We’re seeing levels of industrial action not seen since the 1970s, driven by soaring inflation and dissatisfaction with pay deals on offer. But is this a long-term trend, and how can HR respond? Steve Herbert looks into some of the causes and potential solutions.
“A return to the 70s” scream the tabloid headlines. And it is most certainly true that the nation is experiencing a greater level of industrial action than has been seen for many years.
In the last month a withdrawal of labour has been threatened by a diverse range of workforces including refuse workers, railway employees, the NHS, teachers, pilots, some police forces, and even barristers.
The above groupings represent workers from every strata of British society, yet all are concerned about the erosion in their living standards. With good reason.
The latest figures from the Office for National Statistics indicate that the Consumer Prices Index (CPI) rate of inflation now sits at 9.1%, way above the 2% target set by the Bank of England.
And that older – yet often more familiar – measure, the Retail Prices Index (RPI), is already comfortably in double figures at 11.7%. These are average figures only, and many workers are facing far steeper increases in their daily spending.
Meanwhile, the tax threshold freeze and the increase to national insurance (NI) contributions are compounding the problems for many household budgets.
And interest rates are now rising, increasing the cost of borrowing for many.
Some economic optimists may suggest that the inflation spike could be short lived. This might well be the case, but inflation has a long way to fall to reach a bearable level again.
The key issue here is the level of real-terms increases in employee pay. Real terms simply refers to whether pay awards are above or below the current rate of inflation. For someone who has not had a pay rise, their wages are worth almost a tenth less than they were a year ago.
But in isolation the cost pressures of 2022 are not enough to explain the current wave of industrial unrest. To understand this, we need to look back some 14 years.
The credit crunch of 2008 led to years of austerity, a situation then made worse by the uncertainties of Brexit and the challenges of a pandemic too.
The result, according to a post-Spring statement briefing by the Institute for Fiscal Studies, is that average incomes in the UK are now around £11,000 per annum less than would have been expected had pre-2008 economic trends continued.
That’s a huge drop in expected earnings, but it has been over an extended period, enabling workers to adjust their spending habits gradually to the erosion in their spending power.
It has also been made significantly easier by the support of supply chains that were willing and able to absorb costs.
Yet in 2022 a gradual adjustment is no longer enough, and the supply chain is now under huge financial pressures, not least because of the fuel and energy crisis.
When these costs increase, so too do the costs of every link in the supply chain. This, coupled with the additional logistics issues caused by both Covid and Ukraine, have placed real cost pressures on suppliers, leading to an unavoidable increase in prices.
So, after many years of reduced circumstances, household budgets are now meeting significant inflation. Something must give. And this is why so many workers now feel that they now have little option other than to threaten industrial action.
Back to the future?
So, are we going back to the 1970s? It’s perhaps unlikely given that in 2022 many millions of workers don’t have union membership.
And even employees with such representation may see industrial action as a measure of last resort, not least because they may fear the longer-term employment, economic, and social repercussions of taking such action.
Yet those that can’t or won’t strike might still feel compelled to seek a higher pay packet elsewhere. This would leave their employer with all the fiscal and time costs associated with the recruitment process.
Either outcome is bad news for the employer. So how can HR professionals help, particularly if their employer is not able to grant inflation-busting pay awards as was the case with PwC last week?
Revisit what you have
The first step for HR experts should be to review the current employee offering.
Be imaginative. Each workplace and workforce differ, but there will almost certainly be local measures that employers can implement.
Many employers provide an employee portal to discounts on retail purchases, but such schemes were often poorly communicated initially, and underused as a result. Revisit such offerings, as they may well assume a greater usefulness and importance in 2022.
Likewise remind employees of other benefits that can make a difference. Free debt counselling services are usually included in employee assistance programmes, as are a range of other support tools that will help employees with mental and physical wellbeing.
And don’t forget to remind employees of those – often hidden – benefits already in place. Only by explaining the package will employees fully understand, utilise, and appreciate all the tools available to them.
Add to the offering
There are usually other cost-effective measures that can be introduced to help workers too.
Financial education and wellbeing services can help workers of all grades understand and manage their outgoings better.
Such services can be coupled with workplace finance options, which provide access to a range of borrowing and saving tools through payroll deductions. And the use of salary sacrifice schemes should be encouraged to help mitigate those taxation increases.
Finally, be imaginative. Each workplace and workforce differ, but there will almost certainly be local measures that employers can implement. So, negotiate with local businesses for employee discounts, encourage and support car sharing, providing free parking, or offer to trade excess holiday entitlement for a cash equivalent.
Of course, the cost-of-living crisis is far greater than any of these measures in isolation, but HR can help employees and their employer manage this situation better. And anything that improves workforce relations in these challenging times must be well worth doing.