Last updated: 16 June 2021
The consultation has now closed – what happens next?
Over the summer, we will analyse all of the comments we’ve received and continue to assess the MDA2 proposal against post lockdown trading patterns in your branch. We will engage with multiple stakeholders including our Board, with our two new Postmaster Non-Executive Directors, before confirming the results of the consultation. We will communicate the final changes in September.
What is the Interim Tariff payment?
One of the main features of the new Mails Distribution Agreement is that when Royal Mail put their prices up, Postmasters will see the benefit.
While we are not proposing to implement the new MDA2 remuneration arrangements until April 2022 (March 2022 trading), we want to ensure all Postmasters receive the benefit of the customer price rises that Royal Mail made earlier this year.
Therefore, from May 2021 remuneration (April 2021 trading) through to March 2022 remuneration (February 2022 trading) every Postmaster will receive a monthly Interim Tariff Payment on top of their standard remuneration to reflect these price increases. The value of this Interim Tariff Payment is set out at the top of your detailed Branch Report. This amount is fixed and guaranteed up to and including March 2022, irrespective of trading levels and you’ll see that on the front page summary of your remuneration advice.
What is the Implementation Benefit Payment?
While we are not introducing the proposed new MDA2 remuneration arrangements until April 2022, (March 2022 trading) we recognise that many Postmasters would be better off through earlier implementation of the new value-based arrangements.
We will therefore pay those Postmasters additional top-up payments during the intervening period to ensure that they do not lose out from later implementation.
These top-up payments will be determined by calculating the difference between the remuneration the branch would have received under the proposed new MDA2 arrangements and what they are actually receiving based on current MDA1 rates and the Interim Tariff Payments (explained above).
These top-up payments will be paid in three instalments and calculated as the net difference over each three-month period as follows:
- The first payment in September 2021 based on trading over June, July and August;
- The second payment in December 2021 based on trading over September, October and November; and
- The third payment in March 2022 based on trading over December, January and February.
To put it another way, over each of these three-month periods Postmasters will receive the higher of:
- their existing remuneration plus the Interim Tariff Payment;
- or what their remuneration would be under the proposed new value-based arrangements under MDA2.
Any top-up payments will be shown separately in the remuneration reports for September 2021, December 2021 and March 2022.
Why aren’t you changing anything else based on feedback so far?
We are still in consultation and it’s really important that everyone gets to share their feedback before we make any decisions. Once the consultation closes on 6 June we will then be doing three things:
- reviewing in detail all the comments and ideas received from Postmasters
- continuing to review the monthly trading figures to assess the impact on remuneration of the proposed new rates compared with current rates
- carefully evaluating the impacts and financial implications for Postmasters and Post Office of any changes to our proposals, in consultation with our Board (including the two new Postmaster Non Executive Directors), the NFSP and other stakeholders.
We are committed to doing this work properly and thoroughly, which will take time. We will confirm the conclusions of this process in September.
Will you have a follow up consultation?
Through our engagement with over 7,300 Postmasters to date this consultation has already generated invaluable and detailed feedback which will now inform our final deliberations. Given the clear long-term benefits for most Postmasters of moving to value-based remuneration we do believe it is important to proceed to implementation from April 2022, and therefore will not be holding another formal consultation on this particular topic.
However, Area Managers will continue to engage with individual Postmasters to support them with making the most of the growth opportunities presented by the new arrangements. More generally, we are committed to working in partnership with Postmasters on the future direction of the business and therefore we are keen to continue the dialogue on a range of other topics over the months ahead.
How will you support me more after 1 April 2022 if I am worse off?
This is a consultative approach and does not end when we implement the changes in April 2022. We will want to continue to track performance and work closely with Postmasters to ensure a successful outcome for this and any other future change. This is the way we want to work with our partners now and in the future.
My estimate shows I would have been worse off under the new MDA2 proposals – what do the changes mean for me.
All Postmasters will be kept on the existing MDA1 remuneration structure up to and including March remuneration (February trading). Those postmasters who are better off under the proposed MDA2 rates will receive additional top-up payments (‘Implementation Benefit Payments’) for the period from June 2021 to February 2022 trading, paid in three instalments as part of September 2021, December 2021 and March 2022 remuneration. Finally, all Postmasters will receive additional Interim Tariff Payments to ensure they benefit immediately from the increases to Royal Mail’s customer prices. These steps mean all Postmasters will be better off in the current financial year compared with the current mails remuneration rates.
The three-month extension of the implementation period to April 2022 means Postmasters have additional time to review the actual impact of value-based remuneration month-by-month. Areas Managers will continue to offer support throughout this period on the adjustments that Postmasters can make to enable them to benefit from the new arrangements.
For items such as Home Shopping Returns, P739s and other fixed fee transactions, will these rise with inflation or will these payments remain fixed for 11 years (and therefore reduce in real terms due to inflation)?
While the value based rates will naturally move with customer price and the revenues we receive, for the volume related we will seek to adhere to the same principle of maintaining alignment between Postmaster rates and the revenues we receive from Royal Mail. This means any rate changes will increase in line with Consumer Price Inflation.
You mentioned a forecasting tool that our Area Managers can provide – can you explain what this is for please?
We’ve developed a forecasting tool which will enable Postmasters to model the impact of the old and new approaches to mails remuneration using different sales volumes. Your Area Manager can provide you with this tool which you can populate using the information from your branch report. You can then test the impact of alternative sales volumes as the tool will convert these from volume to value for you using your specific branch’s average value of transactions.
Your Area Manager can also provide you with a comparison of your remuneration for your April remuneration (March trading) under the proposed new value-based structure versus the old volume-based rates. This will give you a chance to see the actual impact of the proposed new rates. We will make May’s report (April trading) available as soon as possible.
On the Branch Report where is the remuneration for the Sale and Accept for RM Signed For items?
These are added to the price of the standard item, so the sale and accept for the Royal Mail Signed For service is all within the total remuneration. The sale and accept of a letter or a parcel for 1st class, 2nd class and BFPO items is included within the total remuneration for those items.
You can see this in the Average Value of Transaction (AVTs) for letters where Royal Mail Signed For makes up a lot of that AVT.
Parcelforce Discounts (Rewards for you). How will this appear on a Postmaster remuneration statement?
You will receive remuneration on what the customer pays. This will show the remuneration for the full amount for the main Parcelforce service (e.g. PF Express AM on SR. No. 0377) but also a deduction against the Discount on sales reference no. 0550 for the discounted value which balances out.
For example, if the full value of an item was £20, and a discount was applied, you would be remunerated on the full value of the £20 on SR 0377 and £3 on the deduction on sales ref. no. 0550. This way you can track the levels of discounting in your branch more effectively.
I used to get paid for all the acceptance of items on sales reference nos. 1618, 1619, 1708 and 1709. Where are these paid for now?
The rates we pay on the value of the sale are a payment for both the sale and accept elements of the transaction, and that applies whether the label produced is for the full cost or where there is only a partial payment, because the item already had some element of pre-payment on it.
We have created additional new sales reference to capture ‘accept only’ payments for all fully prepaid mail. For example, Speed bulk items are all fully prepaid and would be captured under one of those new fully prepaid sales references.
Can you confirm whether or not the VAT amount a customer pays on some mails items is included when calculating remuneration?
Postmaster remuneration is paid on the gross amount paid by the customer for each product – i.e. if a mails product attracts VAT, remuneration is calculated on the total amount paid by the customer, including that VAT. This ensures that no changes are required to the current data captured in Horizon and used to calculate your remuneration.
How are we paid for ‘articles for the blind’ items in the new arrangement?
These would be picked up in the fully prepaid sales reference like any other fully prepaid item. If the customer pays for an additional service to add to that item, e.g. Royal Mail Signed For or Special Delivery, then the item would revert to the value of that transaction captured on the relevant sale and accept sales reference.
What is a ‘Custody of Postman pouch’ transaction?
It is not a customer transaction. This is where a postman/woman out on delivery has one of their delivery bags dropped off for safe keeping at the Post Office branch on the round. They then pick up that second bag as they go around their delivery area. There will be very few branches that do this and there may well be some Postmasters incorrectly recording on this line thinking that a franked mail pouch is what they are counting.
What information should I have received?
A printed pack that contains a letter, a brochure, a rates table, an estimated branch report and a guidelines document to help you with the branch report.
If your pack doesn’t contain a branch report, we weren’t able to initially process one due to insufficient available data in the designated period we used to run an accurate analysis. This could have been caused by a closure period, a contractual change having occurred, or it might just be that your branch has only recently opened or reopened.
Your Area Manager has now received a bespoke report for your branch and can provide this to you.
What should I do if I haven’t received my pack yet?
Let your Area Manager know – the majority of packs landed last week. If you have an element of fixed remuneration your pack should have arrived on Friday 23 April. If your branch wasn’t open for some of the 2020 periods analysed, you will receive your information week commencing 26 April.
How do I feedback?
You can share your views or suggestions through our formal consultation process on this link www.postofficeviews.co.uk/national-consultation-team/049ca624
Or you can speak to your Area Manager. The consultation will end on Sunday 6 June.
Why have you used the four months you specify to build a 12-month statement instead of just applying the actual last 12 months trading? And why can’t you analyse a period prior to lockdown – say 2019/20?
The new agreement with Royal Mail moves from a volume to value-based structure for remuneration.
The system we use to generate precise branch-by-branch remuneration data was programmed to start calculating both value and volume-based payments from last August once it became clear that this was a likely outcome of the MDA2 discussions. This means we are unable to provide comparative analysis of remuneration under the two methodologies prior to that date.
We have, therefore used a four-month period of data to calculate an estimate of the full year’s worth of trading. Having cross-checked the results of this analysis against the actual end of year performance across all branches, we are confident this estimate provides a good reflection of the impacts for each branch.
We are sorry these data constraints mean we are unable to provide branches with comparative analysis for earlier periods of trading. However, alongside the branch reports already provided, we will be making available two further sources of information to help you understand the impacts of the proposed new remuneration structure:
- We are developing a forecasting tool which will enable Postmasters to model the remuneration impacts under the old and new approaches using different sales volumes, it should be available by the end of this week.
- From April trading (May remuneration) we will be able to advise Postmasters of the actual impact each month of the proposed new rates compared with the previous arrangements.
Please talk to your Area Manager if you would like access to these additional sources of information.
Why has the amount of remuneration assigned to Royal Mail Special Delivery (RMSD) reduced from the current arrangements in the new proposed remuneration. Won’t this put Postmasters off selling it?
Previously the business had made decisions that assigned more remuneration on ‘Focus’ products, particularly RMSD. When looking at the redistribution of remuneration arising from the rebalancing, it was clear that this previous bias toward this product was no longer well aligned with the revenues we receive from Royal Mail under the new agreement.
We are therefore proposing to rebalance rates to maintain a strong alignment, shifting the focus from RMSD to other products. However, it should be noted that the RMSD product has an average value of sale which is nearly four times that of a standard First Class letter and there is a higher percentage that is applied for that rate. Bearing in mind that the transaction takes approximately 25% longer than the standard transaction we believe that the product retains a substantial incentive over any other inland mails product.
With the changes being proposed for RM product payments (Sale References) there will no longer be an alignment between the Sales References contractually used for the current annual Core Tier Payment (CTP) calculation. What is going to be proposed here?
We are keeping this aspect under review but want to focus on the other proposed changes around the new Mails Distribution Agreement in the first instance. We are therefore continuing CTP at the current level while we do further work in understanding the impact that the lockdowns have had on that annual calculation and to take into account the changes brought by the new RM agreement. Once we have completed this we will be engaging with those Postmasters on our proposed way forward separately but there is no intention to reduce fixed remuneration for this contractual group and any proposal would aim to protect current fixed remuneration levels.