The Royal Mail appears to be approaching more labour unrest as it attempts to deal with its pension problems. The UK mail and e-commerce logistics provider proposed last week that it would shut its existing scheme and replace it with a cheaper arrangement with lower contributions from Royal Mail.
The cost of sustaining the present fund are considerable. Royal Mail commented that its annual pension contributions are currently around £400m and that “if no changes are made, the contributions could more than double to over £1bn in 2018”. The Communications Workers Union, which is one of the Trade Unions representing Royal Mail’s work force, has put forward alternative proposals and said that it will resist the Royal Mail’s suggestions with the “strongest possible opposition”.
The huge demands of the former Mail monopoly’s pension fund were one of the issues that drove its privatisation, with a proportion of the funds raised from the sale being diverted by the Government into the fund. Yet this still has not been enough.
Royal Mail is facing delicate problems in terms of its market position in the e-commerce sector in the UK. Any sustained interruption to its service could alienate customers and present opportunities to rivals. Consequently, smooth labour relations at present are an issue of strategic importance.
For the mail sector worldwide such problems are hardly unusual and they constitute one the major barriers to former state owned mail monopolies evolving into more agile e-commerce focussed companies. One of the most extreme examples is the US Postal Service which is almost overwhelmed by its pension contributions.
In contrast, new entrants into last mile and other aspects of e-commerce logistics are keen to avoid these problems through the adoption of ‘sub-contractor’ models for much of their operational workforce. Even FedEx has struggled with this issue, whilst UPS continues to wrestle with substantial pension contributions that have had a major impact on its profitability in recent years.
The underlying issue is that both mail and much of last-mile logistics are insufficiently profitable to sustain large stable workforces.
Source: Transport Intelligence, April 18, 2017
Author: Thomas Cullen
For further insight into the e-commerce logistics market, including analysis of its market size and forecasts broken down by regions and countries, analysis of technologies in the industry, and the major trends affecting the market, see Ti’s Global e-commerce Logistics 2017 report.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)