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Challenges and Opportunities in the UK Labour Market

Paper Type: Free Essay Subject: Business
Wordcount: 5170 words Published: 13th Sep 2017

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The Business dictionary defines the labour market as:

“The nominal market in which workers find paying work, employers find willing workers, and wage rates are determined.

Labour markets may be local or national (even international) in their scope and are made up of smaller, interacting labour markets for different qualifications, skills, and geographical locations. They depend on exchange of information between employers and job seekers about wage rates, conditions of employment, level of competition, and job location.”

Although not as heavily regulated as many other countries, the UK labour markets are regulated in many different ways, these include protections against oppression and discrimination, enhance efficiency, attribute responsibility, improve health and safety conditions, offers security, cut costs relating to employee/employer opportunism, and encouraging behaviour from employees and employers by imposing costs and rewards.

Employment regulations exist to provide flexibility to employers and job and financial security to employees. It is vital in reducing poverty, supporting growth and employment with equity.

Some argue the UK is not regulated enough e.g. TUC has called for greater protection in some areas of employment and argued for measures to further support collective bargaining. Whereas, Employers have complained that increased regulation restricts flexibility, particularly in times of economic burden.

For regulations to be effective they must be implemented well and enforced.

Social partner institutions such as, the Arbitration and Conciliation Advisory Service (Acas), the Low Pay Commission (LPC), the Health and Safety Commission (HSC), and the UK Commission for Skills and Employment (UKCES) regulate and influence the labour market via intervention and enforcement, to improve practices within the workplace.

Regulation can also exist in the form of accreditation, e.g. a licence is required to perform a particular service. The number of professionals within the UK continues to expand. In 2014 roughly 24% of workers were classified professionals.

Regulation has brought an end to the closed shop, restricted the ability to strike, and trade union governance.

Although employers complain about regulation, it is recognised that it provides them with a level playing field in the market place.

The UK economy is recovering, all be it slower than before. Recovery has not been helped by financial problems within the Eurozone, impacting on export markets. However, employment has now surpassed pre-recession peaks in terms of jobs (2012) and hours worked (2013).

More recently there has been an increase in the number of jobs at both the top and the bottom of the job market, with significant fall in skilled trades in the middle resulting in an hourglass labour market.

Although long term unemployment has increased, the UK has been relatively successful at keeping people in employment; employment rate, generally increasing each year since 2012, climbing to 73.7% (ONS 2015). Unemployment rates have fallen, however those with low skill levels and the young being more harshly hit. Youth unemployment has fallen sharply, and stands at around 22%. (UKES 2014). Although it should be remembered that substantially more young individuals are staying on in education, and enter the labour market much later than in the past, as graduates.

The number of self employed has continued to grow, equating to 83% of net gains in employment since 2007 (Ashworth et al 2014). However, earnings with this sector have also dropped considerably.

In addition to the growing self employed, the UK has also seen a substantial increase in other less secure employment. Since 2010 there has been a 50% increase in temporary work, zero our contracts, and government training schemes (OECD 2013).

Employment within administrative and secretarial roles, and low skilled manual roles, continue to decline in many industries as technology advances. The world is becoming smaller, and many tasks/roles becoming automated. Many employees will find it necessary to retrain to keep up with technology advances and the changes it inevitably brings. Technology enables change, cost savings, and investment. Employees can now work from anywhere in the country/world quickly and efficiently, with the Financial Services, Specialist Engineering, and I.T. being amongst the industries leading growth and all greatly dependant on technology.

There has been an increase of higher skilled workers commanding higher pay, within some industries; these include advanced manufacturing, creative and digital sectors (HM Treasury, 2011). Evidence shows those with higher skills and qualifications are more likely to remain employed; high-lighting the importance of high skills on job market outcomes.

Research shows a drop in real wages of roughly 2% each year since 2010. (UKES 2014). By the end of 2013, real wages were roughly at levels of a decade previous.

Removal of the default retirement age and changes to pension schemes, has seen individuals working longer, putting pressures on employers to ensure their policies and practices relate to older employees, and older employees needing to constantly retrain to meet the demands of different roles across their working life.

There has been a drop of 19,000 people on Government supported training programmes.

Public sector employment has also fallen, with numbers at lowest levels since comparable records began in 1999. However there has been a significant increase within private sector.

Although it still exists there has been a reduction in the gender pay gap. IFS research shows an average difference in women’s pay compared to means is 18%. This increases again after women have children.

Freedom of movement within an ever growing EU, in addition to an increase in migration from outside the EU, has brought a large number of migrants into the UK looking for work; the number of non-UK nationals employed in the UK grew from 986,000 to 3.22 million 2015) between September 1997 and 2015. Many of which are employed in low-skilled work.

“Women, people from minority ethnic groups, people with disabilities, and those aged under 25 and over 55 years are all more likely to be either unemployed or economically inactive” (Brewer et al., 2012).

More women in the workplace, with more part time roles, and family friendly policies available. 1971 37% climbing to 69% by September 2015.

The number of employed has increased to just over 4.1 million between 1992 and 2013; those over-50 increasing by 3.2 million, under-25s falling by almost 800,000.

By 2013 the number of over 50’s increased to 29% from 21% in 1992.

16 to 64 year-olds with a degree or higher-level qualification increased to +20% in the last 20 years. 2014, approximately 24% of employees were classified as professionals in the UK.

Goods and services traded globally, are now five times the value in 1980.


Employment relationships are both an economic exchange (agreement to give wages for work) and a power relation (employee ‘agrees’ to accept the employers authority).

The psychological contract (Rousseau 1995), relies upon reciprocal expectations between the employer and employee being met. If violated employees may become de-motivated, and inefficient.

Organisations have a huge variety of methods available to them, which involve the employee in the decision making process, making them feel valued and motivated which in turn, supports both the traditional and the psychological contract, enabling a positive working relationship, innovation, and high performing teams, these include:

  • Participation empowers and motivates the employee by involving them in decision making. Teams are also trusted to make decisions for themselves, and encouraged to take responsibility for the quality of their own work.

Examples include project groups, whereby employees are delegated resposnisbility to make important decisions, suggestion schemes providing employees with a channel to make comments and put forward new ideas, delegation of responsibility to employees at all levels, particulalry those on the front line and multi directional decision making allowing decisions to feed not only top down, but upwards and sideways too.

Employee participation is also sometimes referred to as Employee Involvement.

  • Employee Involvement is the level of employee contribution. A one-on-one approach between employee and management. Employee is involved throughout the decision-making process, therefore encouraging employee ownership.
  • Information is the methods used by organisations to communicate information to their employees e.g. newsletters, information pinned to notice boards, informal networking, emails, and a combination of cascaded briefings, face-to-face communication from senior management and employee representatives.
  • Consultation is the process used by organisations toconsult both directly with their employees, via face-to-face upwards communication, or staff surveys for example, and indirectly via employee representatives. e.g.
  • Joint consultation – review issues deemed to be of common interest/ importance to all parties, at unionised/non-union workplaces, predominantly private sector
  • Collective representation – Predominantly in public sector and some large private sector businesses. Involves negotiation between employee representatives (unionised/non union) and senior management on pay and other conditions of employment.
  • Partnership schemes – employee representatives and employers stress mutual gains. Tackle issues via co-operation. There is a high commitment to sharing information.
  • Employee forums – groups of mixed groups unionised/non-union employees meet with managers to share information and consultation. Employees can have a significant influence on the outcome.
  • Partnership working is where employers and employees and/or their representatives work collaboratively to make decisions and plan actions. “Partnership can take shape in a formal agreement between an employer and a trade union, but it is also used to refer to a way of working in co-operation” (Reilly, 2001).

Employee relations today, includes both collective and individual relationships, with alternative direct and indirect channels for employee voice emerging, including communication and involvement via team briefings, staff surveys, project working groups, social media, joint consultation, collective bargaining etc.

Although union membership within the UK has fallen since 1980’s, and employment relations without the involvement of unions is the norm within some industries, collective bargaining still has a considerable influence on European labour regulations. Typically where an organisation is unionised a significant number of employees will be members. Unions will bargain on behalf of the employee, and/or intervene with disputes between employees and management. As they represent large number of employees they are much harder for management to ignore. They can also protect the employee from victimisation.

Another major benefit of belonging to a unionised organisation is that management can be legally bound to take procedures more seriously. In addition, unions have the power to threaten industrial action.

Trade unions are still a strong force, primarily in the public sector, and large private sector companies. The majority of working population however, do not have access to union representation. Some parts of the public sector do not recognise trade unions; impacting on collective bargaining, representation in grievance, disciplinary matters etc, within large parts of the private sector.

Smaller firms use more informal relations for consultation, using intermediaries offering advice primarily on the internet and in publications. However, many small firms operate without procedures and as such can lead to inconsistencies in employment relations.

Non-union consultative committees are becoming common place in private sector, filling part of the gap generated by the decline in collective bargaining; the consultation process giving access to management enabling dialogue.

In redundancy situations where no trade unions is recognised, non-union employee representatives must be advised and consulted of redundancies of +20 employees is proposed within a 30 day period.

Bryson found that direct voice makes a particular difference in union settings suggesting that more channels makes for an employee voice with more impact.

Elgar defines employee voice as ‘the ways and means through which employees attempt to have a say and potentially influence organisational affairs about issues that affect their work and the interests of managers and owners’. With a mixture of direct and indirect consultation and communication methods leading to “higher levels of commitment, job satisfaction and job discretion.”

Initially employee voice was firmly equated with trade unions and collective bargaining, but more recently is viewed as a broad range of methods enabling employees to ‘have a say’ about their organisation; it can be via both formal and informal systems, direct individual channels or indirect collective representation (CIPD 2010). Mechanisms can include one-to-one conversation between employee and employer, email communication, work/project groups, social events, suggestion schemes, profit-sharing, employee consultative committees and trade union representation.

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Research generally supports the notion that employee voice is beneficial to the working relationship of both the individual and the organisation; where employees are allowed to express their views and opinions, put forward suggestions for improvements, they feel recognised and valued. Data shows employee,employer relationships improve as trust increases and employee engagement and in turn performance increases. (Morrison et al. 2011).

Farndale et al. (2011), argues that employee voice enables employees to communicate their views, and creates the belief that their contributions are valued, creating a level of respect and trust for their managers.

Employee voice allows employees to feel recognised, listened to and valued, conversely, if no mechanisms for employee voice exist, or employees believe their views will have little or no influence it is likely to affect their attitudes and relationship with management (Farndale et al 2011).

Truss et al. (2006) argues that one of the major drivers of employee engagement is employees being able to feed their opinions upwards.

Research therefore suggests that there is likely to be a link between employee perceptions of voice and engagement, and increased engagement is proven to increase performance.


“Organisational misbehaviour is defined as any intentional action made by members of an organisation that defies and violates shared organisational norms and expectations, and/or core societal values, mores and standards of proper conduct.” (Yoav Vardi and Yoash Wiener – 1996).

Misbehaviour can be both minor e.g. poor timekeeping, and major e.g. stealing company resources. It can be internal and external, with the main aim being to hurt/damage others or the organisation, e.g. mistreatment, disruption and theft.

Misbehaviour usually occurs where an employee:

  • feels that they have been unfairly treated,
  • unclear of job role
  • bullying and harassment in workplace
  • lack of training
  • lack of equality

and choose to repay this perceived unfairness by mibehaving. Misbehaviour inevitably leads to more management controls.

Conflict in the workplace can take many forms including:

  • an employee becoming withdrawn from the organisation,
  • two workers who are not getting on,
  • employee representatives and management at stand-off,
  • an employee with a grievance,
  • rivalry between teams, or
  • a lack of trust and co-operation between employees and management.

Where conflict exists, an organisation may experience a drop in motivation and in turn a drop in productivity, increased absenteeism, and increased negativity on staff surveys, and a general change in behaviour. By listening to employee views can help identify conflict, and take action to prevent the conflict becoming a problem.

If conflict is not managed it can lead to strike action or even tribunal claims; Intervention at an early stage by management is crucial. When negotiation cannot resolve a workplace dispute industrial action typically follows.

The three main forms of industrial action are:

  • strike
  • action short of a strike – work to rule, overtime ban, or go slow
  • lock-out – the employer stops employees from working

Official industrial action is authorised by the trade union. Employees have a minimum level of protection. Employees have additional protection where the union has appropriately balloted its members.

Unofficial industrial action is action which has not been endorsed by any trade union. There is usually no right to argue unfair dismissal, if dismissed whilst taking part in unofficial action.

Some conflicts are extremely visible. e.g., a heated exchange between two employees, or a stand off between management and an employee representative, and may result in misbehaviour.

“Organisational misbehaviour is defined as any intentional action made by members of an organisation that defies and violates shared organisational norms and expectations, and/or core societal values, mores and standards of proper conduct.” (Vardi and Wiener 1996). e.g unauthorised absence, pilfering or sabotage.

Conflict that is ignored will frequently escalate

Recent industrial action trends are:

  • Increase in private sector strikes however public sector lost significantly more days due to large scale strikes
  • A decline in collective conflict
  • increase in individual conflict, including strike, grievance or disciplinary measures
  • Significant drop in strikes since 1980’s mainly due to reduced trade union density and collective bargaining, and partnership working with employers. (WERS) average days lost fell to 0.5 million by 21st century
  • 1999 employment tribunal cases soared +100,000, peaking again in 2006/7 with 132,500 applications
  • Pay is the principal cause of labour disputes with the exception of 2009/2010, principal cause was redundancy
  • The number of ballots up to 650, from 484 in 2013.
  • Increase in multiple claims. Majority relating to equal pay claims against local authorities due to 1997 national agreement to seek ‘single status’ of pay across employees.

It is vital that managers are trained to enable them to deal with conflict.

To help managers handle conflict they should:

  • be trained to recognise signs of conflict, handle difficult conversations, manage absence, mediation and negotiation skills
  • speak to their employees and letting them speak freely
  • investigate conflict situations, and give sufficient time to finding resolution
  • encourage open communication and expression of views in meetings and appraisals for example
  • recognise the importance of feelings
  • listen to what their employees are saying
  • identify development and training opportunities
  • explain and include employees in planning
  • treat all employees fairly
  • ensure safe working conditions
  • have clear procedures particularly discipline, grievance, dispute procedures, absence and bullying and harrassment to ensure consistency
  • write mediation into contracts of employment and/or grievance and disciplinary procedures
  • identify when outside help is needed

Third party involvement

Where a dispute cannot be resolved using negotiation, unions and management may agree to approach Acas to resolve the dispute using conciliation, via independent support and advice. 70% cases who used ACAS, were settled or withdrawn before proceeding to an Employment Tribunal.

Conciliation is used when a potential or an actual claim has been made to an employment tribunal. An impartial, independent person supporting two or more people in dispute to resolve their differences. Parties are not required to come face to face, as can be conducted over the phone.

Pre-Claim Conciliation(PCC) saves time, money and stress. It promotes a quick solution for the employer and employee which may help to avoid a permanent breakdown in the relationship.

Mediation is the most widespread form of conflict resolution. It is a form of early intervention and involves an impartial, independent person, or trained employee supporting two individuals/groups reach resolution, and maintain working relationships. Mediation does not make any judgments or determine the outcomes. They use appropriate tried and tested techniques to get people talking and listening and help determine the underlying causes of the problem. The mediator will try to get the parties to compromise and protect their working relationship for the future.

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The plus side of this method is, it can improve communication between parties, get them talking again when relationship had broken down, it is without prejudice and is flexible so resolution can be tailored to fit. However, the downside of this method includes, success is determined by how competent the mediator, it may not protect legal rights, and is relient on employee full co-operation and good faith, if pertinent parties are missing the process is weakened.

Arbitration is a dispute which is settled by an independent person who considers everyone’s point of view and then issues a decision which is binding. An employee who believes they have been unfairly dismissed, has a complaint under the flexible working regulations, may have their complaint heard by an independent arbitrator who is appointed by Acas, if both sides agree.

The plus side of this process is, it is completely confidential, it is formal and therefore minimises bad faith, it is quicker than the courts as there is less backlog, and the process is much shorter and therefore much less expensive. On the downside, success is dependent upon the arbitrator, right of appeal is limited, and confidentiality is not suitable in all disputes.

Government has hi-lighted the importance of mediation in the workplace and extended the use of conciliation in-order to encourage the resolution of workplace disputes. 2012/13, over half of the cases (22,630) referred to PCC were resolved with less than a third progressing to tribunal (Acas, 2013).


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