Minimum wage in the private security industry

(UK and Hungary)

László Neumann

Institute for Political Science, Hungarian Academy of Sciences

Common sectoral features

• Male-dominated activities, segmented labour market (cash transit vs. manguarding service)

• Longer regular working hours (although reduced during recession)– Guards may be required to cover long shifts, such as the

traditional Friday evening to Monday morning shift (UK)– In Hungary 24 hour shifts are common, it is in fact legal for

employers to set a 60-hour week in jobs requiring ‘stand-by’ duty • Very high share of small/micro firms• Domestic market, competitive cost-led bidding for contracts with

clients• Company strategies to tackle competitive pressure:

– lead to opportunities to upgrade technologies to offer higher value services

– or to downgrading, risk of informal / grey economy competition

Similarity in Industrial Relations contexts

UK

• Decentralised collective bargaining with 34% coverage

• Union density is systematically low among all low paid groups - men, women, full-timers and part-timers

• A key problem is the limited use of extension mechanisms (compared with other West-European countries).

Hungary

• Dominantly company-level bargaining with 35% coverage, however company level wage agreements coverage is shrinking

• Union density is low (12% nationally), especially in sectors dominated by small and medium-sized firms

• Weak sectoral collective agreements, extension is limited to four sectors

UK Research findings I.

Uprating pay and upskilling jobs• Highly unionised cash transit division, major strike in early 2000s,

highly concentrated industry - employer willingness to improve conditions

• Strong, clear GMB focus on uplifting pay and skills – ‘win-win’ 5-year pay agreement

National NMW SecurityCo - cash transit division Adult rate % annual change Minimum rate % annual change

% Gap

2005 £5.05 n.a. £7.57 n.a. 49.9% 2006 £5.35 5.9% £8.25 9% 54.2% 2007 £5.52 3.2% £8.75 6% 58.5% 2008 £5.73 3.8% £9.62 10% 67.9% 2009 £5.80 1.2% £10.00 4% 72.4% 2010 £5.93 2.2% £10.20 2% 72.0%

UK Research findings II.

But for manguarding services, major problem of client-led pay agreements

• Company agreement for terms and conditions, but multiple pay agreements for individual clients (and many not covered by joint regulation)

• Client-demarcated „bargaining units”

• Same job paid NMW in some contracts and up to £7.50 in others

UK Research findings III.

• Different clients present different puzzles for pay bargaining:

-Public sector client wanted a wider job role – agreed a 15-year contract, but eroded pay enhancement-Banking client set 47 separate pay rates for each

site reflecting value of site to client not skill of job

• However, unions’ pay equity strategy generally supported by employer interested in diminishing labour turnover:

• Passing on higher wage costs to clients

• Union considers organising drive key foundation for the union’s low pay strategy

Hungary: Distribution of hourly wages All private sectors Security industry

• Real wages (controlled for inflation), with minimum wage markers• NMW does matter:

•Gradual right shift of distribution shows that real earnings kept growing between 2005 and 2008•Security: skilled minimum = mode of distribution (about 70% of workers’ pay)

Research findings Hungary I.

• Typical company strategies to tackle low prices (pushed down by strong competition, especially in public procurement):– extensive network of sub-contractors as franchisees– casual employment, envelop wages and unlawful labour

practices– In „stand-by” jobs MW is paid for 60 hours weekly instead of

the 40 hours mandatory working time• Local level trade unions are weak: either they do not even exist

in SMEs, or loyal to the management’s wage policy • Problems are addressed on a higher (sectoral) level

– Negotiations in the bipartite Sectoral Social Dialogue Committee

– Objectives: regulation of wages and unit (hourly) fees

Research findings Hungary II.

Construction as a role model for creating a sectoral agreement

• 10-year long preparation by well-established employer organisation and trade union

• 2006: concluding an agreement which was immediately extended by the Ministry

• It was to the strong support of the government which aimed to combating black labour

• 2007: Government decree on unit fees

Security development

• 2008: Following four year preparation a sectoral collective agreement including wage tariffs concluded

• 2009: the government was not sufficiently supportive of extension

• 2010: Although wage tariffs were amended in a way that favoured employers, eventually employers voted against it

• No Government decree on hourly (unit) fees

A mirrored summaryUK

• Some employer support for an industry-wide minimum wage in order to provide a defence against the intensive cost-cutting competition

• Mixed union success in sustaining and growing a gap between the lowest pay rate and the NMW

• A client-led system of pay determination.

• Improving union membership is a key foundation for the union’s low pay strategy

Hungary

• The wage tariffs of the sectoral agreement was rejected by the majority of employers before its extension

• Company unions’ weak bargaining power

• prevailing individual pay setting

Despite IR similarities, it does make a difference that Hungarian employers’ organisation and trade unions are new and organisationally weak