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Sir Brendan Barber: Pay and productivity

Wednesday 02 December 2015

Sir Brendan Barber discusses how getting terms and conditions right in the workplace is key to a successful and productive economy.

Sir Brendan Barber

Sir Brendan Barber is Acas' Chair, joining in January 2014. Previously Sir Brendan was the TUC General Secretary (2003 to 2012) and sat on the Advisory, Conciliation and Arbitration Service Council (1995 to 2004). Sir Brendan was knighted in the 2013 Birthday Honours for services to employment relations.

Acas Chair Brendan Barber blog

Over 20% of calls to the Acas helpline (that's almost 200,000) relate to contracts of employment. This is where so many misunderstandings in the workplace occur. What should be fairly straightforward documents setting out the what, where and how of a job can become the cause of much confusion and heartache.

Clarity around Rights and responsibilities is one of Acas seven levers of productivity. It makes sense that everyone should be aware of their terms and conditions from the outset. But also, if changes to any element of the contract are proposed - whether it is pay, overtime, benefits etc - then these should always be discussed with affected staff first with a view to reaching agreement.

The new National Living Wage (NLW), which is being introduced in April next year, may require a strategic change in the way employers juggle their people and business priorities, but it will also have a very real impact on many individual terms and conditions of employment.

The changes mean that there will be a new mandatory wage floor for workers aged 25 and above starting at £7.20 (50p more than the current National Minimum Wage rate) and planned to increase sharply over the next few years. But how will organisations react?

A new report from the Resolution Foundation finds that the NLW will have an impact on the wage bill of 54% of employers. Some sectors, like retail, hospitality and health care will be affected more than others. But what's interesting is the way employers say they will respond to paying staff more. Top of the 'will do' list is "improving efficiency/productivity" (cited by 30% of employers), followed by "taking lower profits/absorbing costs" (22% of employers) and "reducing overtime and bonuses" (16% of employers).

Pay and productivity have long been recognised as key to a successful economy: well paid employees and productive businesses are part of a winning formula for most people. There have been some 'chicken and egg' debates over which comes first of course - a TUC report argues that pay rises are needed to spark increased demand for goods and services, while the CBI believe business productivity needs to come before increased wages.

Hopefully, the combined efforts of employers to "improve efficiency" in the wake of the NLW will bring a closer interaction between the two - with a rising wage floor mirrored by rising levels of UK productivity. But for those intending to revise terms and conditions around overtime and bonuses, there should be clarity that this is a step that should only be taken after seeking agreement.

It's good that employers are already planning for the changes ahead. But whatever response they are considering, let's make sure everyone is involved in the conversation.

One organisation that is facing a huge period of upheaval is Wiltshire Fire Service. Find out how they used reflective learning to adapt to both cultural and organisational change in pdf icon How to change a workplace culture: a case study in power of reflective learning [176kb].

Read other blogs in our productivity series

1 Comment

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  • Posted by Roger Jeary  |  3 December 2015, 9:56AM
    The worrying aspect of the response from employers to a higher wage bill is the emphasis on "improving efficiency/productivity" which most of us know in the service sector in particular can often simply mean same amount of work with less employees. This means of improving efficiency has no producitvity benefit but simply harms the economy by reducing employment levels.  It is worrying that only 22% of employers actually recognise that they have a responsibility to properly reward their workforce and even they have to be cajoled into doing it by a statutory requirement.  The important point made by Brendan is that whatever the response to the introduction of a higher National Minimum Wage, (I refuse to accept the government title of "National Living Wage" which it certainly is not) is that any changes to existing terms and conditions must be the subject of consultation, or better still negotiation with the employees affected or their representatives.  

    And so I come to the point of my comment, the encouragement by ACAS for collective bargaining is probably the biggest contribution it can make to fair terms and conditions and better workplaces leading to improved productivity.  Because let's be honest, why would a good employer wait until a statutory increase in the minimum wage is introduced to think about improving productivity.  Trade unions have demonstrated over the years their ability to harness the knowledge and experience of their members to enable constructive and productive discussions which lead to successful companies and organisations.  It is a shame that so many employers appear afraid to enagage in that process.