How to negotiate a pay claim

(Written over many days, but finished on 11/7/2016)

Some weeks ago, I wrote a few lines on negotiating skills. The article has been read by quite a lot of people, so I thought I'd add something about winning a pay and conditions claim, because most people don't understand what actually happens until the claim goes wrong.

I spent nearly twenty years at varying levels in one of the trade unions that negotiated in the electricity industry. After ten years on the Branch Executive, I was trusted enough to take a junior place on the committee that negotiated the annual pay and conditions claim directly with the employers. It was a depressing experience. The senior members of the committee would meet a week or so before the meeting with the employers, pluck a percentage pay rise out of apparently nowhere, suggest a few improvements to holiday entitlement, bolt on a demand for a 35 hour week and that was it.

They'd then present the claim to the employers, who would politely note that it appeared to have been written on the back of a fag packet, and then withdraw to discuss it. Once both sides had emptied the coffee jugs, the employers would return, offer a different, lower percentage, a few cosmetic changes to the conditions of employment and reject the 35 hour week out of hand. Then there'd be a two hour discussion that could be boiled down to "Aw, c'mon, you can afford it!" "No, we can't, and we're being generous because we value our staff." Eventually, concessions were made by both sides and an agreement was reached around a figure that some of us suspected the employers had been aiming for all along.

Several of us junior members of the negotiating committee were annoyed at the way it all happened and felt that there had to be a better way. Time wounds all heels, of course, and several years later all the senior negotiating committee members either died of stress-induced heart attacks (not joking, three did) or retired, and we junior members got to have a go. And we got to explore a better way - after coming up with A Plan.

By this time, the electricity industry had been privatised, and we were in the grip of The Market. That's why we went to our full-time union officers and said "We need to know how The Market works! Organise some education, not with union activists, but with stockbrokers, pensions fund managers and the like. Teach us not only why people choose to invest in our company, but how company accounts work, so that we can talk to our employers in the language they now speak!"

Sad to say, our individual union branches within the company had not been very active in the years up to the Great Dinosaur Cull, which meant that many electricity branches in my Region had massive bank balances. This was all in The Plan, as the junior, now sole, members of the negotiating committee went back to their branches and suggested merging them all. It took about six months to do, but it happened, and all the junior activists managed to secure seats on the new Executive. I was elected Branch Secretary and Lead Negotiator, which was part of The Plan, plus no other bugger wanted the job.

Now that our expanded Branch had access to all those funds, we were able to employ a part-time Branch Assistant. His major qualification for the post was that he was a part-qualified accountant, and, crucially, he knew how to read the fine detail in company accounts.

So - now for the pay claim. It had to feature many aspects. Firstly, it had to be logical and easy to understand, something that could be explained in a couple of sentences to both members and the media. No matter how good you think your negotiating skills are, always remember that you might have to get your point across on a picket line to a reporter on a short deadline, or to the viewers of the Six O'Clock News in the ten seconds you're allowed on the picket line before the employers have their minute's worth in the studio. Secondly, it had to demolish the expected "We can't afford it" argument, which was why our Branch Assistant spent several days at Companies House digging through the fine detail of the latest company accounts to (hopefully) prove that they could afford it. Thirdly, it had to demonstrate that there was a new team in town - no more scribbled lists of demands, it had to be a professional looking document that could stand comparison with any company communication. Fourthly, it had to stand up to financial scrutiny and demonstrate that the key management ratios that investors use to determine investment wouldn't be adversely affected. Fifthly, it had to be not only what our members wanted, but what they thought would be fair. You've got more chance of securing industrial action when the members think they're on the fair side and that the employers are being unfair.

Yes, a good negotiator ought to never need industrial action, but you've got to keep as many cards up your sleeve as possible. If the employers think industrial action is a strong possibility, that's worth nine tenths of actually taking action, plus your members don't lose any pay.

As for the actual pay claim, we decided to go for 6%. We based this figure on one of the management ratios, namely the one that divides annual net profit by the number of employees to find how much profit each employee has contributed. Investors check this to make sure that the profit per employee is rising rather than falling. In the previous year, every employee had been responsible for £93,852 profit (yes, I have the original documents in front of me!) That profit per employee figure had risen in just one year to £134,930. In other words, in the year just gone, each employee had added more than £40,000 to company profits. An average 6% pay raise for a member of staff represented less than three per cent of that extra £40,000 profit they'd created.

That satisfied quite a lot of our objectives. It was easy to understand, it seemed very fair, and it could be explained quite quickly - "Every one of our members increased their productivity by a minimum of £40,000 and we feel that our employers can afford to give 3% of the improved profits back to us." Who could object to that?

It also had value for muddying the waters if the pay claim had to be fought through the media. What did we want, 3% or 6%? "We want three per cent of the extra profits our members have created for the company. Company sales staff are given 10% commission, we're asking for less than half that."

Yes - 3% of £40,000 per employee would mean slightly more than a 6% increase across the board for all staff wages, but as long as we stuck to the magic 3% figure, our employers would look financially incompetent if they went to the media and complained about being held to ransom for a 6% increase. What's more, they'd have to use some fancy arguments and a whiteboard to explain how our wanting 3% of improved profits was actually a 6% pay claim, and The Great British Public tends to write off fancy arguments as squirming. What's more, their argument could be collapsed by a journalist asking "But do you pay your sales staff 10% commission?"

No matter that the "sales staff" we were talking about were unpaid volunteers from the workforce who chose to knock on doors some evenings and sell our electricity in hopes of receiving 10% of the first quarterly bill as payment. No matter that the average wage increase nationally was somewhere between 3.5% and 4% - and that if we'd secured a 4% increase, our members would cheer us to the pylon tops - this was a campaign we could all go out and SELL!

Where, though, could we get the money from? Increasing the company wage bill by 6% when other electricity companies were settling for 3% or less would be resisted strongly by the employers because it would send a very wrong message to The City. "Um, that's no problem", said our clever Branch Assistant. "I've found £30 million in the accounts that hasn't been declared in the profits. It's just sitting there at the moment, although I think it's being reserved to fund redundancies."

Er - what? "The company revalued the pension scheme last year and found that there was a surplus of £30m. So they took the surplus back and hid it in the accounts. Took me several days to find it, but it's there alright. Whenever they want to persuade older staff to take early retirement, there's a big pot they can use to purchase their agreement. What's more, they probably don't want people to know about it."

(How to reduce the company salary bill - if staff are on an incremental salary based on good service, persuade the older ones at the top of their scale to take "enhanced" early retirement and hire some young people who will join at the bottom of the scale. The job still gets done, it just gets done cheaper. Redundancy payments are not classed as salary in company accounts, so the net effect as far as investors are concerned is that salary costs have gone down. Large drinks all round, chaps!)

So there we had it. A good campaign that would play well in the media if it had to go that far, a claim that our members would see as being entirely fair, and one that could be funded from a fairly secret stash that we could bet our employers wouldn't want revealed. It was a claim that would stand up very well to financial scrutiny - "We want this much and you can get it from here."

The principal negotiators got to work, and drafted the document that would be our pay and conditions claim. It was an honest assessment of the financial worth of the company based on key statistics taken from the Annual Report, with management and financial ratios presented in such a way as to suggest the company was fairly awash with spare cash that could be used to meet the pay claim and the £30m slush fund referred to, but hidden among other detail. If anyone from the management side noticed it, we hoped they'd groan "They've found the money!" and leave our employers scrabbling to find an adequate "We can't afford it" response. But, oh! - if they didn't... when they presented the "Can't afford it" argument across the table, we'd just say "But we showed you where the money can come from, it's from the £30m you took from the pension fund." Now, having the employers scrabbling in private to find a decent response is quite a good thing, but having them trying to find such a response when they are across the table from you is a much better thing, especially as one of their junior members might blurt out some ridiculous explanation that can later be reported as "Management say..."

(A quick note on how The Table works. Both sides usually have just one lead negotiator, and those are the only two people who speak, although anyone is allowed to say whatever they want to, in theory. There are about ten people on each side, but each side’s nine silent members act as advisers to the lead negotiator and pass notes to her/him indicating points that they would like made. They range from the helpful ("Remind him that he said the opposite last year, so which is it?") through the bizarre ("What about the Salisbury problem? Press them on this!") to the frankly insulting ("SHUT UP, YOU GONK!"). Discipline is all-important. If one of your trusted colleagues opens their stupid pie-hole and says something damaging, the correct response is to immediately say "Can we have a five minute comfort break?" This is always agreed immediately, but the other side knows that the damage has been done and that the trusted colleague has been taken outside and is now having the living snot beaten out of him/her. One of our best tactics was to goad our short-tempered Managing Director - not the management side lead negotiator, as you will soon realise - to fury, when he was likely to say something deeply insulting; at which the lead negotiator and even-tempered Personnel Director would call for a ten minute cigarette break. In our private moments when negotiating one to one, the Personnel Director would refer to such breaks as "Getting Joe out of the room and hosing him down.")

We had the 6% pay rise sorted, explained, costed and justified, but then there were the "extras" to be decided. Union negotiators have to deliver, because if they don't, they don't get elected next time round, so sometimes it's easier to deliver an average pay claim topped off with a few extras the members weren't expecting. Like another day added to annual holiday entitlement, enhanced meal allowances or the deletion of a few of the lower points of the pay scales, which helps low-paid members. We tried to be fairly creative. It was National policy to include a claim for a 35 hour week, so we attached the usual form of words, in the triumph of hope over experience.

It's important to give management some "wiggle room". Hand in a list of demands that you're committed to, play the hard wo/man and refuse to give ground on any of them - well, then, you're in for a long fight. And, trust me on this, you'll lose.

Even if you get everything you want after months of negotiating, they're going to kill you next time. Oh, and if you get everything you want quite easily, you've pitched your claim too low. So your members are going to kill you rather more quickly.

Give management some hopeful claims, though, make sure you can defend them but be prepared to sacrifice them, and the other side will think they've won a few battles while they lost the war. Er - I mean, while they conceded your well-argued case, obviously.

We submitted our "extras" to the same financial scrutiny we'd applied to the central 6% salary increase, and added those arguments to the Annual Review of Pay and Conditions, as our document was still called. Not the snappiest of titles, we needed a better one. Once we'd thought of it (wait, it's coming), we gave the much amended draft to our Branch Chair. He worked in the Corporate Communications Department, where all the shiny company reports were produced, printed and bound, and where he had access to what was then called desktop publishing software, quality paper, a couple of major Xerox printers that were the equivalent of offset litho machines for any ancient inkies that understand such terms and some kit that can bind printed documents. In other words, our printed pay claim was made on the same equipment that had been used to produce our company's Annual Report and Accounts. My, it looked good.

When we met the employers, they were mildly confused when we handed out what looked like a slim brochure for some luxury timeshare opportunity. Then they noticed the company logo next to the union logo, under the title "Sharing The Success". They were told that this contained the staff side's claim for better conditions, based on the increasing profitability of the company. Crucially, they were told that copies of the document had been released to every union representative across the company, and that the details were even now being shared among their employees.

(That had been a costly headache. We'd arranged for parcels to be delivered to every company location that morning, and each parcel contained several sealed envelopes, each one addressed to a local union rep. Inside was a copy of the document and a letter signed by their Branch Secretary that summarised the claim and placed an embargo on revealing the details before 09:30 that morning, lest they be separated from their breath. The actual wording was probably more tactful than that, but there was certainly a blade within the velvet.)

The employers did as they usually did, called for a break and invited us to make free with the coffee jugs. Fifteen minutes later, one of their junior negotiators popped in to say "Um, they say this is taking a bit longer than usual, so if you want to nip out for a fag, feel free." We did; gleefully.

Fully one hour later, the employers indicated that they were ready to resume the negotiation. Their reply was simple: "We are unable to respond without detailed consideration of your arguments. Can we meet again this time next week?" said the Lead Negotiator Personnel Director - "And, Babba... can I see you in my office? Now?"

Oh no, you can't. Some negotiations are done in private, usually the ones that start "Look, we've buggered things up with this one, how can we sort it out?" When you're leading a team of ten, everything of significance has to be done in front of them. Personnel Director Steve understood my concern and agreed to take a fag break with us. For someone we'd hoped would be really rather concerned, he actually wanted to congratulate us.

"We've been asking for this kind of claim for years!" he said. "Something based on fact rather than emotion, something we can properly argue with! Joe was very impressed with your command of finance and particularly wanted to say 'Well done'. He also wanted me to pass on the message, 'In your dreams, you amateurs.' Mind, he's also told Catering to provide bacon rolls for next week's meeting as well as the coffee jugs, so let's see what happens then, eh?" Before he left, Steve took time to shake hands with every member of the staff side negotiating committee. Oh, good old Steve, friend of the unions - he never missed a trick, the clever bastard.

A week later, we all gathered at Head Office again to hear managements' response. It was slickly complimentary, full of praise for "embracing the Company’s changed trading position", our "understanding of how the market works" and our "command of the complex nature of corporate finance". In the background, I fancied I heard the dying moans of some dinosaurs, but we were there to make a deal with our equals, not enjoy the "Jolly well done, boys!" speech of our masters. All I wanted to know was how far over the barrel we'd got them.

Quite far, we assumed, as they opened negotiations by saying that our very professional claim deserved the respect of a properly considered full and final response; which, after much flummery, turned out to be 4%, no extras and nothing off the working week. (See earlier mention of being cheered to the pylon tops if we'd secured 4%.)

We thanked them for their very helpful response and asked for a short break to consider it. I hustled my mob away as quickly as possible, lest some fool start celebrating or congratulating their lead negotiator and thereby give the game away.

"Fag break, folks", I said as soon as we were outside, "We'll give them five minutes to think we'll accept." Some of the first-time negotiators reacted with disbelief - "We're not going to turn 4% down? That's above what we agreed to settle for!" Oh yes we were, but that needs a little explanation.

When negotiating, you have to have what's called a "bottom line", a figure or set of conditions that you won't go below. In the case of this pay claim, we'd set that at 3%. The employers do the same, except that they set a "top line", a figure they won't go beyond. The fun of negotiating is that neither side knows the others "bottom/top line" and the difference between the two is where the real negotiating happens. We hadn't "agreed to settle" for 3%, that was our agreed bottom line. That detail was swiftly explained to our junior members, together with one of the great rules of negotiating, namely - you never, ever, under any circumstances, accept the first offer. That's the employers' best hope of limiting the damage, and they still have ground to give. No matter that there may be several million pounds on the table for you to take, if you can get just one pound more, you're doing the job your members trusted you to do for them.

As for the five minute time limit for our break, that was important, too. Five minutes was enough for:

"Shall we take the money?"

"No way!"

"Right, let's go back and tell them."

"Hang on, can I finish my fag?"

"Yeah, why not?"

More than five minutes meant potential arguments among the staff side, giving the employers the idea that they could perhaps exploit the disagreement and split the staff negotiators. In the short term, that meant that they'd put out some hopeful feelers towards our inexperienced members that had nothing to do with the staff Lead Negotiator's arguments - like a junior manager saying "But, Annie, didn't you say last week that...?" or "Sorry, - but Frank, didn't you tell me that...?" and trying to tempt those junior negotiators into responding.

In the long term that meant no deal that day, come back next week once our managers have had a chance to grill every staff side negotiator on a one-to-one basis with friendly coffee and "What's said here stays here, of course" nonsense.

Discipline is vital, as is the perception of discipline. Five minutes had to be the extent of the break.

We went back in, rejected the 4% out of hand and invited the employers to make a more realistic offer, given our members' clear increase in productivity, and God bless 'em, the employers went into full "We can't afford it/We can't send that message to The Market" mode. We invited them to look at our figures again, where we'd shown that they could easily afford it, and what's more, they wouldn't send any message to The Market. The employers' baffled looks meant that they hadn't twigged the pension fund cash pot, but they took a break anyway.

They took twenty minutes. In other words, either they were split on a better offer, or they couldn't see where the money was. There was a potential third option; they'd seen where the money was and were frantically trying to construct an argument against using it that had to avoid the "We're going to use that to fund redundancies that we haven't told you about" excuse.

When the employers returned, they began by restating their "very generous" offer, and acknowledging our command of finance. "But that command only goes so far" they said, and restated the concern they had about sending the wrong message to The City. We didn't understand management ratios properly, and there was nothing in our claim that justified going beyond 4% - although, if it would bring an end to the negotiations, they could go as far as 4.2%, one-time offer, take it now or it would be gone forever.

No need for a break to consider that one, I rejected it out of hand; "Because we've clearly shown you where the money to fund this claim can come from... but if you want chapter and verse, look at page 17 and our mention of the £30m you took from the pension fund surplus." Given the looks on the faces of some managers, I knew that a significant blow had been landed. You see, ever since Maxwell, employers have been super-careful about taking money from their employees' pension funds.

Management immediately called a break. Ten minutes later, they suggested that now would be a good time for lunch, and to resume at 2 p.m., so that meant at least an hour to wait for their response. Except... management Lead Negotiator Steve found me and asked for a "side meeting". Now, that's a little different to "Can I see you in my office?" It's a way of exploring an offer without actually making a formal offer. I said that I'd need another member of my negotiating team in the room to witness that I didn't sell the staff down the river, and a few minutes to explain to the rest of the staff side how significant a side meeting was - and to beg them to trust me.

A side meeting is never mentioned in the minutes of any discussion, and technically, it doesn’t exist and never took place. It allows both sides to speak their minds without fear of being quoted, though, and it usually involves an exchange along the lines of “If we do X, will you do Y?” Of course, each side can still say “No” and return to open negotiations across the table, but a request for a side meeting is often an indication of a major offer by one side or the other.

As it proved when we met in Steve’s office. “Look, you’re not going to get 6%, it’s above anything we’re prepared to settle for”, he said. “I can go to 5%, but only if you can promise your side will accept it with no further argument.” I suggested that he could go a little further and offer 5.5% (never accept the first offer, remember?), and that if he did the staff side would happily accept. (Happily? They’d be ecstatic!)

Rather than replying, Steve changed the subject. We’d circulated the pay claim to our representatives across the company. Had we made clear to them that we wanted a share of the £30m pension fund surplus? Ah ha, so that was a sensitive issue, as we’d hoped. No, Steve, they got exactly the same booklet you got - and your side didn’t spot it, did they? No, we are not telling the staff that you’ve had thirty million quid out of what they think is their pensions.

“But we will if your side doesn’t settle this claim today. Don’t send us home empty-handed.”

Steve gave every impression of thinking carefully, and then said that he could try to get the offer up to 5.2%, but it might take a little time. I said that I might be able to get my side to accept 5.4%, but the employers would have to offer some inducements from our “extras” list.

Steve grinned, and said “So you and I are going to have to get our people to accept 5.3%, then?”

“5.3%, an extra day’s holiday across the board and an employee savings scheme for the next five years that will allow them to buy shares at today’s prices in five years’ time.  The employers will throw in one free share for every ten the staff buy under the scheme.”

“You’re a hard bastard, Babba”, Steve grinned.

“I’ll take that as a compliment.”

“It was meant as one. OK, 5.3%, no change to the holidays, and we'll talk about the share scheme next month so that we can take the credit for the idea.”

“I can lose the holiday if you’ll replace that with a form of words for next months’ agenda offering an opportunity to discuss ways that staff can profit from investing in the company. Then we can both take the credit for it. We’ll even write a paper for the meeting.”

“Done!”

And so it proved. My witness from the staff side confirmed to the rest of the staff negotiators that in her opinion I’d got the best deal possible, and they were amazed that we were looking to settle for 5.3%, let alone getting the employers to swallow the share save scheme. It was probably the biggest item on our “extras” list and resulted in our members making many thousands of pounds each five years later.

So then it was down to waiting for the management side. A little before 4 p.m. they indicated that they were prepared to respond again, and offered 5% for an immediate agreement. (Remember, the side meeting never happened, and sometimes you have to go through the motions just for the minutes.) I restated the case for 6%, but indicated that we’d settle for 5.3% if it meant agreement that afternoon.

Thus it was that a deal was struck and my team brought home the highest percentage pay rise in the electricity industry that year without changing the all-important management ratios by one penny.

In the weeks that followed, I took a congratulatory call from the union’s Head of Electricity, was invited to be keynote speaker at the union’s National Electricity Group Meeting (and this lengthy tale has been assisted by my notes from that speech), and my negotiating team were feted back in their workplaces.

So what did we learn? Apart from negotiating is fun?

We learned that you have to do all the work for the employers and show them exactly how the proposed pay and conditions claim can be funded. We learned that you have to justify the claim by means of strong financial arguments. We learned that you have to have someone who can go through accounts with a fine-toothed comb, because if someone’s hidden some cash, you need to know where it is. We learned that it really helps if you can discover some aspect of your employer’s business that they’d rather not make public. We learned that you have to be at least as good as the other side when making presentations. We learned the value of discipline, to keep quiet no matter how much of a gonk the Lead Negotiator seems to be, because s/he probably has A Plan.

And we learned that negotiation at senior levels can be terrifying and exhilarating – sometimes both at the same time.

The following year, our employers were fully prepared for our heavily-researched claim (“Building on the Success”) and thought that they’d organised a fool proof “We can’t afford it” argument. If only they hadn’t played fast and loose with an insurance company they’d set up… but that’s a different tale.

(Naturally, given that this all happened many years ago, reported speech is an approximation of what was actually said, although it reflects the spirit of the discussions.)