Read the first piece in the series here

After the longest dispute in the company’s 500-year history, the CWU’s deal with Royal Mail Group (RMG) offers no easy answers. The agreement itself spans 35 pages and covers almost all aspects of the job: pay, working hours, sick pay, employment models, workplace ‘culture’ as well as the wider regulatory environment and parcel delivery sector. But before getting into the details, it is worth highlighting Royal Mail’s unrelenting attack on the CWU and its members over the past year. The company has been determined to remove the union from the workplace and has taken extremely punitive action against workers in its attempts to do so. The union has not been broken but this agreement cannot be understood without factoring in this extremely fraught industrial relations backdrop.

Pay

After imposing a 2% pay rise in 2022, this agreement represents a 6% pay rise in 2023-24 (with a lump sum of £500) and a further 2% pay rise in 2024-25. The deal has not forced RMG to increase the 2% imposed on workers last year and 8% over the next two years is obviously a significant real term pay cut. In 2022-23 alone, CPI inflation was 10.0% and RPI inflation was 12.8%. Over the course of this agreement then, workers are looking at a roughly 10-15% pay cut in real terms.

The profit sharing agreement announced in the deal is also unlikely to shift pay substantially. As the deal details “for each financial year up to and including 2024/2025… The first 20% of operating profit will be distributed as a one-off payment to employees, paid after publication of the company’s audited accounts.” RMG does not expect significant profit by 2024-25 and given the size of the workforce, every million in operating profit would only get a worker about £8 anyway.

Terms and Conditions

The deal introduces a number of changes to workers’ terms and conditions that bring significant financial benefit to the company. RMG’s own analysis states that they expect the roughly £350 million spent on this pay deal to be offset by other changes in the agreement. The positive news is fairly limited to the promise to phase out owner-drivers in Parcelforce, further distinguishing RMG as the only parcel delivery operator to not rely on bogusly self-employed labour. The agreement outlines that “RMG has no plans to compete on the basis of becoming a gig economy employer.”

The negative news, however, is much more widespread throughout the deal. From Autumn 2023, RMG will introduce “seasonal variation” in hours where employees work 35 hours a week where delivery loads are lower (i.e. summer), 39 hours a week in busy periods (leading up to and including Christmas) and 37 hours a week in other periods. Besides the obvious impact of working later in periods of high demand, there are now diminished opportunities for overtime pay as those hours are formalised into base pay. From March 2024, deliveries will also start an hour later, forcing employees to work later in the day and significantly disadvantaging those with caring duties.

Sick pay and ill-health retirement have both been cut significantly from their previous levels. From August 2023, the second absence in a 12-month period will mean workers now receive only statutory sick pay for the first two days of the second absence, the first four days of the third absence and the first three days of the fourth and any subsequent absence. Before this agreement, workers received full pay for all absences. The agreement does state that if the company-wide absence rate falls below 5.5%, the previous sick pay regime will be re-instated.

Finally, new entrants to the business are introduced on significantly inferior pay, especially when accounting for the greater number of weekly hours these workers will be working. While Sunday working for existing employees is only encouraged (through new pay per parcel duties), Sunday working is mandated for new entrants. There will now be a significant two-tier workforce in RMG, with older, better-remunerated workers retiring and being replaced by new entrants on inferior terms and conditions.

Understanding the Deal

The most obvious factor to consider when assessing this deal is RMG’s financial performance. RMG made an operating loss for the 2022-23 of just over £1 billion with industrial action estimated to have cost the company around £200 million. The latest results are a dramatic turnaround for a company that posted record profits just last year. In 2021-22, International Distribution Services (which constitutes RMG and GLS, a separate company that operates internationally) recorded profits of £768 million. Look beyond the dramatic headlines, however, and revenue across both RMG and GLS only decreased by 5% in 2022-23.

Ultimately, there are three massive caveats that should apply when referencing RMG’s billion-pound loss. Firstly, adjusted operating loss across the group was ‘just’ £71 million for 2022-23. Impairment charges not related to the day-to-day operations of RMG made unadjusted headline figures look worse. The company is also choosing to not cross-subsidise from GLS to RMG. This is a very deliberate decision to make the Universal Service Obligation (the mandate from government to deliver letters to every address in the UK six days a week and parcels every five days) look financially unviable. RMG requested the government reduce the USO earlier this year but were unsuccessful. (There is an important debate to be had about the scope of the USO going forward but it is clear that RMG management wants to completely scrap what is still an important public service.) Also of note is that cross-subsidisation is extremely common – Amazon, for example, cross-subsidies from their very profitable web services operation to their not-so-profitable Prime delivery services.

Secondly, and unsurprising if you look at the track record of any privatised public service, shareholders have extracted billions of pounds from RMG over the past decade. Just last year, shareholders received pay-outs worth £400 million – which is significantly more than the total pay envelope given to workers in this deal – and given the need for RMG to adapt to compete in the wider parcel delivery market, this money could easily have been invested rather than lining the pockets of wealthy shareholders. RM senior management continued to earn significant bonuses throughout this confected financial crisis and the group (RMG and GLS) is sitting on retained earnings of £3.8 billion and liquidity of £1.7 billion. Put simply, there is money there.

Thirdly, RM is being battered by extreme downward pressure on pay and conditions from the rest of the parcel delivery sector. This much is recognised in the deal itself, stating that “RMG faces intense and increasing competition in parcels” and “RMG and CWU will jointly campaign to level up terms and conditions in the broader postal sector and ensure that RMG continues to set the benchmark across the post and logistics sector.” So while RMG is still the dominant player in the parcel delivery market, their total market share is being eaten up on a year-by-year basis by other employers (Amazon, DHL, Evri, Yodel etc.) who rely on bogusly self-employed labour.

Lessons Unlearnt?

The union has undoubtedly made tactical mistakes throughout this dispute. Why, for instance, not announce strike dates after a costly second ballot? Why post meaningless “win the ballot, win the dispute” content which belittles the complexity of negotiations and undersells the task at hand? A situation whereby middle management at RMG is represented by Unite, in a different bargaining unit, with a different deal that is contingent on pushing through regressive changes on the wider / CWU workforce is also not conducive to building long-term industrial strength and leverage in the workplace.

Members will eventually have their say on the deal. The ballot has been delayed as RM continues to push through unagreed changes to workers’ terms and conditions across the country. There is another question to ask here as to why an incomplete agreement was put to the members in the first place but, either way, it remains to be seen what the plan is should the deal be rejected.

The much larger, strategic mistake from the union has been its inability to organise the wider parcel delivery sector. It is common knowledge that letter volumes are declining rapidly and success in the parcel market is key to the company’s financial success. This is evident in the latest financial results: despite delivering 7.3 billion addressed letters in 2022-23 compared to 1.2 billion parcels, parcel revenue far exceeds letter revenue. (The reality of a privatised public service is that shareholders chase money and de-prioritise letter delivery, this fundamental truth explains the quality of service issues the company continues to have.)
So parcels are where it’s at and unfortunately the rest of the parcel delivery sector is almost entirely bogusly self employed labour that is barely paid the minimum wage and receives no sick pay, annual leave, holiday pay, paternity pay etc… This dynamic, having RM on fairly decent pay and conditions while everybody else is routinely exploited, is not sustainable. You could not find a more archetypal race to the bottom, either RM conditions continue to degrade or conditions in the rest of the sector improve.

So the key question becomes why has the CWU not had any success in the rest of the sector? This can only be answered by union senior leadership. Possible explanations include: the union has not dedicated any resource to it i.e. they are short-sighted. Or the union has tried and failed i.e they are incompetent. Either way, this lack of organising will eventually be fatal to RM workers and the union.

This failure to organise means that workers across the parcel delivery sector are now split between unions who have been more pro-active. The IWGB, GMB and Unite all have a presence within the parcel delivery sector and, as ever, these unions do not collaborate. In many instances they lack the industrial strength to drive up conditions themselves, let alone get them anywhere near the level needed to stop dragging down RM employees. The GMB’s agreement with Evri also validates the use of self-employed labour which is a huge stumbling block to wider union success.

This dispute and the deal which has emerged from it should be a moment of deep reflection for the CWU. Having a union almost entirely formed around two formerly public sector employers (Royal Mail and BT) that are shredding jobs and cutting wages has long been a ticking time bomb. When, on Thursday 18th May, RM announced heavy losses and BT announced cuts of around 55,000 jobs, that bomb went off. If CWU does not organise and diversify, it will die. The RM agreement is a reflection of that reality.