Royal Mail: Agreement with CWU and Trading Update

Royal Mail: Agreement with CWU and Trading Update

Royal Mail has announced that it has reached agreement in principle with the Communication Workers Union (CWU) on pensions, pay, a shorter working week, culture and operational changes – and also provides an update on trading.

The proposed agreement has been considered by the executive of the union who recommend that CWU members vote in favour of it in an upcoming ballot.  The proposed agreement has been approved by the Board of Royal Mail.

In a statement sent to Post&Parcel today (1 February), Moya Greene, Chief Executive Officer of Royal Mail plc, said: “This agreement marks a new chapter for Royal Mail and the CWU. Following the conclusion of a helpful mediation process and further talks, we have delivered the right result for Royal Mail and our stakeholders. This is an affordable and sustainable solution that enables us to continue to innovate and grow and to meet the intense competition with confidence.

“Royal Mail and the CWU will continue to work together as we build on our position as the leading delivery company in the UK. I’m pleased that, under this agreement, we will continue to offer the best terms and conditions in the delivery industry by some distance.

“Both Royal Mail and the CWU have shown that disputes can be resolved without recourse to damaging industrial action. Our people’s commitment to serve customers throughout this period has allowed our good trading performance to continue. This means we now expect to deliver adjusted Group operating profit before transformation costs of at least £680 million for 2017-18.”

The Royal Mail statement also provided a summary of the key points of the agreement:


· The Royal Mail Pension Plan (RMPP) will close to future accrual in its current form on 31 March 2018.
· Royal Mail and the CWU have committed to work towards the introduction of a Collective Defined Contribution (CDC) scheme for all employees. This will be subject to necessary legislative changes being enacted. A Defined Benefit Cash Balance Scheme (DBCBS) will sit alongside it.
· Transitional pension arrangements will be put in place from 1 April 2018 until a CDC scheme can be established. These comprise a DBCBS and an improved Defined Contribution scheme.
· The ongoing annual cash cost of pensions will continue to be around £400 million.


Pay and shorter working week

· From October 2017, employees will receive a 5% increase in pay (including base pay, overtime and allowances). This rate of pay will also apply throughout 2018-19.
· From October 2018, there will be a one hour reduction to the working week (currently 39 hours), subject to completion of trials and implementation plans for a range of initiatives.
· From April 2019, employees3 will receive a 2% increase in pay (including base pay, overtime and allowances) and a further one hour reduction to the working week from October 2019, subject to successful implementation of those initiatives.
· Eligible part-time employees will, in addition, receive increases in their hourly rate of pay equivalent to c.2.6% in October 2018 and October 2019 to reflect the impact of the shorter working week.
· Commitment to move towards 35 hour working week by 2022.


Royal Mail also provided these summaries on “culture and operational changes”

· As part of our strategy of ensuring a contemporary USO, the last letter delivery time will move back by 30 minutes to 3.30pm in urban areas and 4.30pm in rural areas.
· Agreement on operational changes to enable later collections, processing and delivery of parcels, use of technology to enable further efficiency improvements and a pipeline review.
· Review of the Agenda for Growth starting in 2019. The legally-binding undertakings on industrial stability and protections under the Agenda for Growth are ongoing and remain until 2020.


Royal Mail said it will put in place the following transitional pension arrangements from 1 April 2018:

· For RMPP members, Royal Mail will implement a DBCBS. The Company will contribute 13.6% of pensionable pay towards members’ retirement lump sums, and a further 2% for other member benefits, including death in service and ill-health. Members will continue to contribute 6% of pensionable pay towards their retirement lump sums.
· Members of the Royal Mail Defined Contribution Plan (RMDCP) with a minimum of five years’ service will have the option of joining the DBCBS.
· The Company will increase its contribution to the RMDCP at each standard contribution tier by 1 percentage point.
· The Company will move current and future RMDCP members in the standard section of the plan to the top tier of contributions (10% from the Company and 6% from the member).


The Royal Mail statement also included this trading update:

· Our continuing good trading performance means that we now expect to deliver adjusted Group operating profit before transformation costs for 2017-18 of at least £680 million.





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