Royal Mail has ended a two-year dispute with workers in a settlement that gives staff an above-inflation pay rise and enables the company to transition to a parcels-led business to cash in on the online shopping boom. The Communications Workers Union (CWU) hailed the “landmark” deal, which it said was an “excellent agreement” for postal workers which offered job security, a reduction in work hours and a pay rise. Workers will get a 3.7% pay rise, backdated to April this year, plus a one-hour reduction in the working week, which the union said equated to a 6.5% increase over the two-year deal. In addition, Royal Mail has agreed there will be no compulsory redundancies – it employs 143,000 workers in the UK – and in return the union has promised to support an ambitious modernisation of the business. “This is a landmark agreement that means that even in these incredibly difficult times, when members stand in solidarity with their union, it is entirely possible to plan a future that can still benefit workers, customers and the company.” Royal Mail has been at loggerheads with the CWU over a five-year £1.8bn turnaround plan launched by the former chief executive Rico Back, which has been held up by the threat of strikes. A walkout last Christmas was only averted after Royal Mail won a high court injunction. Workers have been concerned about job security and employment conditions as Royal Mail looks to introduce new technology and automation to enable the development of a 24/7 parcel delivery service. “We have a window of opportunity to focus Royal Mail on what our customers want today,” said Keith Williams, Royal Mail’s chief executive. “An ever-growing need for more parcels, whilst providing a sustainable letter service. This agreement provides a framework to do just that. We have been far too slow to adapt in the past and now need to deliver change much more quickly.” Royal Mail’s traditional letter business is in long-term decline, with volumes falling about 5% each year since 2015 as people move to digital communications. The trend has accelerated during the pandemic, with Royal Mail reporting that it delivered 1.1bn fewer letters in the five months to the end of August compared with the same period last year. Last month, research from the postal regulator, Ofcom, found that scrapping Saturday letter deliveries would have no significant impact on consumers, but would save the business up to £225m a year. In contrast, Royal Mail’s parcel delivery operation is booming, thanks to the online shopping revolution, with the company reporting a 31% increase in volumes between April and September as home deliveries surge during the pandemic. Ofcom recently reported that 2.8bn parcels were sent and received via Royal Mail in the year to the end of March – 1bn more than in 2013.