Establishing The Terms And Conditions Of Employment Introduction HR Management

Critical to the structure of capitalist economies in the modern era has been the manner in which labour is rewarded for the effort made to produce goods and services – the ‘effort–reward bargain’(Burowoy, 1979). As capitalism developed and began to mature, the foundations of a ‘wage’ economy were formalised. This led to contention regarding how work should be measured and valued.

In response to the exploitative nature of early capitalism, trade unions developed as collective forces to protect employment conditions for skilled labour. The state, after some dissension, made union representation legal and laid basic protective rights for labour on statute. Employers, albeit sometimes grudgingly, accepted these constraints upon their freedom, and so the concept of negotiating terms and conditions of employment with labour emerged into modern society (Coates and Topham, 1986).

Regarding the establishment of, and improvement to, the terms and conditions of employment, it was determined that the most efficient and equitable manner in which the ‘effort–wage bargain’ should be negotiated, for the majority of labour in society, was through free collective bargaining (Webb and Webb, 1902; Brown, 1993). Collective bargaining is a process of negotiation undertaken between employers’ representatives and trade union representatives to determine the conditions under which labour should be employed.

During the latter part of the nineteenth century and for most of the twentieth century, collective bargaining came to be accepted as the most appropriate vehicle for establishing the terms and conditions of employment and to this end, has been tacitly supported by the state and accepted by employers (Brown, 1993).

However, with the election of a Conservative administration in 1979, this supportive stance, from both the state and employers, was actively challenged. With a clear affiliation to a free market philosophy, successive Conservative governments since 1979 have overseen a calculated decline in the influence of trade unions in the UK. Along with the constraint and control of trade union power came a concomitant decline in the coverage of collective bargaining.

This decline has been recorded by successive workplace surveys undertaken during this period such that, in 1984, it was found that over 70 per cent of employees were covered by collectively bargained agreements, but this figure had dropped to approximately 45 per cent by 1998 (Cully et al., 1999: 93). However, it was noted that the majority of the largest firms in the economy and a substantial proportion of the public sector still utilise collective bargaining to establish and change the terms and conditions of employment (Cully et al., 1999: 93).

So until recently, in any debate upon how the terms and conditions of employment are agreed, the critical focus would have been upon collective bargaining. However, it is now clear that whilst a substantial minority of employees still enjoy collective bargaining coverage, the majority do not. Bacon and Storey (1996: 43) refer to the ‘fracturing of collectivism’ by the structural changes in the labour market and the pursuit of individualism by management.

This is evident in the increasing number of firms who do not recognise unions as either employee representatives or bargaining agents and contraction of bargaining in traditional bastions of strength such as the public sector (Bach and Winchester, 2002). So, it is recognised that overall, collective determination of the terms and conditions of employment no longer dominates in the UK. Yet, there is little evidence for a credible alternative model of employment relations emerging to replace the collective bargaining approach, leaving what Beaumont (1995) describes as an institutional vacuum.

Towers (1997: 64), meanwhile, suggests that there is now a representation gap in the UK, where no formal method of articulation for employee voice has emerged with any coherence to effectively replace collective representation. There may be a role for HRM to fill this vacuum, but there is little indication that there is any wholesale, coherent and strategic adoption of HRM practices and policies by British management. Indeed, rather the opposite would appear to be evident, in that where HRM initiatives are in place they have largely been adopted in an ad hoc, opportunistic fashion and, moreover, are more likely to exist as a coherent policy strategy in unionised firms where collective representation persists (Cully et al., 1999).

It is undeniable that collective representation and bargaining have declined. Towers (1997: 64) raises the pertinent question regarding union and bargaining decline, ‘does it matter?’ If the modern economy has grown away from collectivity and employees are not overtly resisting this trend, should there be concern over the demise of trade unions and collective bargaining? Based on two main issues, Towers argues that the decline of collectivity is a cause for considerable concern.

Briefly, it is argued that employees are denied an independent representative channel within the naturally exploitative capitalist system, and tha there are implications for national productivity, given that firms with a strong union presence are more effective at introducing change. Towers notes, ‘it is more than arguable that collective bargaining can contribute positively toward the economic performance of individual enterprises and the economy as a whole’.

Supporting these points, Cully et al. (1999) found that investment in high-commitment management practices was more likely where there was a strong union presence whilst only a minority of workplaces without union representation offered employees formally agreed consultation over the organisation of the labour process. Brown (1993) explores the decline in collective bargaining, recorded in the 1992 workplace industrial relations survey (Millward et al., 1992).

Based on that evidence, Brown was pessimistic regarding the future of bargaining but noted, ‘how much worse off are employees who do not enjoy the protection of collective bargaining. They are, on average, less favoured than their union brothers and sisters in terms of pay, health and safety, labour turnover, . . consultation, communication and employee representation’.

It could be argued that periods of transition, such as that from collective representation to an alternative model, will be turbulent and lead to casualties.

Yet, this process of transition has been under way for some time and, to date, the decline in collective representation would appear to have denied labour a democratic channel to articulate their rights and does not appear to have contributed to a sustained productivity growth in the UK (Nolan and O’Donnell, 1995). It would appear, furthermore, that the most innovative firms, in terms of employing new managerial strategies to effect change, are those with a union presence (Cully et al., 1999).

Overall, the decline in union representation and collective bargaining would appear to ‘matter’ and to be a cause for concern regarding the protection of labour rights, the introduction of change and improving productivity levels within the economy. The extent of collective bargaining coverage in the UK has experienced some change since the election of the Labour government in 1997 and the introduction of a statutory recognition procedure within the Employment Relations Act (1999).

Gall and McKay (1999) drew attention to union recognition campaigns aimed at over 300 companies with 235 000 employees where the indications were that many firms were planning to accept such agreements in advance of statutory obligations; and this was supported by the findings from the CBI 1999 Employment Trends Survey which found that from 830 companies currently without union recognition, 60 per cent employing more than 5000 employees, and 50 percent of those employing 500 to 5000, were expecting a recognition claim.

While it would appear that substantial increases in membership density have yet to emerge definitively, due to the ‘churning’ effect of exits and entries into membership, it is probably fair to suggest that union decline has plateaued (Sneade, 2001). Within this picture of declining trade union affiliation, the public sector appears to be the exception, with union density remaining at just over 60 per cent (Bach, 2002).

So, the public sector unions have maintained a presence in the workplace but, even here, there can be little doubt that they have lost influence regarding the determination of the terms of employment. As in the private sector, there has been some constriction of bargaining agendas and shifts in bargaining level. Moreover, since the 1980s successive governments have made greater use of pay review bodies, which, although consulting with unions, effectively bypass the collective bargaining process.

The debate surrounding the contraction and expansion of bargaining coverage in both the private and public sector is set to continue but it is clear that a majority of employees now work in firms that do not recognise trade unions for bargaining purposes. Rather, a range of approaches, from individual negotiation to unilateral management determination, can be identified in this sector. Limited empirical evidence pertaining to such firms has led to descriptors such as ‘black holes’ (Guest and Hoque, 1994) and ‘bleak house’ (Sisson, 1993), implying that such firms are steeped in exploitation.

This is somewhat simplistic as there is a range of approaches adopted by management in firms without union representation to reward, organise and innovate, and these differing approaches will be explored to illuminate this debate further. As there are a number of parallel processes regulating terms and conditions of employment in the contemporary economy, it is essential to explore all of these. As such, and in recognition of the growing diversity in establishing terms and conditions of employment, this chapter will:

  • offer a comprehensive overview of the collective bargaining process in both the private and public sector;
  • discuss recent modernising initiatives and agendas which might impact upon this process;
  • consider the manner in which terms and conditions are established in firms which do not recognise trade unions for bargaining purposes.

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