Labour Court Database __________________________________________________________________________________ File Number: CD87249 Case Number: LCR11497 Section / Act: S67 Parties: TARA MINES LTD - and - ITGWU |
Cost reduction plan and 26th wage round.
Recommendation:
12. (a) Wage Increase:
The Court, having given careful consideration to all the
arguments of the parties at the two hearings of the case and
in the subsequent correspondence and having regard to the
need to maintain continuity of employment, recommends that,
in the context of a 14 month agreement, basic rates be
increased by 3.5 per cent with effect from 1st June, 1987.
(b) Other Claims:
The Court does not recommend concession of the Union's other
claims.
(c) Cost Reduction Plan:
The Court recommends that the Company's proposals in the cost
reduction plan be accepted. However, in devising the new
bonus scheme the Company should withdraw its claim that there
be an upper limit on earnings over any given period and the
Union should agree that the rate of increase in bonus
earnings should be constant over the whole range of possible
outputs.
Division: CHAIRMAN Mr McHenry Mr O'Murchu
Text of Document__________________________________________________________________
CD87249 THE LABOUR COURT LCR11497
CC87172 INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
RECOMMENDATION NO. LCR11497
Parties: TARA MINES LIMITED
(REPRESENTED BY THE FEDERATED UNION OF EMPLOYERS)
and
IRISH TRANSPORT AND GENERAL WORKERS' UNION
Subject:
1. Cost reduction plan and 26th wage round.
Background:
2. On the 8th January, 1987, the Company issued a notice to all
employees containing a review of the Company's operations and
future prospects. It also contained a cost reduction plan
including a pay pause, changes in work practices, bonus payments
and a reduction in the number of employees through voluntary
redundancy (details supplied to the Court). A local level meeting
was held on 9th January, 1987 at which the Company outlined the
proposed cost reduction plan which it said was designed to improve
the Company's ability to operate continuously when metal prices
are low.
3. At this meeting, the Union served a claim in respect of the
26th wage round as follows:
(a) a twelve month agreement;
(b) 10% pay increase to be applied to basic pay (with a
minimum increase to be agreed for lower paid
categories); and bonus (based on increased
productivity);
(c) three days extra annual leave;
(d) meal allowance to members who cannot avail of
subsidised meals;
(e) shorter working week.
4. On the 22nd January, 1987 the Company issued a further notice
outlining in more detail its proposals in relation to the cost
reduction plan (see appendix A for details).
5. The Union reject the Company's proposals to introduce yearly
and monthly ceilings on plant bonus, as per section B part (a), of
plan and are claiming a 10% adjustment to the bonus rate based on
increased productivity to the Company of 20.9% resulting from an
increase in productivity targets from 2.5m tonnes in 1986 to 2.6m
tonnes in 1987. In relation to the wage round the Union are
seeking the following amended minimum terms.
- a fourteen month agreement (1st November, 1986 to 31st
December, 1987),
- a 7% increase in pay: 4% from 1st November, 1986 and 3%
from 1st May, 1987,
- one days extra annual leave,
- provision of subsidised meals underground or a meal
allowance equivalent to the subsidy.
6. In January, 1987 the issues were referred to the conciliation
service of the Labour Court. A conciliation conference was held
on 11th March, 1987 at which agreement could not be reached and on
23rd March, 1987 the matter was referred to the Labour Court for
investigation and recommendation. The Court investigated the
dispute on 15th July, 1987 and a second hearing was held on 26th
August, 1987. At this second hearing a copy of a further
memorandum (dated 25th August, 1987) being issued to all employees
was presented (details supplied to the Court). This related to
labour costs in the Company, the effect of conceding pay
increases, requirement to implement the cost reduction plan in
order for the Company to be viable, etc. Further correspondence
was sent to the Court by the employer on 25th September, 1987.
7. The Company's position is that unless the plan is implemented
the Company will be in extremely serious financial condition
during the coming recession and will not be able to continue
operations during periods of low metal prices. The Company
believes that its employees are excessively well paid and it
cannot agree to any further labour cost increases.
8. The Union's position is that it rejects the accuracy of the
statistical data supplied in the Company's submissions. It
highlights the favourable energy costs, exchange rates, labour
productivity, etc which has been available to the Company. The
Union considers that the amended terms which it seeks are more
than reasonable when placed against the total background.
9. Matters in relation to work practices and redundancy have been
resolved or are being discussed at local level.
Union's arguments:
10. (i) The group of which this Company is a member (since
1986) forecast a turnover of #1.2 billion in 1986 and
had an investment budget of #230 million. Since its
takeover, investments in plant and equipment have been
made in the Company while at the same time the
workforce has been cut by 15%. This has reduced the
annual cost of labour by a minimum of #3m per annum.
Since 1977 the Company has been extremely successful in
reducing its debts (details supplied to the Court) from
$142m in 1977 to $26.5m in 1986. The workers
contributions to the Company since 1977 have been
equally significant and while the Company seems to be
able to finance investments in different areas it has
not made any further investment in its main asset its
workforce. The claims sought by the Union in the wage
round are done so in order to protect the workers
living standards and to sustain relativity with workers
in industry.
(ii) The Company has stated the many costs (including labour
costs) which it must bear and which affect its
viability. Different figures are given for labour
costs, electricity prices, etc. the accuracy of which
we would question (details supplied to the Court).
Similarly, in relation to other cost items, interest
rates have fallen, the price of the dollar has
strengthened recently, prices of zinc, lead, etc, are
assumed.
(iii) An agreement concluded under the 26th wage round should
at least be in line with other agreements to date in
relation to both duration and increases. However, the
Union has indicated that it is willing to consider
terms providing for an agreement of more than twelve
months duration and for a lower increase in conjunction
with phasing. Of the 774 wage round agreements
concluded at June, 1987, the average duration was 13.7
months while 475 (61.4%) were for twelve month. In
addition these agreements provided for an annualised
increase of 6% and an average cumulative increase of
6.8% (details supplied to the Court).
(iv) Wage increases in the Company since 1977 have been
below the level of inflation taking the period as a
whole. An analysis of increases in the previous wage
rounds (18th to 25th), show that the total real value
of increases has been 105.31% compared to an increase
in the consumer price index in the same period of
177.07%. Even if this is taken on a cumulative basis
the increase in wages was 166.31%, again below the
increase in inflation for that period. In addition, a
survey undertaken on a hundred companies shows that
when comparing the basic rate of the lowest paid
operative at the end of the 25th wage round with the
equivalent in this Company the latter's rate of pay is
below any of those in the companies (details supplied
to the Court).
(v) The structure of the present plant bonus scheme arose
from a 1982 Labour Court Recommendation. The
introduction into the scheme of indexation to movements
in basic pay was introduced later. The scheme has
provided many of the working incentives it was designed
to and all workers have maximised their efforts
collectively. An assessment has been made of the
Company's proposals and they would have significant
implications for the workers (details supplied to the
Court). The monthly and yearly ceilings proposed by
the Company would reduce the workers' bonus pay. In
addition while the 1987 production target of 2.6m
tonnes is above the 1986 target the Company wish to
produce this increased tonnage with a reduced
workforce. The incentives in the existing scheme
should be maintained and there should be an increase in
the bonus rates for the workers due to the extra 20.9%
productivity which the Company is seeking.
(vi) Workers in other european countries receive more annual
leave and specifically, in the mining industry
internationally workers have more beneficial leave
arrangements (details supplied to the Court). The
workers concerned presently receive 22 days annual
leave and the objective is to increase this to 25 days
over a number of wage rounds. Most of the workers
concerned work shifts and many work week-end shifts on
a regular basis.
(vii) The site canteen which provides subsidised hot meals,
is limited to surface and mill workers. While canteens
are provided underground these do not provide
subsidised meals and the workers should either be given
this facility or payment in lieu.
Company's arguments:
11. (a) Costs in the Company, in particular labour costs and
therefore production costs are too high. When metal
prices are not at the appropriate level and the dollar
to the pound is not at a reasonable rate the Company
cannot operate. It is necessary that labour costs do
not increase and that other cost reductions and
efficiency improvements are made for the Company to
become viable. The Company has made it clear at all
times that the proposals in the plan had to be
implemented as a package if they were to be effective.
(b) When the Company began operations in 1973 a very
substantial amount of money was borrowed, 20% of which
is still owing ten years later. The Company's auditors
have prepared a report which consists of an analysis
of: 1986 financial results; 1987 financial
projections; and an analysis of employee costs (details
supplied to the Court). The Company incurred mining
operating losses during 1986 and during the first half
of 1987. Based on current costs and with no increases
in labour costs and with a reduction in the workforce
(as outlined in the Plan) together with projected metal
prices and planned production levels the Company is
expected to incur a mining operating loss during 1987
(details supplied to the Court).
(c) The Company is in a poor financial condition due to
high operating costs and cannot consider any cost
increases. The Tara Plan was prepared in order to
achieve a significant reduction in operating costs per
tonne. This would be achieved by: purchasing new
equipment; reducing prices paid and usage of parts and
supplies; increased labour productivity; and a pay
freeze and changes to current bonus scheme.
(d) In the circumstances, the Company must continue with
all efforts to reduce costs and improve production.
Further improvements are needed in 1987 and 1988 to
enable the Company to operate during periods of low
metal prices. The Company has spent a substantial
amount of capital expenditure in order to modernise the
plant and equipment. Such changes and others which are
necessary in order for the Company to be viable must be
accompanied by a greater degree of co-operation by the
workers in the re-organisation of work at the mine.
Pay and bonus rates will have to be established at
economic levels and improved work practices introduced.
The changes proposed by the Company should result in
the necessary performance levels to restore the
economic viability of the mine.
(e) The Company has commissioned a number of surveys on
labour costs (details supplied to the Court). These
show that: the workers have received a substantial
increase in total earnings during the last six years;
pay and conditions of employment are very fabourable
compared to other Irish companies; the Company has
conceded larger pay increases than other companies
particularly during the 23rd, 24th and 25th pay rounds,
resulting in high labour costs to the Company.
Compared to an international cross section of other
underground lead/zinc mines, the Company will have
higher operating costs during 1987 and the cost to the
Company of each employee is almost the highest in the
worlds mining industry. These reports also show that
the Company's labour costs have become uncompetitive
and will have to be reduced if the Company is to be
able to operate in the future.
(f) The present pay rates of the workers are twice the
average industrial wage rate and equal to the highest
paid in the international mining industry. The
auditors in their July, 1987 report to the Company
prepared an estimated cost of conceding these claims
(details supplied to the Court). This cost would be
substantial and just taking a 10% pay increase for all
workers employed at the end of 1987 would amount to
approximately $2.8 m (approx. #1.9m).
(g) When the present bonus scheme was established it was
never envisaged that the top level of tonnage would be
achieved and the level of bonus paid is therefore
disproportionate. The cost of producing 2.52m tonnes
is #2,075,270 and the cost of producing the 1987 target
of 2.6m tonnes would be #2,748,043. Therefore in the
present structure of the scheme for an increase in
production of 3.2% there is an increase in costs of
32%. It would then be uneconomical to produce above
2.52m tonnes. It is essential that a limit is put on
payments under the bonus scheme at 2.52m tonnes per
annum and that one plant bonus scheme is introduced.
RECOMMENDATION:
12. (a) Wage Increase:
The Court, having given careful consideration to all the
arguments of the parties at the two hearings of the case and
in the subsequent correspondence and having regard to the
need to maintain continuity of employment, recommends that,
in the context of a 14 month agreement, basic rates be
increased by 3.5 per cent with effect from 1st June, 1987.
(b) Other Claims:
The Court does not recommend concession of the Union's other
claims.
(c) Cost Reduction Plan:
The Court recommends that the Company's proposals in the cost
reduction plan be accepted. However, in devising the new
bonus scheme the Company should withdraw its claim that there
be an upper limit on earnings over any given period and the
Union should agree that the rate of increase in bonus earnings
should be constant over the whole range of possible outputs.
Signed on behalf of the Labour Court
30th October, 1987 John M Horgan
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UM/PG Chairman