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9609 · 2.1.7

Management and workforce relations — practice questions

Practice and worked examples for 9609 Management and workforce relations. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Public transport workers vote to strike over a 3% pay offer vs 8% inflation. Analyse impacts and one resolution approach.

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Impacts: No services → revenue loss, public anger, commuters switch to cars long term; brand/reputation damage; political pressure on management.

Union view: Real pay cut vs inflation — morale and recruitment of drivers at risk.

Resolution: Return to ACAS-style negotiation — phased increase linked to productivity gains or fare revenue share; partnership working group on scheduling to fund pay — avoids prolonged industrial action costs.

Worked example 2

A manufacturing firm, 'Component Co', has 200 unionised employees, each earning an average of $40,000 per year. The union demands a 5% pay rise, but management has offered 2%. The union is threatening a 10-day strike if its demands are not met. The firm's daily contribution to fixed costs is $80,000. Calculate the annual cost of both offers and the total cost of the potential strike. Advise management on a course of action.

Show solution outline

Step 1: Calculate the current annual wage bill for unionised staff.

Total Wage Bill = Number of employees × Average annual salary Total Wage Bill = 200 × 40,000=40,000 = 8,000,000

Step 2: Calculate the annual cost of management's 2% offer.

Cost of 2% offer = Total Wage Bill × 2% Cost of 2% offer = 8,000,000×0.02=8,000,000 \times 0.02 = 160,000

Step 3: Calculate the annual cost of the union's 5% demand.

Cost of 5% demand = Total Wage Bill × 5% Cost of 5% demand = 8,000,000×0.05=8,000,000 \times 0.05 = 400,000

Step 4: Calculate the cost of the threatened 10-day strike.

Cost of Strike = Daily contribution lost × Number of strike days Cost of Strike = 80,000×10=80,000 \times 10 = 800,000

Step 5: Analysis and Advice

  • Difference in pay offers: The annual difference between the union's demand and management's offer is 400,000−400,000 - 160,000 = 240,000.240,000.
  • Comparison: The immediate cost of the 10-day strike ($800,000 in lost contribution) is more than three times the total annual difference between the two pay offers ($240,000).
  • Advice: From a purely financial perspective, it is significantly cheaper for management to accept the union's 5% demand than to endure the 10-day strike. The cost of the strike would take over 3 years to be 'paid back' by the savings from a lower pay deal. This calculation doesn't even include non-financial costs like damage to customer relations, loss of future orders, and poor employee morale. Management should seek to negotiate a settlement, possibly by agreeing to the 5% rise or a figure close to it, perhaps in return for productivity improvements.
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