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Royal Mail Strikes

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Royal Mail Strikes

No one in the UK will be unaware of the Royal Mail’s importance for mail delivery. Imagine how much the UK’s economy would suffer if the Royal mail stopped working unannounced for a day. This happened when the Royal mail employees went on strike with the trade unions.

Royal Mail Strikes

Before we move to understand what happened with the Royal Mail plans, why the trade unions decided to strike, and what actions they took, let’s understand what a strike is.

Strike action is a pressure strategy that a group of employees use to be heard by management or to have their working conditions or pay improved. A strike action consists of stopping work for a period which may be a few hours to a few days or even months. Strike action is also called a labour strike or just strike.

Royal Mail Strikes overview StudySmarterA Royal Mail post box in the UK. Source: Matt Seymour, Unsplash.

The Royal Mail Strike: An Overview

The Royal Mail strike was a series of strikes that took place over the years between the Royal Mail and the members of the Communication Worker Union (CWU) in the UK. In the table below you can find an overview of those strikes:

Year

Reason for strike

Goal

Strike ballot

Resolution

2007 Royal Mail’s modernisation plans1

The Royal Mail: wanted to increase the work levels of workers and increase automation to control costs.

CWU: argued that employees were treated as slaves and the work burden increased to an unacceptable level.

To avoid modernisation which may have impacted about 40,000 jobs. Other issues were flexible working hours, pay rises, and pensions.

Voted by 77.5% in favour of industrial action.

Discussion between the Royal Mail and CWU was concluded and endorsed by nine to five votes.

On 12 October 2007, the CWU and Royal Mail agreed to phase out the practices that would affect employees.

2009 Job security and working conditions2

The CWU was afraid of the introduction of walk sequencing machines that would make thousands of full-time employees redundant.

To get the 4th phase of the 2007 strike agreement fulfilled.

Three to one voted in favour of a strike.

The parties agreed on a pay rise of 6.9% spread across three years.

They also agreed that they would retain 75% of the workforce full-time and reduce the work hours from 40 to 39.

2013

Privatisation of the Royal Mail3

The CWU was worried about the privatisation of the postal service that was being sold for £3 billion.

To stop the privatisation. Also, improve pay and working conditions.

96% of staff opposed the sell-off

The parties agreed on an increase of 9.06% in basic pay over three years, five years of job security, and pensions.

2017

Closure of the pension scheme4

The Royal Mail announced they would close the post benefit scheme in 2018.

To continue getting benefits or negotiate more beneficial plans for its members for replacing defined benefits.

89.1% of employees voted in favour of the strike.

The Royal Mail and the unions reached a sustainable and affordable solution.

The Royal Mail Pension Strike

The Royal mail had a pension scheme that granted some benefits to the employees as they had agreed with the CWU after the strike in 2013. However, in April 2017, the Royal Mail announced they were closing the benefits scheme post-March 2018.

The Royal mail paid about £400 million a year as part of the pension scheme but believed it could double and reach £ 1 billion if they didn’t take further action to implement some changes.5

However, the employees and the Communication Worker Union condemned this move and announced 48 hours of strikes on 19 October 2017. Almost 110,000 workers voted in favour of the strike.

To solve the issue, the Royal Mail Strike Management team offered to select a mediator acceptable to both parties. The Royal mail offered its affected employees to choose from defined benefits and defined contributions schemes that would replace their ongoing defined benefits plans.

With the support of the Communication Workers Union, the workers of the Royal Mail were able to negotiate a better deal with regard to pay, pension plans, and working conditions.

What are defined benefits?

Workers who pay into a defined benefit scheme are guaranteed income for life based on their final salary or career average pay. The income is usually adjusted for inflation and provides benefits for children or family members.

What are defined contributions?

Workers who pay into a defined contribution scheme pay into a savings pot, which is used to buy a pension when they retire. The size of the pot varies depending on its performance in the stock market.

Economic Implications and Impacts of the Royal Mail Strike

In the age of email and the internet, Royal Mail was seeing a drop in the use of their services, which resulted in financial difficulties. Hence, the government proposed to privatise the sector with a strategic partnership: they would sell 90% of the company and the remaining 10% could be distributed as shares among the employees.

Privatisation has advantages and disadvantages. Let's take a look at some of them:

Some advantages of the privatisation of Royal Mail

1. Privatisation reduced the firm’s reliance on government funding, borrowing, and public spending. It would also result in access to more private capital and better service provision.2. Due to the growing competition, it was necessary to implement changes in the process and bring more modern technology. This newer technology required funding and this could be done faster with private investment.3. Since privatisation took place in early 2013, the need for clearance for new investment from the European Commission was no longer required under the state aid rules.

Some disadvantages of the privatisation of Royal Mail

1. The Royal Mail was a natural monopoly. It is a firm with very high fixed costs and it is only practical and efficient to have one firm in the market. Privatising such a company could fragment the firm, which would result in an increase in its average costs and loss of economies of scale. This could ultimately result in higher prices for consumers.2. Although the government benefitted from the large lump sum they received from selling the Royal Mail, they lose out on the continuous revenue Royal Mail generates annually.

3. Privatisation may have resulted in the loss of taxpayers' money as the privatisation fees were covered by the taxpayers.

To learn more about this subject, read or explanation on Privatisation.

Persisting Problems at the Royal Mail: Strikes in 2021 and 2022?

Despite the implementation of several resolutions after the series of strikes between 2007–17, some problems in the Royal Mail still remain.

There is a possibility of strikes in 2022 as post-pandemic difficulties prevail.

The alleged plan to fire about 1000 managers and then re-hire them at lower rates was announced in March 2022 by the United Labour union. This is a possible sign that there are deeper internal problems, despite the fact of the recent improvements in profitability.

This may mean that we could possibly see Royal Mail strikes again in 2022. Nevertheless, Ofcom (the communications regulator in the UK) would continue to monitor the services provision and efficiency of the Royal Mail to ensure that the consumers are protected.

Royal Mail Strikes - Key Takeaways

  • Strike action is a pressure strategy that a group of employees use to be heard by management or to have their working conditions or pay improved. A strike action consists of stopping work for a period which may be a few hours to a few days or even months.
  • The Royal Mail strike was a series of strikes that took place over the years 2007–17 between the Royal Mail and the members of the Communication Worker Union (CWU) in the UK.
  • Some of the advantages of the Royal Mail privatisation were: a reduction of reliance on public sector money, access to private capital, and better services provision.
  • Some of the disadvantages of the Royal Mail privatisation were: higher prices for consumers, the government lost out on extra revenues, waste of taxpayers' money.

Sources

1. James Arrowsmith, ‘Royal Mail hit by first national strikes in a decade’, Eurofound, 2007.

2. Press Association, ‘Postal workers go on strike in London and Scotland’, The Guardian, 2009.

3. Rupert Neate, ‘Royal Mail staff set to strike after ministers unveil plans for £3 billion sell-off’, The Guardian, 2013.

4. Richard Stuart-Turner, ‘Strikes threatened as Royal Mail announces pension scheme closure’, Print Week, 2017.

5. FT Adviser, ‘Fresh deadline in Royal Mail pension dispute’, 2017.

Frequently Asked Questions about Royal Mail Strikes

The Royal Mail strike was a series of strikes that took place between 2007 and 2017 between the Royal Mail and Communication worker Union members in the UK.

The following were the reasons for the Royal Mail strike:

  1. Modernisation plans.

  2. Job security and working conditions.

  3. Privatisation of Royal Mail.

  4. Closure of the pension scheme.

1. The strike was expected to result in the loss of about 300 million pounds for Royal Mail in 2007.

2. Employees were offered a 9.06% pay rise over a period of 3 years in 2013.

The 2009 Royal Mail Strikes were due to the job security and working conditions.

Royal Mail announced they were closing the defined benefit scheme after March 2018.

Final Royal Mail Strikes Quiz

Question

What is strike action?

Show answer

Answer

Strike Action refers to the stopping of work by the group of employees for a brief period of time which may be a few hours to a few days or even months.

Show question

Question

What are the reasons why Royal Mail is going on strike?

Show answer

Answer

The following were the reasons for the Royal Mail strike:

  1. Modernization Plans by the Royal Mail

  2. Job security and working conditions

  3. Privatization of Royal Mail

  4. Closure of the pension scheme

Show question

Question

What was the Royal Mail Pension Strike?


Show answer

Answer

Royal mail was giving defined benefits of pension as per the defined benefit scheme as agreed with CWU after the strike in 2013. However, in April 2017, Royal mail announced to close the benefit scheme post March 2018. 

However, this move was condemned by its own employees and the Communication Worker Union and 48 hours strikes were announced on 19th October, 2017. The strike was voted for by almost 110,000 workers.

Show question

Question

What was the amount Royal Mail was paying as pension a year until 2018?


Show answer

Answer

Royal mail paid about £ 400m a year as a pension

Show question

Question

What was the reason for the 2007 strike?

Show answer

Answer

Royal Mail wanted the flexibility of workers in the work levels and to increase automation to bring costs under control. 
CWU were of opinion that employees are treated as slaves and work burden increased to an unacceptable level

Show question

Question

How was the 2007 Royal Mail Strike resolved?

Show answer

Answer

On October 12th, 2007, The CWU and Royal mail reached to the conclusion which decided to phase out Spanish practices. Also, Royal Mail offered CWU members who wished to continue work can do so at other offices to avoid conflict with striking members.  

Show question

Question

What was the reason for the 2009 strike?

Show answer

Answer

Fear of introduction of walk sequencing machines which may make thousands of full-time workers redundant. 

Show question

Question

What was the reason for the 2013 strike?


Show answer

Answer

Privatization of postal service at GBP 3bn.

Show question

Question

What was the reason for the 2017 strike?


Show answer

Answer

Royal mail announced to close the defined benefit scheme post-March 2018. 

Show question

Question

How was the 2009 Royal Mail Strike resolved?


Show answer

Answer

A pay rise of 6.9% spread across 3 years was offered.

Also, retain 75% of the workforce as full-time and reduce work hours from 40 to 39.

Show question

Question

How was the 2013 Royal Mail Strike resolved?


Show answer

Answer

Increase of 9.06% in basic pay over 3 years and 5 years of job security, pensions and other conditions was given to the employees

Show question

Question

How was the 2017 Royal Mail Strike resolved?

Show answer

Answer

A sustainable and affordable solution was worked out along with the unions.

Show question

Question

What are Defined benefits?

Show answer

Answer

Workers who pay into a defined benefit scheme are guaranteed income for life which is based on their final salary, or career average pay. The income is usually adjusted for inflation, and often provides benefits for next-of-kin.

Show question

Question

What are the defined contributions?


Show answer

Answer

Workers who pay into a defined contribution scheme pay into a savings pot, which is used to buy a pension when they retire. The size of the pot is determined by the performance of the stock market.

Show question

Question

How much pay rise was by the royal mail offered after the 2013 strike?

Show answer

Answer

9.06% Pay rise was offered to its employees over a period of 3 years

Show question

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