The Rail Dispute

Representative of the Rail Consortium

Introduction
A consortium is an organised group of employer organisations who join together to maintain, and
advance the financial and collective interests of their members – the railway companies. Consortia,
like The Railway Consortium, lobbies the Government for legislation and policies favourable to
railway companies, promotes the railway companies to the public, and negotiates with trade unions.

A trade union is an organised group of employees who join together to maintain, and improve, the
pay and working conditions of their employment. Historically Trade Unions are organised around
“trades” (e.g. dockworkers, textile factory workers, warehouse workers, railway workers, teachers,
etc). Trade Unions have an organisational structure, usually with a General Secretary at the top,
supported by a team of professionals and volunteers who may be either appointed or elected to
their positions by the workers who constitute its membership.

This negotiation simulation regards the pay and conditions of railway workers, negotiated between
the union’s General Secretary and you, the lead negotiator working on behalf of a consortium of
railway companies.

Your role
You are the lead negotiator for The Railway Consortium. Your membership are the employers who
operate and run Britain railways. The membership of the consortium includes London and Northern
Railways, Westcoast Lines, Southern Eastern Railways, Themies Link, and Southurn Railways. In total
you represent 15 rail companies, that employ 189,000 workers. 81,200 of those workers are
members of the Rail Union. This represents 42% of all railway workers (less than half, but well above
the 23% of workers who are in a union across the UK as a whole).

As the lead negotiator for The Railway Consortium, you are responsible for implementing the rail
companies’ policies and advancing their interests. In this simulation, you are to negotiate with The
Rail Union over proposed changes to the pay and working conditions of railway workers’
employment.

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

The negotiation simulation

Over the last few years Covid-19 has had a hugely detrimental impact on rail passenger numbers –
resulting in a considerable drop in ticket sales revenues. As a result, the UK Government has
increased its financial support for rail companies (i.e. your members) to protect them again financial
losses during the pandemic. However, the Government is now seeking to withdraw this financial
support, and is pushing the railway companies for labour ‘reforms’ in the railway sector.

The rail companies cannot continue the way they did before the pandemic. We need to reduce the
amount of money we spend on staff, and automate as many systems and processes as possible.

As part of these reforms, we are looking to cut back on the number of staff we are employing, as
well as make much-needed savings in our massive wage bill. We also need our staff to become more
flexible to deliver for our customers and the secure the rail industry for the future. We will have to
impose new, less generous, contracts on the railway workers.

The trade union, The Rail Union, have reacted badly, and is now in dispute with the rail companies.
So far the rail companies have not responded to the demands of the trade union. The unions have
now called for industrial action

“Industrial action” can include “working to contract” (sometimes called “action short of strike”) –
which is when staff refuses to work any overtime or carry out tasks that are beyond those outlined
in workers’ employment contracts. It can also include “strike action”. Strike action involves a large
group of workers refusing to work. By refusing to work, workers seek to disrupt the business
operations of their employer (i.e. your membership), causing the rail companies financial and
reputational harm. However, the employer, in turn, does not pay the workers for the time they are
striking – causing financial harm and risk to the workers.

The threat of strikes means that this dispute has reached a crisis point, and the Government has
become unhappy. The rail companies need to urgently negotiate with the Rail Union to settle the
dispute before it turns into a strike. If you cannot settle the dispute, and a strike is called, then the
Government is threatening to either fine or revoke rail licenses for the rail companies. You cannot let
the union call a strike!

The railway companies which form the Consortium have authored you to enter into negotiations on
their behalf regarding renegotiating the working conditions and pay of the railway workers with the
General Secretary of The Rail Union. If these negotiations end as a strike, then the government will
impose large fines on your membership, and potentially lose their licenses to operate trains.

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

Issues to negotiate:

1. Number of redundancies

One of the most important issues for the rail companies is to try and reduce wage costs by reducing
the number of workers.

The rail companies want to reduce the number of workers by 12%, through a combination of
compulsory redundancies, voluntary redundancies, and staff attrition. This would represent a loss of
22,000 workers on the railway, saving the rail companies £800million per year. This is a high priority
for the rail companies because it will save so much money.

However, the Government also wants to reduce road traffic and increase rail traffic to combat
climate change, and this may actually mean there is a need for more staff on the railways in the
coming years to handle increased passenger and freight traffic, not less.

Furthermore, the public is unhappy about fewer rail staff working on the railways. Reducing staff
means fewer guards on trains, fewer catering staff, cuts to cleaning, and the closure of almost all
ticket offices. The public is not happy about this.

Table 1: Number of redundancies, with points.

Redundancies Points
12% reduction +200
10% reduction +100
8% reduction +50
5% reduction +25
0% No change -25
+5% increase in staff levels -50
+10% increase in staff levels -100

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

2. Nature of redundancies

If you managed to get the trade union to accept that there would be a reduction in the number of
staff (above), then you will need to negotiate how those redundancies will take place.

As briefly noted above, there are three ways an organisation can reduce the number of staff. These
are through:

1. Compulsory redundancy. This is when a business terminates a contract with an employee

due to business circumstances rather than due to an employees’ behavioural or
performance-related issues. Employees usually receive a ‘redundancy package’ which
includes a cash settlement.
2. Voluntary redundancy. This is when a business asks employees to voluntarily resign in
exchange for a financial package. Usually, this is most attractive to those who are near
retirement or were looking for other employment opportunities anyways.
3. Staff attrition. This is the loss of employees through a natural process of retirement and
resignation, and where the vacancy left is not filled by the employer.

The Scottish and Welsh Governments have both guaranteed that there will be no compulsory
redundancies and have protected staffing levels. If the UK Government were to let rail companies
reduce staff through compulsory redundancies, then it would increase the reputational damage to
both the UK Government and railway companies in the eyes of the public.

However, using compulsory redundancies is the quickest and cheapest way to reduce the number of
staff. As such, while it comes with reputational risk, the rail companies would prefer compulsory
redundancies over voluntary redundancy or staff attrition.

If you accepted redundancies in issue (1) above, then your best-case scenario is to have a reduction
through compulsory redundancies, but other options are available too, and have points attached to
them.

Table 2: Nature of redundancies, with points

Redundancies Points
Compulsory redundancies +25
Voluntary redundancies +20
Staff attrition +5

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

3. Pay

The third issue that requires negotiation is pay. Inflation is soaring, currently at 12%; meaning that
workers’ real wage1 has dramatically fallen. The union is asking for a pay rise to compensate for the
rising cost-of-living for its members. However, with Covid-19, the number of rail passangers has
dropped, and the rail companies are now highly reliant on the UK Government for funding to
prevent financial losses. The rail companies argue that they cannot afford to offer more than a 3%
increase – even if this represents a pay cut.

As the representative of the rail companies, you will argue that you understand that a 3% pay cut is
below inflation, and therefore a real-term pay cut, but simply put, the rail companies cannot afford
to pay any more.

If you are to offer more than the 3% pay offer, then it must be linked to more job cuts or other
changes in conditions (see other negotiation points).

If you offer to the Rail Union:

❖ A 5% pay rise, then you must link it to at least of 5% redundancies in item 1.

❖ A 8% pay rise, then you must link it to at least 8% redundancies in item 1.
❖ A 10% pay rise, then you must link it to at least 12% reduction in item 1.
❖ A 12% pay rise, then you must link it to at least 12% reduction in item 1, AND ‘compulsory
redundancies’ in item 2.

Table 3: Percentage pay increase for workers, with points

Pay settlement Points

>15% pay increase No deal
15% pay increase No Deal
14% pay increase -400
13% pay increase -200
12% pay increase -100
11% pay increase -50
10% pay increase -25
9% pay increase -20
8% pay increase -15
7% pay increase -8
6% pay increase -4
5% pay increase -2
4% pay increase -1
3% pay increase 0 (current offer)
2% pay increase +100
0% No change +200
-2% pay cut +500

1
Real wage refers to a person’s wages adjusted for inflation. Imagine you are paid £10,000 in 2022. In 2023
there was 10% inflation, and your salary remained the same. This means that while your income remained at
£10,000 in 2023, the value of that your wage has reduced by 10% because the costs of goods and services have
increased, so you can buy fewer things with that £10,000 in 2023 than you could in 2022.

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

4. Conditions

The rail companies are looking to change other aspects of railway workers’ working conditions:

Sunday Rest Day

At the moment, Sunday is a ‘rest day’ meaning that working on a Sunday is voluntary and paid at
overtime rates, which is x1.5 the hourly rate. The rail companies want to change this so that there
are no ‘rest days’, and no overtime paid on Sunday ‘rest days’. This way, we can rota staff in to work
on Sundays when we need them, without having to rely on workers’ volunteering for Sunday shifts.

Reduced holiday time

At the moment, each full-time employee is entitled to 30 days of paid holiday a year, including public
holidays. The rail companies want to change this so that this is reduced to 25 days, a reduction of 5
days. As before, it may be possible to offer higher wage increases in exchange for getting workers to
have fewer paid holiday days per year.

On Call premium.
Some staff are ‘on call’ during the night, meaning that they can be called into work with 1 hours’
notice to address urgent business or emergencies. This is usually done by station staff and train
yards staff. At the moment, workers who are ‘on call’ are entitled to a £50 ‘on-call’ fee, and a further
£100 if they are called out to the station or the train yards during the night. The rail companies are
trying to change this to a flat fee of between £50-£79, regardless if the workers are called out during
the night, or not. This will save the rail companies money on call out fees.

Negotiations BUSI1632, led by Dr Scott Tindal

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 The Rail Dispute
Representative of the Rail Consortium

Terms Points
Keep Sunday rest day voluntary -10
Voluntary Sunday Rest day working is removed +10

Sunday overtime is paid at x2.5 hourly rate -15

Sunday overtime is paid at x2.0 hourly rate -10
Sunday overtime is paid at x1.5 hourly rate (current rate) -1
Sunday overtime is paid at x1.0 hourly rate (standard rate) +20

Paid holiday entitlement increased to 40 days -10

Paid holiday entitlement increased to 35 days -5
Paid holiday entitlement remains at 30 days -1
Paid holiday entitlement decreased to 25 days -10
Paid holiday entitlement decreased to 20 days -20
Paid holiday entitlement decreased to 15 days +30

On call premium flat rate >£150 -10

On call premium flat rate between £120 and £149 -8
On call premium flat rate between £100 and £119 -1
On call premium flat rate between £80 and £99 +1
On call premium flat rate between £60 and £79 +10
On call premium flat rate between <£60 +20

Negotiations BUSI1632, led by Dr Scott Tindal

Do not share this case with anyone outside of your class: preserve its integrity for future students.