Royal Mail PLC (LSE:RMG) is reportedly considering tearing up a long-standing deal with unions designed to protect jobs and working conditions.
The agreement, called the “Agenda for Growth, Stability and Long-term Success”, was signed when the postal service was privatised nine years ago.
And according to sources quoted in The Telegraph, executives and legal advisers are collecting evidence to trigger a break clause in the contract with the Communications Workers Union (CWU).
Signed in 2013, the contract protects workers’ rights and limits Royal Mail from certain practices, including employing new workers on different terms than existing staff and using temporary labour.
To pull out of the contract, Royal Mail must demonstrate it faces exceptional circumstances, the Telegraph reported.
Royal Mail is current losing £1mln a day and grappling with a declining letter market and growing on-demand parcel delivery service offered by the likes of Amazon, but the CWU disputes these figures.
In a statement issued by the CWU, it “corrected” claims made by Royal Mail in recent weeks.
It questioned the claim made by operations director Ricky McAulay that the business “is currently losing £1mln a day”, asking how a company that made record profits of £758mln could become loss-making in a matter of months, while also giving back £400mln to shareholders and paying senior management £2mln in bonuses.
Royal Mail claimed to have offered staff a 5.5% pay rise, but this was also disputed by the Union, which alleged that nothing was offered at all.
Instead, it said a 2% rise was imposed without the agreement of union members, and a 1.5% payrise conditional on workers accepting changes “which would rip up their terms and conditions.”
Royal Mail also suggested a £500 lump sump that “could” be paid in 2023, but that the union has no clear view on the criteria for that.
What’s happened so far?
Nearly 115,000 members of staff voted in favour of strike action on 10 August, set to take place on 26 and 31 August, and the 8 and 9 September over pay.
Royal Mail said the staff, who work in collecting, sorting, and delivering parcels, were offered a 5.5% pay rise, significantly below currently inflation levels of 10.1%, meaning workers would receive a real wage loss.
2% of the wage increase was unconditional, Royal Mail said, while the remaining 3.5% was dependent on the agreement of working practice changes.
Rick McAulay, operations director at Royal Mail told the BBC at the time the offer was the “biggest increase” it offered in years, but the CWU wanted a pay deal that reflects the current cost of living for its members, which is expected to reach 18% next year.
A week later, on 18 August, union members again voted in favour of further action, this time in a dispute over working conditions.
The union said after workers provided crucial services during the pandemic, they are being "treated with complete contempt" by management.
After agreeing to new terms with the union in March last year, which obliges both sides to negotiate, discuss and agree on change measures, the CWU said senior management has shown "increasing hostility" to these principles - most notably returning to "imposed and unagreed change by executive action".
What does this mean for the summer of strikes?
This summer the UK has been rocked by a series of strikes as workers seek pay increases to combat the cost-of-living crisis.
IAG’s British Airways staff were set to strike during the peak summer period before the airline reached an agreement.
Rail strikes, which have been ongoing all summer, however, show no sign of abating as both sides look for a compromise.
But Royal Mail’s potential decision to back out of the long-standing agreement could spark a chain reaction and lead to other bosses pulling out of similar deals - mirroring the tensions of the 1980s when striking miners prompted nationwide action.
-- adds union response --