Lessons for HR from the public sector pay disputes? ‘It’s good to talk’

Blog posts

19 Dec 2022

Duncan BrownDr Duncan Brown, Principal Associate

More disputes

Alongside the advent calendar on our kitchen wall this chilly December, my daughter and I have a ‘strike calendar’. It’s to help avoid the growing number of mostly public sector pay-related strikes.

Last week, nurses for the first time in their Royal College’s 106-year history joined postmen/ladies, rail workers, university lecturers, Highways Agency staff and many other groups on a picket line in arguing for inflation-linked pay awards.

According to the new Office for National Statistics data (brilliantly reviewed by Tony Wilson here) the number of working days lost to industrial disputes has escalated to over 400,000, the highest since 2011.

As Tony highlights, although the increase in average earnings is also up to 6.9 per cent, this is heavily driven by the private sector (where increases are 4 per cent higher than the public sector). In real, inflation-adjusted terms it still represents an annual pay cut of 3 per cent.

The Office for Budget Responsibility now forecasts that our real wages will not return to their pre-financial-crash 2008 level until 2027. They would be an incredible £15,000 pa higher if they had matched inflation. No wonder there are more strikes.

I listened to Professor Michael O’Hear on Radio 4’s Moral Maze argue the strikes show ‘we have lost a sense of duty’ in our public services. Professor Nicola Smith from the University of Connecticut on the other hand, and supporter of the strikes like Genny and me, maintained there is nothing self-interested about wanting to earn a fair, living wage.

So, what do these disputes teach us about reward and employment? I would draw out three learning points.

 1. Maslow was right 

"We're tired. We're fed up. We need a pay rise to make a living."

That’s Ameera, a senior nurse in London, on the hospital picket line last week. One in four hospitals have introduced free food for their struggling staff in recent months. The Trussell Trust charity handed out 1.3 million emergency food parcels in the last quarter, compared to 1.2 million in all of 2017. According to the Children’s Society the number of kids living in poverty will reach five million by year-end. The majority have at least one parent in work (you can donate to their Christmas campaigns here).  When I first wrote in our Handbook of Reward Management about Maslow’s hierarchy of needs I never anticipated I would be spending so much of my working time helping employers to address the basic physiological needs of their people - to eat, stay warm and healthy.

2.  Pay decisions are socially mediated, not just economics-driven: ’it’s not fair’

Giving nurses more than the  £1,400 annual award they received on the recommendation of the NHS’ Pay Review Body, is Health Secretary Steve Barclay asserts, ‘not affordable given the situation the economy faces’. Yet rather than driving the rate of inflation, current levels of earnings increase lag price inflation by a record amount, even more so in the public sector. The Bank of England’s former deputy governor Sir John Gieve explained that ‘public sector pay increases don’t directly affect prices’, which were driven ‘largely’ by the effects of the war in Ukraine. But this, surely, isn’t why opinion polls show significant majorities of the public supporting the nurses. It’s because they aren’t seen to be being treated fairly.

3. Pay process is as important as pay level 

The research we profile in the Handbook of Reward Management highlights that people’s satisfaction with their pay is not just based on how much they get and ‘distributive justice’, but also by the process of how pay is set, or ‘procedural justice’.

There is considerable debate over the NHS pay-setting process, particularly the independence of the NHS PRB. RCN General Secretary Pat Cullen referred to it as being ‘set up by, paid by and appointed by government’. In Scotland NHS staff have ignored it and negotiated their own higher award averaging 7.5 per cent directly with the Scottish government.

There is certainly a strong case to review the NHS pay-setting process. At a minimum the PRB should consider an additional award to reflect the unanticipated scale of this jump in prices since the Ukraine invasion.

More fundamental reform of the process might also be considered. Perhaps, as I described in my IES blog last month, adopting the process for setting the National Minimum Wage the French government uses, based on a COL-linked formula which an expert group reviews.

'It's good to talk'

Dialogue has to lie at the foundation of any fair, effective pay process. Pat Cullen strongly hinted that the RCN’s 19 per cent pay demand was negotiable. Whatever you think of the NHS award there is surely no justification for Mr Barclay not following the Scottish government and at least agreeing to discuss the level of award with the RCN.

Last month BT quickly settled the pay dispute which saw 40,000 workers take industrial action. After a £1,500 pay award in April, the Company agreed with the Communication Workers Union a second £1,500 payment for all staff earning below £50k, taking their total annual increase to an almost-inflation-matching 9 per cent.

BT’s chief executive Philip Janssen said that although affordability was an important issue – pay is 1/3 of BT’s costs - ‘crucially, it has been worked on in conjunction with the CWU…whatever our differences, our unions are vital partners.’

It is indeed ‘good to talk’ Mr Barclay. Or as Bob Hoskins put it in his famous, gruff  TV advert for BT, ‘what men call ‘chatta’ really does matta’.

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