UK companies will soon have to set up works councils and consult employees before organisational changes are made – a tricky job for retailers when they have local, regional and national offices and divisions to take into consideration.
Many retailers will have shuddered and thought “there before the grace of God go I” three years ago when high street retailer Marks & Spencer faced well-publicised staff protests and was ordered by a French court to suspend store closure plans in France for failing to consult employees.
At the time, there was no such protection for UK workers but the prospect of a retailer facing a similar scenario this side of the Channel will soon be more likely. The clock is ticking for retailers to get their houses in order in preparation for the National Information and Consultation Directive (NICD), which comes into force on 1 October this year.
It will require UK businesses to set up works councils if at least 10 per cent of the workforce requests this, and to consult on:
the recent and probable development of the undertaking’s activities and economic situation
the situation, structure and probable development of employment within the undertaking and any anticipatory measures envisaged, particularly if there is a threat to employment
decisions that may lead to substantial changes in work organisation or in contractual relations, including collective redundancies and business transfers.
Retailers face enormous challenges in meeting the directive as they employ staff in so many locations.
Guy Lamb, partner and head of employment and HR in law firm the DLA’s Leeds office says: “This will be particularly challenging for the retail sector as it has such a diverse geographical base with lots of shops in different locations, making it hard to push down management structures.”
Nicola Fenny, senior policy adviser at employers’ body, the CBI, agrees that retailers will have their work cut out. “Representative bodies do not tend to be set up in the retail sector because there are lots of shifts and part-time employees. Pulling people together can be difficult so retailers are likely to find this challenging,” she says.
Failure to comply with the NICD will mean retailers and other employers will face a fine of up to £75,000. But this fine is not likely to be the main deterrent.
Lisa Clarke, partner in employment, pensions and incentives at law firm Dundas & Wilson warns: “Large retailers will not see this as the big deterrent so much as they could face deals not going ahead because of delays.”
The NICD, along with legislation impinging on flexible working, and regulations on grievance, disciplinary and dismissal procedures, are right up there on the employment law priority hit list for retailers. The Information and Consultation requirements and flexible working are key policy development areas for industry body the British Retail Consortium. These topics have also been flagged up as the two top issues to address at a retail HR forum set up by law firm Pinsents and sponsored by retailers Ikea and Adams, going live later this year.
Although the retail sector is aware when it comes to the NICD, according to a survey by law firm DLA and Ashridge Management School published in April, this awareness is still not all that widespread. And even those organisations that are aware are generally still not doing much about it. Annamarie Howard, HR manager at clothes retailer Principles, which employs about 2,600 staff, says: “We’re not organised on this yet although we’re aware of the need to start working on it and we have undertaken an employee attitude survey to see what the general consensus is.”
Principles has no staff forums in place but it considers itself an open company and will be looking to set up its own model.
Multi-sited employers are very uncertain as to whether works councils should cover all sites at national level or whether there should be sub-councils at local level, according to the DLA survey. The survey recommends opting for local councils to help prevent the unnecessary escalation of concerns to the national agenda and to provide a useful link between local sites and the national forum.
Guy Lamb of the DLA urges retailers to put in place an effective communication structure and to consider having mini works councils in each store similar to those at Marks & Spencer.
“This is a very sophisticated structure that requires lots of management involvement, but it is a way of saying how important branch level issues are,” says Lamb.
Lamb says companies can either sit tight and adopt the Government’s onerous default model or take the opportunity to construct structures that work for their organisation, recognising best practice issues and the impact on brand that the failure to embrace NICD could have.
Where employers have existing agreements, as with high street retailer John Lewis Partnership, they can hold a ballot to establish whether to stick with it.
One issue to consider, says the survey, is how any NICD bodies will integrate into any pan-European consultation body. Even those with existing European Works Councils are uncertain how these will link in.
Debenhams is examining how to update its existing employee works forum to comply with the directive. Employee relations manager Sue Greenland says: “We did a lot of work in this area when we restructured in February, which has been positive.”
Although the John Lewis Partnership considers itself to ahead of the game, head of personnel policy and benefits Paul Backhouse is concerned about the complexity of some of the directive.
“The regulations take a complex approach and we want clarification on issues such as what is the definition of an undertaking: a branch or a shop?”
John Lewis is owned by staff and has tight democratic structures in place to consult and inform employees. “We are pleased the Government is not enforcing a statutory model,” says Backhouse.
Pinsents is developing a product, ICON, to help businesses meet NICD requirements, looking at how to adapt any existing processes or create appropriate new processes, as well as how to overlap with other information and consultation requirements such as redundancy and TUPE consultation.
One of the other hot topics under discussion by retailers is flexible working. The retail industry has pioneered policies in this area, such as job-sharing, term-time contracts, homeworking and compressed work. But it faces more and more legislation making such practices highly challenging to juggle. These include the Sunday Working (Scotland) Act 2003, the Working Time Directive governing the amount of hours worked and legislation giving parents with children who are disabled or under six the right to request flexible working.
And now the Government is looking to extend the right to request flexible working to employees caring for elderly relatives. “It will be increasingly difficult for retailers to juggle all these rights and decide which ones get priority. There is no answer to that; whether you do it on a first-come, first-served basis or whatever. Retailers face discrimination claims if they get it wrong,” says Kate Temple, senior associate in law firm Baker & McKenzie’s employment department.
Debenhams is thrashing out its flexible working policy. “We are looking at how to maximise flexibility and to tackle the challenge in meeting various demands for flexible working. We rely on a high percentage of part-timers with restrictions on when they can work,” says Greenland.
“Legislation on the right to request flexible working, Sunday working opt-outs and the extension of rights to temporary staff all impact on flexibility and we are trying to pull together all those strands,” she says.
Pinsents plans to explore the whole issue of flexible working at its forum. “As retailers employ lots of women and because of their opening hours, they have to try to accommodate a host of requests and balance this with meeting regulation requirements on employing agency staff and giving part-timers the same rights as full-time staff,” says Pinsents’ Farr.
Principles is looking at what realistically works in the business in terms of flexible working. “Our outlets range from three to 30 staff so we are having to look closely at where we draw the line in offering job-sharing or part-time work,” says Howard. The company is looking at teleworking and flexi-time at head office, which it does not offer at the moment.
John Lewis has extended the right to request flexible working to all employees. In the first six months of the law, it received 200 requests, most of which it has been able to accommodate. “As we open seven days a week, we have a lot of flexibility,” says Backhouse.
Many retailers have invested in sophisticated software to help them juggle the issue of when employees work. Kitchen and homeware retailer Lakeland installed Kronos Systems’ Workforce Central software in May to help it manage the scheduling and time attendance of its 520 employees, who work a variety of shift patterns.
“Even the smallest changes are time consuming to make and a manual system makes it difficult to monitor hours worked under the Working Time Directive rules,” says Jane Evenett, retail accountant at Lakeland.
The Kronos system alerts the company if any employee is close to working more than the specified number of hours.
Under the new statutory disciplinary, dismissal and grievance procedures coming into effect on 1 October 2004, if retailers plan to dismiss an employee, failure to follow specified procedures will render any dismissal automatically unfair. It will also increase the potential compensation that can be awarded to an employee by between 10 and 50 per cent. This could see retailers facing compensation awards of £110,000.
Employees who do not follow set procedures will be penalised by compensation being reduced by up to 50 per cent or by not being allowed to go to tribunal.
Kate Temple of Baker & McKenzie says: “These will be key regulations for retailers as they tend to employ high numbers of low-skilled, lower-paid staff and we are frequently asked to advise on disciplinary issues such as honesty issues or poor timekeeping.”
Another change is that employees will have the right to accompaniment in redundancies; this currently only applies to disciplinary and grievance
“The retail sector is going to have to work very hard to make sure it is geared up for this, reviewing its procedures to make sure it complies and that managers understand how to follow these procedures,” says Julie Quinn, partner in employment at Allen & Overy.
The basic thrust of the new set procedures will be:
obtain a written statement about the issues
hold a meeting to discuss the issues
inform the employee of the decision and their right to appeal
hold a meeting to discuss this appeal if they choose to appeal.
“As many retailers do not have an HR person at each store and much of the people management is devolved down the line, retail does tend to have higher claims profile and it is vital to make sure you get the procedures right so as not to be burdened by silly dismissal claims,” says the DLA’s Lamb.
Although Principles has dispute and grievance procedures in place that it feels work well, it is reviewing the level of policy detail it leaves with line managers. A few years ago, it launched an HR and employment manual to empower managers, but there have since been cases where managers have been put off by there being too much information or have taken things too much into their own hands. It now wants to redress the balance.
John Lewis’s Paul Backhouse is concerned that the new regulations will increase paperwork. “Although our existing procedures comply with the Acas Code of Practice, I think these regulations will create more bureaucracy for us, having to document everything. Also Acas talks about a word in the ear, which is difficult in large retail companies with lots of part-timers,” he says.
Pinsents Farr says that many retailers assume that they need not worry as they have policies and procedures in place. “I met someone in retail recently who did not even know about these regulations. But among those that do, many think they really only apply to small employers. But the details are such that retailers can easily fall foul, it is a big change and they must take it seriously,” she says.
Among the areas to watch out for are the importance of letting an employee pursue a grievance despite whether the line manager thinks it is not worthwhile pursuing and the fact that grievances can still be pursued after the employee has left.
The retail sector employs about 2.7 million people, approximately 11 per cent of the UK workforce.
Over the past five years, employment in retailing has risen by more than 190,000.
The industry continues to be one of the biggest providers of net new jobs in the economy.
The sector is the largest employer of women, employing almost twice as many women as men.
It employs a majority of part-time workers, about 1.6 million, as opposed to 1.1 million full-time employees working more than 30 hours a week.
Source: British Retail Consortium