Employee Engagement

Although many organisations did their best to engage staff through the challenge of the pandemic, there is clearly a significant proportion of the workforce that feels let down, whether through ‘furlough’ that wasn’t, poor management of health and wellbeing, managers not taking individual circumstances into account, and so on. In the words of PG Wodehouse, we can see that, if not actually disgruntled, many are far from being gruntled…

The extent of the so-called Great Resignation – employees leaving in droves – is becoming clear. In the UK 791,000 people – equivalent to 2.6 per cent of the workforce – moved jobs between April and June this year; the fastest since 2008.

While early in the pandemic people felt insecure and keen to hang on to their jobs, they are now looking to explore their options. The volume of Google searches for ‘leave job’ are 50 per cent higher than they were in early 2020. It seems that many employees are taking a far more transactional approach; sentiment and loyalty may be in short supply.

At the same time those millions of employees who kept our healthcare, logistics and other essential sinews of our country going for eighteen hard months, have been stretched often to breaking point and are burnt out. Figures for understaffing in the NHS, for example, are alarming.

Meanwhile, inflation is now a growing worry for the first time in years, with energy and food prices spiralling upwards.

No wonder that across the trade union movement there’s a sense that the time has come for a serious flexing of the muscles. If not now, when bargaining conditions favour labour, then when?

The government’s slogan to move the UK to a high wage, high skilled economy plays strongly into the union movement’s hands. Indeed, it would not be surprising to the see the Prime Minister quoted on placards as union members take action to improve their pay and working conditions.

Trade Unions

After decades of decline, we have seen trade union membership beginning to rise again over the past five years. And we are now seeing increasing, sporadic industrial action; it might not take much for these sparks to ignite into wider action, particularly if inflation does spiral and borrowing becomes much more expensive through increases in interest rates.

Across the Atlantic, the USA has seen a wave of strikes and walkouts - this month being dubbed ‘Striketober’ with over 100,000 workers currently on or threatening industrial action – perhaps a harbinger of things to come here in the UK.

So how should employers respond, given that for some, market pressures, repaying COVID loans and collapsing customer demand – especially in Europe – represent a very real threat to their survival?

First – spend as much time on getting their internal house in order as on meeting external pressures. Good HR and positive employment practices are not a luxury: they are an essential tool to recruit and retain staff. Now more than ever, employees really are the only asset.

Listen to and engage with employees systematically and on an on-going basis – through surveys, cascades, town halls, staff councils and unions.

Identify and detoxify a culture that your employees are telling you has gone wrong.

Learn from the COVID experience: what went well, what could have been done better.

Have a proactive employment relations strategy. Be generous with pay if you can, but if substantial pay rises are not possible given current conditions, look at other ways to retain staff – better training and development opportunities, reduced hours, truly flexible working and other initiatives that will improve employee wellbeing.

Be honest about the finances, about challenges facing the business or the sector. Tell the story. If you can’t afford to meet a demand – explain why.

Unnecessarily resisting union recognition is counterproductive and will backfire. Far better to invite unions in to make their case to employees. In a recognition agreement employers can set out how they intend to engage with unions, preferably on partnership terms. That way when recognition comes you start off with mutual understanding and engagement, and on the front foot.

Partner with your employees in discussing their needs and the needs of the business; ensure there’s mutual understanding and real dialogue around the future.

This is a challenging moment for employment relations. But those organisations which take employees seriously, and try and identify the sweet spot of mutual interest, stand a good chance of coming through strengthened and not weakened.

It is all to play for.

If you want training, consultancy or research in Employee relations then please email us to see how we can help.