It’s easy, therefore, to see why employees are seeking not just a pay rise, but an inflation-busting pay rise; many are struggling to feed their families, fuel their cars and heat their homes.

Of course, printing firms want to accommodate their employees where there is headroom to do so, but there are limits. The BPIF’s Q2 Printing Outlook found that energy costs have now become the top business concern for printing companies – just ahead of substrate costs; that firms in the industry continue to be faced with climbing costs throughout their businesses; and general cost inflation is a real concern.

So, what can the sector do to square the circle and keep staff happy while still earning a return on investment?

Pay awards

Lucy Gordon, a director at Walker Morris, understands employers and employees alike are feeling the squeeze at the moment. She thinks the response to demands will depend on where employers are at in their usual pay review cycle, the industry in which they operate and the extent of the competition.

“Most employees,” she says, “expect an annual pay increase at least in-line with inflation, which is currently running at its highest rate in 40 years. So, it’s entirely understandable that employers can’t afford (or don’t want) to be offering 9% or 10% pay increases at the moment, particularly given that employers face national insurance contributions on top.”

As an average, she’s seeing awards in the region of 4%-5%; this means in practice that employees are effectively earning less.

And this corresponds to what the BPIF is seeing. It’s Printing Outlook found that 42% of respondents reported they had conducted a pay review in Q1 and the resulting average (mean) change in basic pay was 4.5%. Further, 76% of those surveyed expect increases in labour costs in Q2.

But the problem of pay is compounded by what Charles Cotton, reward and performance adviser for the CIPD, describes as “a tight labour market where employees can easily change jobs to earn more”. For him, the issue is that “if a firm can’t increase pay by enough, then there’s the danger it will lose staff and find it hard to recruit new workers”.

And to drive the point home, Cotton cites data from the Office for National Statistics’, Average weekly earnings in Great Britain: June 2022 report, which found that regular pay (excluding bonuses) grew by 4.2% between February to April 2022, with variations by sector. To him, this means that “employers need to know what pay increases other organisations in their industry and location are offering so that they stay competitive”.

Setting pay

When setting pay, Yolandie Gibbs, regional HR adviser at the BPIF, says the first thing to understand is that there is no legal right to a pay rise unless it is stipulated in the employee’s contract. However, she says that “normally a yearly performance appraisal... or a one-to-one meeting... will decide whether they have earned a pay rise.”

Further, she thinks pay rises should be based on employee performance, employee behaviour, workload and commitment. She also sees the benefits of rewarding staff with a pay rise – it can improve productivity and retention rates and will help with mental wellbeing as reduces financial stress outside of work. It also shows that hard work doesn’t go unnoticed.

There is no standard to set pay levels. Cotton notes that in some parts of the economy, pay is determined through negotiations with unions, in other parts its set by independent pay review bodies, while minimum hourly pay is set by the Low Pay Commission.

Specifically for the private sector, Cotton says that pay increases are often determined “by HR teams taking into consideration criteria such as affordability, employee performance, future business plans, inflation, and staff turnover.” However, he recommends employers should be as open and transparent as possible about the pay process and outcomes because “staff will be more likely to see the decisions as fair if they understand the reasons for what’s being offered and why.”

Gordon sees a similar pattern: that pay is rarely negotiated with employees and is usually determined by the managing director in smaller businesses, and by remuneration committees in larger businesses and PLCs. She tells how “remuneration committees have the job of benchmarking pay both externally, in the market; and internally, between staff operating at the same levels”.

And in unionised industries, Gordon sees pay negotiated between the employer and the union, and “this is why we are suddenly seeing a return to strike action when these negotiations are not successful... employees are facing a crippling cost of living crisis and the unions are trying to secure the best deals they can”.

But whichever tack is taken, Gibbs thinks that best practice means “giving an opportunity for an employee to present their case as to why they believe they deserve a pay rise, and then it is up to the company to consider”. Often, she says, pay rises may be based on a percentage, if stated in employment documents such as contracts and handbooks, or on what the company feels they have earned.

A different type of bonus

One solution to the problem of pay is to link pay rises to productivity or some other deal that gives both sides something. Gordon likes this as an idea, whether that be piece-work or linking salary increases to team or company performance, as it’s already used in some sectors. “However,” she says, “at the moment, even when businesses are out-performing their previous results, it may still be difficult to give substantial pay rises, given that recession is likely to be looming.”

An increasing number of firms are granting one-off bonuses to help their employees cope with the cost of living crisis. Building society Nationwide recently announced a £1,200 payment to staff earning less than £35,000. The advantage of this is that because the bonus isn’t consolidated into wages, it doesn’t permanently inflate the pay bill.

There is another option for Cotton: giving employees shares in the business “so that if the firm becomes more valuable, then the success is shared with staff”. And to this he adds non-financial offerings, such as linking increased productivity to extra paid leave, increased pension contributions, or other staff benefits.

Gordon too looks to non-salary incentives such as salary sacrifice “that can present real advantages for employers and employees” by offering a tax and NI efficient way of purchasing items such as bikes and cars and making pension contributions. In her view this may be a better option for employers than a pure pay increase, but it’s not suitable for all as employers must think about what happens if an employee leaves part-way through the repayment term. Also, salary sacrifice can’t reduce pay to below national minimum wage levels.

Gordon does think that employers need to be inventive about what they can offer to staff to ease the strain on income, but which costs them less too. She says that “we’re seeing some really novel ideas that tick other boxes as well, such as corporate discounts on energy-saving devices, electric cars and solar panels for home offices”.

But for any of these options to work Cotton says that the firm needs to be able to define, measure, assess and develop performance.

Overtime as a solution

Is working overtime a solution? Possibly, but Gordon would suggest that employers and employees check contracts first. “Overtime,” she says, “is usually offered by an employer, and depending on the contract, the employee might be compelled to work it or might be able to decline the offer; it can be paid at enhanced rates, such as 1.5-times or double the normal rate depending on the contract.”

While law demands that employees receive at least the national minimum wage on average for all hours worked or treated as worked, overtime can be a good solution if employers have work available, but as Gordon says, “for businesses experiencing a reduction in work following the pandemic, this might not always be an option.”

Amit Sen, Acas senior business manager, takes a legal line and says that where employers choose to offer overtime or to offer pay for overtime, “details must be clearly stated in individuals’ written statement of employment particulars and any accompanying guidance”.

He emphasises that employers should monitor and record any additional hours to make sure they abide by the Working Time Regulations to minimise any potential negative effects on health and safety.

In more detail, Gibbs says that the regulations state that employees cannot be forced to work more than an average of 48 hours in an average of 17 weeks if they are over 18 –different rules apply for under-18s. And for staff working an average of 48 hours in a week or more, then there’s an option for employees to sign an opt-out agreement.

Employee wellbeing is a concern for Cotton too. He says that “while working more hours can help in the short term, in the medium and longer term it can cause mental and physical health problems and result in a drop in productivity.” He reckons that instead of working harder, “HR teams should be looking at how employees can work smarter, such as through improved job design and work tasks.”

But if overtime is the answer then Gibbs reminds employers that “it’s important to include details about the type of overtime practiced within the business, the conditions and remuneration in the employee’s employment contract, and if overtime is required”. She also says that to avoid discrimination claims, “overtime should be offered to all employees, and you cannot stop other employees from working overtime and allowing others to.”

Threats made

Even with the best will in the world negotiations may fail and offers rejected. So, how should employers react if employees are upset with response to a pay rise request and threaten either work to rule or strike action?

In some cases, employers will have to rethink and potentially roll over and pay. Here Gibbs thinks that “this is to do with supply and demand, and companies may end up paying a premium for candidates which are hard to find.”

But if it comes to it, strikes and ‘work to rule’ will cause disruption to a business and can affect supply chains, which may lead to an employer then breaching the terms of its contracts with customers. For Gordon there is more to worry about: “Employee relations issues can also expose the business to negative publicity – consider the RMT’s successful balloting for industrial action by rail workers.”

Where collective bargaining agreements are in place, Gordon cautions employers to make sure they are followed and fully exhausted in order to try to avoid industrial action. However, she says that “it may not be possible to avoid industrial action altogether. How such action should be handled depends on whether the action is lawful (authorised and endorsed by a union) or unlawful (where employees take matters into their own hands).”

On this, John Cadman, HR Adviser at the BPIF, says that for industrial action to be lawful, “the union must have complied with a series of statutory requirements (including strict balloting and notification requirements) and the action taken must have been done in contemplation or furtherance of a trade dispute”. 

Similarly, Sen warns that this area of employment is extremely complex. He says that in terms of strike action, “the first thing is that any action has to be in contemplation or furtherance of a ‘trade dispute’ as defined in the Trade Union and Labour Relations (Consolidation) Act 1992”.

Sen adds that “failure to comply with the law, means that legal protections against dismissal, detriment, and victimisation would not apply”.

But if the rules are followed, Cadman says “the effect is that the union will be immune from liability for any losses incurred by an employer as a result of the industrial action”. In contrast, he says that any “unilateral action by employees that is neither official nor lawful is likely to lead to individual disciplinary action which could potentially result in dismissal without notice for unauthorised absence.” And where action is shown to be unlawful, it’s possible to obtain a court order to prevent an unlawful strike.

In relation to a refusal to work overtime, Cadman says “action can only be taken if it’s clear in the contract of employment that the working of reasonable levels of overtime is a contractual requirement”. While he thinks that informal warnings and attempts at resolution are always advisable before any formal action, “such unofficial overtime bans often fizzle out as usually employees are keen to work overtime at overtime premium rates of pay”.

Threats aside, industrial action may always be a possibility; wise employers contingency plan with a view to re-deploying non-striking employees from other parts of a business based in other locations. 

Certainly, unrest can lead to a non-unionised workforce seeking to become unionised. In this situation, Gordon advises employers to consider “placating staff by agreeing to an informal request for voluntary recognition which might give the employer more scope to determine the remit of the union”.

And from Sen’s standpoint, it is not uncommon for unions to seek to recruit members with a view to eventually gaining voluntary or statutory recognition and the bargaining rights that flow from that. He says, though, that unions can be a force for good, but that “depends on the relationships between the recognised union and the employer, as well as the relations between the union and its members”.

Cadman reiterates this. He says: “Union officials will have a good handle on what pay rates and pay rises have been achieved in similar companies and can advise their members what is going on outside their company ‘bubble’.” 

In other words, union officials can explain the bigger picture to disaffected employees and also discuss possible cost reduction measures with an employer that the union can put to its members to make any increase affordable. As Cadman says, unions “can condition expectations to a realistic level to some extent by explaining the fact that companies are suffering... that unfortunately other companies have become insolvent due to their cost base, including pay, being too high”.

Of course, it’s better to avoid conflict in the first place which is why Cotton advises employers “to go to arbitration to resolve any pay disputes... though that would also depend on employees being prepared to go through the process as well”.

And Cadman agrees, saying, that “companies would be best advised to discuss and seek to resolve any such issues with employees before any employee contemplated hostile action”. He adds though that “the days of Wapping, when the printing industry was byword for poor industrial relations, are long gone.”

The ‘Great Resignation’ and the power dynamic

The pandemic led many to re-evaluate their priorities, and for some, they sought a better work/life balance while retaining the flexibility that they enjoyed working from home. The Great Resignation, as it’s been termed, is officially recognised says Gibbs. She refers to the Office for National Statistics (ONS), which said that “the number of vacancies in the UK soared to an all-time high between July and September 2021, reaching over a million for the first time. The Great Resignation has disrupted an already unstable post-pandemic labour market, making it difficult to recruit and retain talent”.

Interestingly, she seeing job hopping on the rise generally and “in my experience it is often seen as a way to move on and keep skills fresh once an employee has learned all that they can in their current role.” However, she thinks that print is overall quite stable at present with “very little movement in the market... employees generally stay for long periods and don’t move around too much”. But there are two exceptions – the lowest paid and less skilled manual jobs, and sales where employees are “chasing the money and may not have that much loyalty to a company... Also, it’s a highly pressured environment with targets to meet, if they are not met these members of staff move to another role very easily”.

In terms of the employer/employee power dynamic, Cotton views employees as having the power to demand higher pay precisely because of widespread labour and skills shortages – and more people are moving jobs to secure better offers. He adds that “while being paid a wage that gives a decent standard of living is important, it’s crucial to remember that it’s not the only thing people are looking for. To better retain or recruit staff, HR teams need to help their organisations create a strong employer value proposition and then effectively communicate it”.

So, if he were running an HR department, he’d look to “include flexible working, staff development, career progression opportunities, being listened to, fair pay, a good pension, interesting work, inspiring mission, occupational sick pay and more.” Ultimately, he thinks that while staff might be tempted by more pay, “they won’t jump ship if they fear losing other valuable perks”.

Gordon thinks the same. She’s seeing “a real need for employers to balance their offering to employees so that they are an employer of choice; employers really need to reflect their employees’ values, ambitions and loyalty.”

She’s also seen that benefits such as those listed by Cotton as well as extra holiday entitlement or even unlimited annual leave, free breakfasts or lunches and employee discounts can go a long way to improving the employee experience without increasing salary overheads.

In parting, Gordon adds that “employers are looking more at employee health and wellbeing, and this is also serving to increase retention rates and stave off the Big Quit… focusing on supporting mental health, new parents and carers and key issues for women in the workplace, such as fertility, baby loss and the menopause – these can all increase loyalty to an employer.”

Conclusion

The issue of pay is perennial, and it’s exacerbated by the web making comparisons and job hunting easier, and the exigencies of markedly higher inflation and squeezed family budgets. Of course, employers are in the same position. But for the moment at least, employees have the whip hand. If pay demands cannot be met, employers need to be creative in offering low cost but valuable alternatives.