Royal Mail agrees pay deal to end 2-year union dispute

Royal Mail has reached a landmark deal to improve pay and working conditions for its postal workers, ending a bitter two-year dispute with its union and enabling it to overhaul its business.

In an agreement struck with the Communication Workers Union, members will receive a 2.7 per cent pay increase effective from April 2020 and a further 1 per cent rise from April 2021. They will also benefit from a one-hour reduction in the working week.

As part of the deal, Royal Mail has won support to push through the changes needed to modernise its business as it attempts to switch its focus to the booming parcel delivery market.

It plans to develop a 24/7 operation for parcels and rollout new technology and automated services. 

It said the company and its staff “recognise this will require new ways of working, a more flexible business, greater use of technology and the insight of our workforce. This will also provide both job security and job opportunities for the future.”

The union called the solution “an excellent agreement for postal workers, customers and company alike”.

Dave Ward, general secretary, praised the “fantastic efforts of postal workers, who as key workers have kept the country connected and met customer and social needs throughout the pandemic”.

Shares in Royal Mail rose by 1.4 per cent after the announcement on Tuesday.

The company has faced a busier than normal Christmas period and admitted recently that customers may have to wait longer than usual to receive letters and packages. It has hired 33,000 additional temporary workers for this year’s festive season, up from about 20,000 extra staff hired for the same period in 2019.

Keith Williams, interim executive chairman, said that, although the company had been too slow to adapt in the past, the agreement reflected “what our customers want today — an ever-growing need for more parcels, whilst providing a sustainable letters service”.

A review of the operational network — set to conclude by April 2021 — would probably lead to changes in how the company ran its new parcel hubs and herald the introduction of dedicated van delivery duties for parcels, Royal Mail said.

Frank Proud, director of Apex Insight, said the postal group had suffered from under-investment for many years and that, as a result, its parcel operation was less automated than its rivals.

“But it sounds like [the agreement] will allow Royal Mail to make some changes, which will help them become more efficient and move to a seven-day service,” he said.

Innovations would include replacing handwritten sign-in sheets with “scan in, scan out” technology at sorting sites, Royal Mail said.

The postal group reported in November that revenue was expected to be £380m to £580m higher year on year due to the pandemic-driven surge in demand for ecommerce. Parcel delivery now accounts for 60 per cent of total turnover, compared with 47 per cent in the same period last year.

The company announced on Monday that it had temporarily suspended all mail services to Europe with the exception of the Republic of Ireland following the closure of the French border on Sunday.