How to harmonise terms and conditions in a unionised workplace

Author: Adam Geldman

Standardising pay and conditions is never an easy task, especially where such an exercise involves several groups of workers. We look at two harmonisation processes: one that led to a complete breakdown in industrial relations and another that was largely free from problems.

Key points

  • If not handled with care and sensitivity, the standardisation of terms and conditions can cause difficulties for both the organisation and its employees.
  • There can be a tension between employers that want to limit the costs of a harmonisation exercise and workers who want to secure the best possible terms and conditions.
  • As trade unions are often experienced in negotiating harmonisation agreements, employers need to ensure that their managers are properly trained to bargain effectively on this issue.

Establishing a common set of terms at the workplace through harmonisation has been a recurring theme in HR over several decades. Initially, the focus was the elimination of the different treatment of blue- and white-collar workers in the same organisation. In the past, it was common for employees on the "shop floor" to be on inferior conditions compared with their counterparts in the offices, frequently having a longer working week, shorter holidays and less generous sick pay arrangements.

Many of the harmonisation exercises that took place from the 1970s onwards focused on eliminating these divisions and, strange as it may seem today, they were seen in some quarters as a radical departure from the existing industrial relations order. The argument for change was that it would improve working relationships between different employees, improve administrative efficiency and, ultimately, boost productivity and profitability. Even so, some workers remained stubbornly resistant, especially those who feared they would be the ones to "lose out".

Harmonisation and equal pay

 
 

Whatever the motivation for harmonisation, the thorniest issue is often whether terms and conditions should be levelled up or down.

 

Standardising the terms and conditions of manual and non-manual workers was not the only issue that needed to addressed. Prior to the Equal Pay Act 1970 (which came into force in 1975) it was not unlawful, and indeed was common practice, for employers to offer women inferior terms and conditions (including pay) to those enjoyed by men doing exactly, or essentially, the same job. The legislation outlawed this practice and triggered a further wave of harmonisations, often underpinned by job evaluation, designed to eliminate gender differences at the workplace. More than four decades since the passing of the Act, some of these exercises are yet to be finally concluded, often having been mired in a web of complex negotiations and litigation.

In recent years, there has been a third wave of harmonisations triggered by mergers and acquisitions, mostly in the private sector, with the waters often muddied by the legislative requirements of the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006.

Whatever the motivation for harmonisation, the thorniest issue is often whether terms and conditions should be levelled up or down. Naturally, employees are keen to receive the best possible reward package, while organisations are usually determined to avoid "cherry picking" and so limit the impact on the paybill. The result is often a compromise, with some terms for some employees improved, others remaining the same and some brought down to the lowest common denominator.

Harmonisation in the rail industry: not a smooth journey

In 2007, a UK rail franchise holder, Central Trains, was disbanded and some of its services merged with Silverlink to form a new organisation, London Midland. It operates services to London from the North West and the Midlands, as well as commuter trains in and around the Birmingham area.

The Associated Society of Locomotive Engineers and Firemen (ASLEF) is a trade union representing more than 18,500 train drivers employed by operating companies, freight companies, London Underground and some light-rapid-transport providers. ASLEF claims that 604 of London Midland's 614 drivers belong to the union, a membership density in excess of 98%.

In recent years, ASLEF has been party to several sets of negotiations covering harmonisation. These have primarily come about as a result of changes arising from the awarding of rail franchises and the subsequent break up and merger of train operating companies. While some deals have been relatively simple to conclude, others have been more complex.

XpertHR talked to Mick Whelan, the full-time ASLEF official most closely involved in the talks between the two parties, to get the union's perspective on the harmonisation negotiations. He is now the union's general secretary.

Complex collective agreements

Following the completion of the amalgamation, London Midland, having inherited two separate and complex collective agreements covering drivers, invited ASLEF to the bargaining table to negotiate a harmonisation agreement which, the union says, the company wanted to conclude within three months.

As well as the core issues - Silverlink drivers were entitled to six more days' annual leave than those in Central Trains, but they had a base salary of between £1,200 and £1,600 per year below that of their counterparts - ASLEF says there were also up to 1,000 other items that needed to be considered, many of which were both longstanding and industry-specific. These included:

  • the time spent driving particular routes;
  • arrangements for booking on and off work;
  • allowances paid when a train terminated at what is defined as a "remote location";
  • "personal needs breaks"; and
  • concessionary travel arrangements.

The Silverlink agreement was itself a by-product of the old "Purple Book" terms inherited from what was previously British Rail, while Central's conditions were an amalgam of various agreements from its constituent companies. Even so, as both sets of drivers worked an underlying four-day, 35-hour week, spread over Monday to Saturday with Sundays, if worked, paid at double time, the union says that ironing out any differences in terms and conditions "should not have been insurmountable". However, it proved to be very difficult.

No commitment to harmonisation

Discussions continued for more than two years with little substantial progress. In the middle of talks, several members of London Midland's senior management team, including both the managing and operations directors, left the organisation. According to ASLEF, their replacements decided to halt talks, stating that the company had not given a commitment to harmonise drivers' terms and conditions. At this point, ASLEF's company-level lay representatives, who had been conducting negotiations up to that point, registered a "failure to agree" under an existing procedural agreement and called in a full-time official, Mick Whelan.

"We produced documentation to support our contention that management had given a firm undertaking to negotiate on harmonisation but it refused to budge," he recalls. The ball was then in ASLEF's court. "Faced with this impasse, we did what the union does best: we threatened to take their train set away by balloting for industrial action," Whelan says.

Threat of strike action

 
 

Harmonisation should not be based on the aspirations of management to deliver a cost neutral package.

Mick Whelan,
general secretary,
ASLEF

 

The union says that the threat of a strike was enough to bring London Midland back to the bargaining table but on the premise that it sought a productivity agreement before it would commence talks on harmonisation. ASLEF's position was that it wanted drivers' terms to be harmonised first, and then it would move on to discuss efficiency measures to help offset the cost.

Further, the union's stance entering talks was that it wouldn't accept a package funded by a "significant worsening" of any working conditions, arguing that all terms must be levelled up. "Harmonisation should not be based on the aspirations of management to deliver a cost-neutral package. London Midland had to accept that the principle of treating all their staff fairly and equitably was a cost they had to bear," the union said.

For its part, the company accused the union of trying to "cherry pick" the best elements of both packages, adding that ASLEF's demands were "unrealistic" in the then prevailing economic climate. It was reported at the time that London Midland estimated the annual cost of levelling up pay and leave would be approximately £3 million.

"Diagramming" the options

Despite their different positions, both parties recognised that each would have to concede ground if an agreement was to be reached. However, with such a vast array of terms and conditions to be harmonised, and therefore so many possible variations of a deal, it was difficult to model the impact on the overall shape and cost of a potential package.

In order to map different scenarios, the two sides used computer facilities at Loughborough University to produce a series of complex charts and diagrams simulating a range of potential packages, the impact they would have on drivers' working conditions and remuneration, and the cost to the company.

"Management wanted a deal that would mean drivers being in their cabs for an untenable amount of time in what we regarded as unacceptable conditions. We rejected this," Whelan says. "The reality of harmonisation is that not only do you need to get the terms and conditions right, but you also have to ensure that what employees have to do in return is acceptable and forms an overall package they will vote for."

Strike ballots

Despite this gulf, the two sides agreed to meet for intensive talks, held over a week at a neutral venue, using external facilitators. This was followed by further discussions in an effort to secure a deal. However, talks again broke up without agreement and the union decided to ballot for industrial action. The vote was overwhelmingly in favour.

With strike dates set, the company sought a High Court injunction in December 2010 to prevent action that was scheduled shortly before Christmas, on the basis that there had been a number of voting irregularities. These included the fact that of 604 ballot papers issued, two were incorrectly sent to members. The union argued that any breaches of the Trade Union and Labour Relations (Consolidation) Act 1992 were minor, technical and accidental and, as there was an 87% backing for a strike on a 78% turnout, they had no material affect on the result. Despite these arguments the injunction was granted and the strike called off. In March 2011, the union took its case to the Court of Appeal, which reversed the High Court's decision in what was a landmark ruling.

Substantive agreements remained in place

According to ASLEF, the company then started exerting political, media and economic pressure on the union in response to the continued threat of industrial action. Despite the ongoing dispute, other substantive agreements remained in place and were adhered to by both parties. London Midland inherited a longstanding arrangement, which was subject to periodic review, whereby drivers could work voluntary overtime. The union says that the company decided unilaterally not to renew this provision, which led to a severe disruption to services, and then portrayed ASLEF as, in Whelan's words, "being awkward".

For its part, the company maintained that ASLEF refused to renew the understanding. "In fact, the union tends to leave overtime provisions in place during disputes so that members can make up some of the wages lost through industrial action. So it wouldn't have made sense for us to end this arrangement," Whelan says.

According to the union, London Midland also reduced the payment for working Sundays from double time to time-and-a-half without negotiation or consultation. As working this rest day was not contractual, most drivers did not volunteer to come in, leading to the cancellation of all Sunday services.

With the dispute dragging on, and no end in sight, in March 2011 both sides were given the opportunity to take their case to Acas. While the company accepted the invitation, the union declined the offer. Asked why it took this stance, Whelan says: "While I have a great respect for Acas, we are an industrial organisation and, given we are the most powerful union in the country, nine times out of 10 the threat of strike action is sufficient to bring the employer back to the bargaining table. That was, and is, our position during these negotiations."

External facilitator

 
 

The company is driven by the needs of its shareholders and we are driven by the needs of our members. Even though the dispute was prolonged, at no stage did disagreements become personal.

Mick Whelan,
general secretary,
ASLEF

 

Although attitudes were becoming ever more entrenched, behind the scenes "talks about talks" were nevertheless taking place. As a result, both parties agreed to meet formally with the assistance of a new external facilitator. Several consecutive days of negotiations took place at the union's headquarters in April 2011.

In the end, it took less than three days to hammer out a framework deal that addressed ASLEF's key concerns - pay and annual leave - while taking account of the company's desire to limit the impact on the paybill. Whelan says that most of the hard work had actually taken place, albeit sporadically, in the four years since the merger and both parties were fully aware of the contentious issues and possible solutions.

"Because the company had unilaterally decided not to reach a deal by March 2009, as it had initially promised, our members had lost a lot of pay on one side, and a lot of annual leave on the other," Whelan maintains. "But once these major issues were resolved, everything else in the jigsaw fell into place."

According to ASLEF, the disparity in salaries at the heart of the wrangle virtually equated to the cost of the disputed holiday entitlement. In the end, both pay and leave were levelled up. In return, the union agreed a comprehensive review of working practices in order to mitigate the impact on the paybill. Agreement was secured on, for example, changes to work rosters and train preparation times, as well as concessions on various demarcations. "The company said these were issues that needed to be resolved in order to run the business effectively and, as they didn't place any substantial additional demands on our members, we were happy to agree to them," Whelan observes.

The final package was put out to ballot and received overwhelming support.

Lessons learned

In stark contrast to some disputes, where strike action has left a bitter legacy, after the agreement was concluded industrial relations soon returned to normal. As Whelan explains: "The company is driven by the needs of its shareholders and we are driven by the needs of our members. Even though the dispute was prolonged, at no stage did disagreements become personal. To a certain extent, we were acting out our respective roles."

Indeed, the main protagonists came together at an academic conference held at the University of Westminster specifically to discuss the lessons learned from the strike. These were reported in the January 2012 edition of the union's Locomotive Journal (PDF format, 2.36MB) (external website).

Among the main points emerging from this round-table discussion were:

  • "There were problems relating to the lack of training in negotiation for managers, especially compared with the training and experience of the trade union side.
  • All negotiators need to carefully assess the realities of power. This means they have to work out what sanctions the other side has at its disposal, and would be prepared to use.
  • There needs to be an understanding of how the 'other side' views any particular cause of a dispute. Without this it is difficult for management, for example, to frame any offer to the unions in terms they will appreciate.
  • Sometimes a negotiating team can have as many problems controlling and managing their own side as they do talking to the other.
  • It is both interesting and important to understand the [significance] of the 'negotiating ritual'. In many disputes, the employer is unable to concede at the beginning of the negotiations what they can eventually concede at the end.
  • Negotiations don't need to be 'personal' and it is a hindrance to progress if they are. While people don't need to be friends, they can remain on good, professional terms outside the talks."

Harmonisation in financial services: two become one

 
 

The harmonised structure was underpinned by an extensive job evaluation and mapping exercise to ensure that roles were correctly and consistently sized.

 

A merger of two financial services companies resulted in talks with its recognised trade unions on harmonisation of employees' terms and conditions starting one year later. The aim was to secure and implement a collective agreement within one year. We spoke to a senior member of the reward team about the harmonisation exercise.

The new organisation had a number of different staff groups on a variety of terms. In many cases, employees were working alongside each other and the new management team felt that it would be just and equitable to harmonise conditions under a single set of terms and conditions.

There were several issues to be addressed in negotiations, including:

  • salaries;
  • bonuses;
  • personal accident insurance;
  • car allowances; and
  • location payments.

In addition, key HR polices covering, for example, holiday entitlement, sickness absence and performance management, were also reviewed.

The organisation was able to draw on the experience it had gained during a previous harmonisation exercise several years earlier. This meant there was already a "fairly robust" pay and grading structure in place that didn't need a vast amount of work to accommodate the new employees.

External consultants

The company commissioned two external consultants to establish market salaries and benefits to ensure that the revised package of terms and conditions would be broadly in line with those in the finance sector as a whole. The aim was to produce a "cost-neutral" set of proposals.

A new 12-grade pay structure was agreed covering all employees below senior management level.

The harmonised structure was underpinned by an extensive job evaluation and mapping exercise to ensure that roles were correctly and consistently sized. The trade unions identified a number of job evaluation scores that they said "were obviously wrong" and these were reviewed on appeal.

Negotiating change

 
 

The harmonisation process was overseen by a single, joint management-union project group, although some sub-groups were established to deal with specific issues such as organisational design.

 

The harmonisation process was overseen by a single, joint management-union project group, although some sub-groups were established to deal with specific issues such as organisational design.

The unions formed a joint committee to negotiate with management. The company was represented around the bargaining table by members of the employee relations team, the reward team and certain senior managers.

While recognising that individual employees could gain from some changes but lose out on others, the unions entered talks on the premise that any final agreement would only be put to members if it emerged that no employee would be worse off "in the round" under the new arrangements.

Due to the complexity of the negotiations some terms and conditions, such as pensions and working time (including flexitime and annualised hours), were deliberately excluded from the exercise, to be considered at a later date.

Employee communications

Senior management conducted a number of "roadshows" to explain the planned changes. Each member of staff was given a handbook outlining the key elements of the proposals. Regular updates were also placed on the company intranet.

In addition, individual employees were given the opportunity to meet with their own line manager to discuss the implications of the role-mapping exercise. The trade unions held surgeries to explain the package to members.

Bargaining took just short of one year to complete and a set of proposals was put to a ballot of union members with a recommendation to accept what negotiators described as an "industry leading" pay and conditions package. It was supported overwhelmingly, by a majority of around nine to one.

Our contact says that there are always teething problems when harmonising terms and conditions, and it is sometimes difficult for staff to see the "big picture", although they add that many issues resolve themselves once employees accept the organisation "isn't trying to diddle them". They add that, despite all the hard work, the exercise was worth it and employee attitude surveys indicate that employees are more settled. "The harmonisation of terms have contributed to a feeling that staff are now part of the same company, whereas this was not necessarily the case immediately following the merger," they conclude.