Post Office Network Transformation - Business, Innovation and Skills Committee Contents

5  The future role of the subpostmaster (SPM)

Current situation

42. The role of the subpostmaster (SPM) is key to the successful delivery of services in post offices. Each SPM is self-employed and signs a contract with Post Office Limited (POL) to provide post office services. The SPM of Duns post office, Tim McCormack, gave us the following description of what he believed made a good SPM:

    The right person to run a sub post office is one who first of all is willing to invest capital, time and effort in order to achieve a suitable return on their investment. They must be intelligent, trustworthy, able to gain the knowledge and experience required as well as willing to provide the support that is required of them to the local community. Above all they must demonstrate the patience and care required when dealing with their most important customers, the elderly.[70]

43. The SPM receives a fixed core tier payment, and is paid for annual leave and sick leave. On top of the fixed core payment, subpostmasters are paid per transaction. For example, selling a 2nd class stamp would generate 2.25% of the value (or just over 1p).[71] The Rural Shops Alliance highlighted a typical income that a subpostmaster might receive:

    The balance of income for a post office between the core payment and transaction fees obviously depends on the specific PO contract and the level of business, but a typical rural shop with a PO might receive a PO income of £12,000 per year, of which something like £8,400 would be the core payment, £3,600 transaction fees.[72]

However, the National Federation of SubPostmasters (NFSP) argued that many subpostmasters are facing financial pressure:

    A major survey carried out by the NFSP in 2009 revealed subpostmasters' personal drawings (money taken as a salary) from their Post Office income had dropped by nearly 9% over the previous three years and average drawings were £866 per month. Moreover, 14% of subpostmasters were taking no personal drawing from their post office at all.[73]

44. Network Transformation offers a number of choices to SPMs for the future of their own post offices. In evidence, the Government stressed that any conversion to the 'Locals' model would be voluntary, a point reiterated by Post Office Ltd in supplementary written evidence:

    The Network Transformation programme is designed to achieve these objectives by addressing the economics and lack of flexibility of the traditional sub post office operating model thereby enabling branches to adopt a new business structure where circumstances are suitable. But it is also important to recognise that the transformation programme is voluntary.[74]

    Voluntary—any move to the new Post Office Local model is entirely voluntary on the part of the subpostmaster. They will only move to the new operating model if the economics stack up for them and we will only introduce the new model where there is a robust business plan and where we are sure it can be successful and sustainable.

    Stay as you are—any subpostmaster who wants to stay on their current contract terms—if that works best for them—can do so. [75]

There has been confusion among SPMs about whether they will retain the fixed element of their pay if they choose to 'stay as they are'[76] but George Thompson, General Secretary of the NFSP, was firm in his reassurances: "No one is having their fixed pay taken off them, unless they volunteer to become either a new Local or a new Main".[77] However, the 'stay as you are' option might be the only one on offer for many. As Debi Kemp, a SPM, wrote:

    There is no way I could change to a Local [as] I am a small village post office with a very small retail side—cards, stationery, gifts etc. so my retail side is too small to be a local—and neither of the other two businesses in my village—a fair sized convenience store and a pub—are the least bit interested in having to deal with POL.[78]

45. The Government will need to ensure that the roll-out of the new models for post offices does not result in further financial uncertainty for subpostmasters. In particular, it needs to state clearly that those who choose to remain on their current contract terms or are unable to move to the 'Local' model, will continue to receive the Core Tier Payment, in accordance with current terms and conditions of pay.

Retirements and new entrants

46. At present, Post Office Ltd has no control over when or the location of where a subpostmaster may retire or give up their business. However, those decisions will have a significant impact on the future location and type of post offices in the network. As the Post Bank Coalition wrote:

    The precise number of closures of existing offices will depend on whether individual postmasters opt to accept a 'buy-down' with compensation for the loss of the fixed payment and remain in the business under the new Locals model, or opt for a 'buy-out'.[79]

47. The following table shows that the majority of subpostmasters are aged 50 or over:

Agents' Age bands
Age Banding
Under 20

Ev 48, Post Office Ltd, supplementary evidence

George Thompson, the general secretary of the NFSP, taking the Government's figures for conversions to 'Locals' in the current Parliament, gave a broad sense of the proportions of SMPs who are expected to take advantage of the compensation package:

    Of the 2,000 Post Office Locals, something like only 200 will be run by existing subpostmasters. About 1,800 will be off-site conversions; that is new retailers. We are comfortable because these 1,700 or 1,800 who do not want to stay will be given compensation. We have over 1,000 members who are over retirement age. Some of them are well into their 70s and some of them are very ill as well, and they are desperate to leave, because the post office model as it stands is not working.[80]

48. These figures suggest that the majority of post offices may be subject to relocation and variation in the location and services offered, because of the large proportion of subpostmasters expected to take compensation. The Rural Shops Alliance highlighted the uncertainty felt by many:

    What happens to businesses put up for sale—will a new operator only be offered PO Local? The situation needs to be clarified for sub postmasters—POL and the NFSP need to be absolutely clear on the rules of the game and to communicate this information clearly to those involved.[81]

When questioned further on what would happen to post offices where the SPMs took compensation, Post Office Ltd gave the following response:

    Where a subpostmaster is looking to sell their branch, Post Office Ltd will meet with them to establish if their branch is suitable for conversion to the new operating model. If it is decided that a new operating model would be most suitable and appropriate at that time then Post Office Ltd would advertise the vacancy and also make sure that all the necessary details are provided to applicants. [...] There will be some circumstances in which Post Office Ltd decides that the most appropriate option would be for the appointment to be made on the current operating model.[82]

While this goes some way to clarifying the situation, it does not explain the criteria by which decisions will be made on whether to convert post offices to a new 'Local' or to keep current operating models, when SPMs decide to sell their businesses.

49. Both the 'Local' and 'Main' Post Office models involve changes to the remuneration of subpostmasters, with pay becoming entirely variable, and the current fixed core tier payments being removed. We are concerned that the 'Locals' model may be unviable for many existing subpostmasters, thereby leaving it to the large supermarkets to take over the Post Office mantle. Furthermore, there is an expectation that a large number of subpostmasters will take compensation and leave the service, which will increase the likelihood that the majority of smaller post offices will move location. The Government needs to set out in detail how it will manage those post offices where subpostmasters take compensation and the criteria by which decisions will be made on whether to convert post offices to the new 'Local' model.

50. We do not agree that the default position for new entrants should be restricted to the 'Local' model. While this may be the predominant route for new post offices it will not always be a viable option. Post offices provide valuable services to deprived areas and the current approach runs the risk of removing those services from communities which need them most. Therefore, we recommend that the Government set out how it will support the location or relocation of post offices in areas where the 'Local' model is not appropriate.

Training of staff

51. There has been concern about the lack of proposed vetting of those staff who will be serving customers in the new 'Locals' post offices. Currently, Post Office Ltd carry out strict checking and vetting processes, including Criminal Records Bureau (CRB), County Court Judgment (CCJ) and right to work checks, which are all carried out on SPMs.[83] Post Office Ltd reassured us that "exactly the same checks are completed for the Post Office 'Local' and 'Main' contracts as those carried out for traditional sub post offices".[84] Sub postmasters are then responsible for training their own staff. However, Tim McCormack, the owner of Duns post office, argued that one of the shortcomings of the 'Local' model is that "operators will be paid significantly less than now to do the same job and therefore have fewer resources available to cover the cost of adequate training".[85] Similarly, Andy Furey, Assistant General Secretary of the Communication Workers Union (CWU), described the extra responsibility of training for all members of staff:

    It is not just the new postmaster who would need the skills. The range of opening hours would require more than one person. Open all hours literally would mean two or three additional people to be able to serve the customers at seven or eight o'clock at night.[86]

52. Research carried out by Consumer Focus supported these views. It carried out a 'mystery shopping exercise' with researchers visiting 105 pilot 'Locals', between one and four times each, making a total of 362 visits. Consumer Focus' supplementary evidence summarised the findings as follows:

    Our mystery shopping exercise found widespread evidence of inconsistent and often inaccurate product and pricing advice—for example, a basic transaction such as posting a large second class letter was sold correctly in only 1 in 5 visits, dropping to only 15% of visits during extended opening hours; large or heavy parcel (up to 20kg) transactions were refused in 1 in 4 instances; and in two-thirds of cases, Special Delivery was sold but without counter staff asking the questions necessary to determine whether this was the most suitable product to meet needs.[87]

53. The Consumer Focus research also highlighted inconsistencies of staff service during the extended opening hours:

    Almost one in five consumers (19%) were reluctant, because of concerns over the consistency and reliability of staff, to undertake high-value, personal or confidential transactions at PO Locals during longer opening hours. 23% of PO Local users felt staff working in the evenings or at weekends were less knowledgeable than during 'core' hours and 22% reported levels of customer service to be poorer during extended hours. PO Locals will only be able to capitalise fully on longer opening hours, if consumers can be assured that service standards are robust, and if they can be confident they will always be correctly served the product or service they require.[88]

54. A fundamental requirement of any retailer offering goods and services must be that consistency of service is maintained throughout the opening hours and across all staff. The proper training of staff is therefore paramount to the success or otherwise of 'Local' post offices.

55. Staff training is vital to the success of post offices. However, this should not be restricted to narrow training on traditional post office services. To be successful, post office staff will need to develop new skills such as marketing and retailing. We therefore recommend that Post Office Ltd develops and invests in a more modern training programme for post office staff in order to equip them with these skills.

56. The Post Office 'brand' needs to be consistent across the country; if there is too much variation, loyalty will be lost and this will only serve to undermine the Post Office service. We therefore recommend that Post Office Ltd should consider issuing a 'Certificate of Competence' to be given once all relevant staff have taken appropriate training, which can be displayed.

70   Ev 60 Back

71   Ev 55 Back

72   ibid Back

73   Ev 38 Back

74   Ev 21 Back

75   Ev 46 Back

76   For example, Ev 51 and Ev 52  Back

77   Q 56 Back

78   Ev 51 Back

79   Ev 22 Back

80   Q 74 Back

81   Ev 56 Back

82   Ev 50 Back

83   Ev 48 Back

84   ibid Back

85   Ev 60 Back

86   Q 10 Back

87   Ev 34 Back

88   ibid Back

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© Parliamentary copyright 2012
Prepared 17 July 2012