Why contracts are the new HR battleground

Asda recently hit the headlines for a wrangle over renegotiation, but it could be the first of many to clash with unions

Why contracts are the new HR battleground

Christmas ought to be one of the most profitable times of year for Britain’s supermarkets. But for one of the largest – Walmart-owned Asda – the festive season was almost overshadowed by an HR argument that dragged it into the headlines. And experts are warning it is far from an isolated case.

When Asda announced it was moving 120,000 employees on to a new contract that meant their breaks would go unpaid, along with changes to night shift payments and a reduction in the minimum hours they could be asked to work, the backlash was swift. Unions threatened to call a strike – which ultimately never materialised – and Labour leader Jeremy Corbyn was among the MPs to raise the issue in the media.

The supermarket pointed out that the contract was offering greater certainty over shift patterns and involved a pay rise to £9 per hour for most shop floor staff. And Ranjit Dhindsa, head of employment law at Fieldfisher, says it handled the resulting dispute reasonably well: “I actually think Asda, in the scheme of things, did a fantastic job given the scale [of the undertaking]. There’s been no industrial action, which speaks volumes. And generally a lot of people have signed up, which signifies good communication.”

Asda was reacting to a fast-changing retail environment in which its market share has been consistently falling and its sales dropped 0.9 per cent in the third quarter of 2019 as rivals posted strong results. It appears to have been able to resolve the dispute without a full-scale revolt, though it was criticised for allegedly threatening to fire employees who did not sign the contract, and a small number of staff had indicated they were prepared to take the retailer to an employment tribunal if they were dismissed.

Whether such claims were successful would depend on several factors, says Rebecca Thornley-Gibson, employment partner at DMH Stallard. These include whether Asda followed a fair consultation procedure, the business reasons for the change, and what notice was given. “In a difficult and highly competitive retail environment where Asda is seeking to benchmark terms with competitors, it is probable its business reasons for change will stand up to scrutiny,” says Thornley-Gibson.

But while Asda is the last of the ‘big four’ supermarkets to put employees on to a new contract in such a major exercise, the broader issue of amending terms and conditions could affect many more businesses next year, particularly in the hard-pressed retail, hospitality and leisure sectors. For companies coming under increased profit margin scrutiny, cutting down on perks or trimming working hours is one of the few levers to dramatically boost profitability. And new contracts may be preferable, and certainly less noticeable, than widespread redundancies. 

“I can understand, for efficiency and good corporate management, why you would want to standardise, reduce your admin overhead and make everyone clear what their rights and entitlements are,” says Dhindsa.

Unions are braced for potential disputes next year in the wake of Brexit and a disruptive general election, bringing echoes of 2016, when the aftermath of the introduction of the national living wage saw several high street names introduce new contracts, with varying degrees of controversy. B&Q cut bank holiday pay and bonuses for some staff, but raised its basic pay, although it was forced to amend its offer and compensate employees after a petition garnered 130,000 signatures. Coffee chain Caffè Nero was lambasted for ending free food perks for its staff (it offered a discount instead), while both Tesco and Wilko announced changes to holiday pay and Morrisons cut Sunday rates and paid breaks. 

In almost all such cases, employers will have the law on their side provided they follow basic procedures and undertake a minimum consultation period of 45 days. But Dhindsa argues the current legislation is not well equipped to support large companies in such circumstances, offering no guidance on how to consult on such a scale. “The law doesn’t help,” she says. “It doesn’t, for example, say it’s OK to use videos for consistent messaging.”

For employers looking to regulate their own terms and conditions, Dhindsa’s advice is to plan ahead and communicate well. Work out why you are making the changes, how you are going to explain that to employees and how you will train managers and other key leaders in consistent messaging. You may also need to handle the media and unions, with an eye on how you will defend the changes if they are ever challenged in a judicial process.

“Change is difficult,” she adds. “It’s particularly difficult for managers to deliver change, but it’s also hard for employees to accept and get used to. But after a period of time, people generally tend to settle down and move forward. And when things are standardised, it’s clearer what your rest break, holiday, shift and notice entitlements actually are.”