The CBI Industrial Relations Summit

With inflation set to increase beyond even its current 40-year-high, industrial relations is well and truly back on the agenda - and not just for the railways, but for businesses across all sectors up and down the country.

The CBI and Mills & Reeve LLP held an industrial relations summit with industry leaders that sought to uncover exactly how businesses should be preparing for the rocky months ahead.

We also looked at how employee relations can be used to create a more engaged, skilled, and productive workforce that can drive economic growth in the long term.

Here are some of the key takeaways uncovered:

• Invest in your industrial relations (IR) now to avoid unnecessary issues later

Investing in your business’s employee engagement and relationships with your trade unions and staff forums up-front may very well pay dividends later. Many companies already know that they won’t be able to offer pay rises matching forecast inflation at their next pay round. We heard from companies in this situation who had opened discussions with workers – and trade unions where recognised – on issues that they could offer something on to build goodwill ahead of more difficult pay negotiations.

Disputes, especially where they involve industrial action, can be costly and threaten productivity. That’s why businesses identified thinking about when to involve ACAS as a key consideration. If a neutral third-party could help alleviate a disagreement or tension earlier in the process, then it’s likely to be less costly than going to ACAS only when facing strikes.

• Make sure employees and unions understand your business’ performance and strategy

A good wage settlement affords fair renumeration whilst ensuring a business can effectively invest in its long-term future.

To ensure staff representatives understand where this mutual sweet spot is, it is important that they – and those they represent – are kept well informed about the business’s financial position and investment plans.

At the CBI’s IR summit, it was made clear that this shouldn’t just be something that happens during pay negotiations. Rather, it should be a regular part of the ongoing dialog between a business and its workforce. This will ensure not only that unions are as informed as they can be when it comes to negotiations, but that messages about business plans and performance are not dismissed as a short-term negotiating tactic.

This may be especially important where bargaining takes place with multiple workforce division representatives, as here competition could cloud reasonable judgement if parties do not understand how they fit into the business’s overall strategy.

• Own the narrative

Trade unions will naturally want to tell their own story to members. In recent months many have reportedly been under or overstating pay offers received.

It is vital that businesses have a clear plan for communicating wage settlements to employees so that expectations can be effectively managed and your workforce understands the settlement that is ultimately reached.

• Be mindful about salary disparity – and how it impacts your workforce

At our summit we heard from businesses about the challenge of comparing multi-year agreements with trade unions and single year agreements with non-unionised workers. While most could show that over the medium-term pay rose equally, telling this story clearly is important, especially if for instance the latest deal with trade unions included a higher pay rise to offset them having had lower pay rises previously because the last multi-year agreement had underestimated inflation.

• Consider non-traditional pay options or bonuses

The CBI expects inflation to peak towards the end of this year before easing off in 2023 as energy prices come back down.

There is significant uncertainty on whether external macroeconomic shocks (like further supply chain disruptions caused by the war in Ukraine) could influence the outlook for inflation, as well as how the Bank of England and government interventions may influence the picture.

With this in mind, it may be appropriate for your business to consider shorter term or non-traditional forms of increased renumeration, like changing your Employee Value Proposition (EVP) or a targeted one-off bonus to counter cost-of-living pressures.

Resources

Visit our Managing the Increasing Cost of Doing Business page to learn more about how your business can best navigate the ongoing high cost, high inflation environment.

For the latest CBI intelligence on the economic outlook and how it could affect your business, visit our economic and political intelligence hub.

We are keen to understand the pressures your business is facing with trade unions. Please contact Laurence if you want to discuss ongoing IR challenges and the impact of increased IR activity on your business.