Editor's Desk 
Fire and rehire: Employees’ strike likely at Centrica-owned British Gas
Summary
- Centrica-owned British Gas could face a strike by its employees in coming months after majority of the workers voted in favour of it in response to the energy company’s fire and rehire plans.
- In a consultative ballot by the GMB union that saw participation of more than two-thirds of its total 10,000 members, around 95 per cent voted in favour of the strike.
- Centrica said that its staff has around 80 different employment contracts that need to be modified and made simpler to suit some modern requirements.
In a follow-up to the announcement made by Centrica plc (LON: CNA), an international energy services and solutions company and also the parent company for British Gas, regarding extensive job cuts and change in employment contracts, thousands of employees came forward to support strike at the company. It is to be recalled that in June 2020, the energy giant proclaimed to cut around 5,000 jobs to ramp up its restructuring efforts due to the coronavirus-led crisis. The utility company also indicated to bring into effect new terms and conditions for employment.
What did the union say regarding the strike?
However, viewing that Centrica had made a fire and rehire threat to its workers, the GMB union, a general trade union in the UK, stated that in case of not reaching a deal with the unions, the staff could be notified and re-hired on new terms and conditions. The GMB also informed about a ballot in which two-thirds of its 10,000 members from British Gas and PH Jones participated. As per this voting, almost 95 per cent were in favour of a strike. PH Jones, another company owned by Centrica operates nationally across the UK and provides local delivery through its 15 regional offices.
Though considered to be a consultative poll, it showed dissatisfaction of the employees at large. It further prompted a warning for the union leaders to conduct a formal strike ballot in autumn. Reiterating that the Centrica management threatened to change the contract of its loyal and dedicated workforce, GMB stated that the 19 to 1 vote showed that the GMB members would not accept the fire and rehire threats. The members of the GMB union are firm on having their own insurance policy and it is time for the energy company’s Board to understand the needs of its employees. The union mentioned that Centrica described its fire and rehire plans as an insurance policy. It further added that the energy major issued statutory HR1 and s188 notices, according to which, the company could start the process at the end of November 2020.
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Centrica’s viewpoint and background leading to the decision
The company had informed that its staff had around 80 different employment contracts that need to be modified and made simpler to suit some modern requirements. It is expected that approximately 50 per cent of the job losses would impact the managers. In its latest statement, the energy major said that in order to provide better customer service by offering them affordability in what they want and at a time they need, it is crucial to have a more flexible working practice.
Stressing on the fact that the change could be tough and assuring that the company is continuously working towards supporting its workforce, Centrica highlighted that it urgently needs to strategise and win back customers and grow the business along with protecting more jobs in the long-term. The company is making efforts to have a negotiated settlement in 2020 and urged the unions to agree with the need for change. Reiterating that the modifications in terms and conditions were required, Centrica assured that the base pay and pension of its staff would be protected.
It is important to note that Centrica declared its plans at a crucial time when the energy firm cautioned that its earnings had reduced by around 50 per cent in recent years. Given the increased competition in the sector coupled with the government imposing a price cap in recent years, several domestic energy suppliers are under stress. The government decided on putting a price cap amid argument over the rising cost of household’s energy bills in the 2010s.
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In early April 2020, Centrica had announced plans to cut around £400 million from its spending for 2020 due to the impact caused by the coronavirus pandemic. In addition, the energy major put a hold to payment of bonus for its managers, besides cancelling a final 2019 dividend for its shareholders. While in the past couple of years, British Gas lost about 1 million of its customers, in 2019, Centrica registered a loss of £1 billion.
Despite a rise in the domestic energy consumption due to stay-at-home and work from home orders during the coronavirus pandemic, Centrica recorded a more significant decline in energy demand from its business or commercial users due to complete shutdown of economic activities during the lockdown months. The energy firm also feared that there is likely to be an increase in bad debt as declining business revenue and household income would hit its customer’s ability to make the bill payment. The company also observed that its revenues from non-essential services were badly impacted as essential work were given a priority as a step to curb the spread of the Covid-19 infections.
On 21 August 2020, at 8.15 AM, the company’s stock (LON: CNA) was trading at £45.93 up by 0.04 per cent from its previous day’s close of £45.91. The 52 week low high range was recorded as 30.21 and 93.50. With a market capitalisation (Mcap) of £2,680.56 million, the stock provided a negative return on price, which was minus 49.08 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 167,823.
Conclusion
The voting by the GMB union depicted a growing tension between the UK’s leading energy supplier and staff union. As the union charged the company for compelling its large section of workforce to agree on an unacceptable employment contract, it is likely that the employees who would not consent with the modified terms and conditions of employment could suffer a job loss. In the wake of the coronavirus pandemic and increased competition that the utility companies are facing due to the price cap announced by the government in recent past, it is crucial that the companies work towards retaining the old customers and also adding new ones by offering better deals and customer services. Many experts agreed that these measures would help them in recovering from the losses incurred and also grow their businesses, ultimately leading to protecting the jobs, besides offering employee friendly terms and conditions.
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