Labour Court Database __________________________________________________________________________________ File Number: CD87634 Case Number: LCR11499 Section / Act: S67 Parties: TARA MINES - and - AUEW(TASS) |
26th wage round and cost reduction plan.
Recommendation:
9. (a) Wage Increase:
The Court, having given careful consideration to all the
arguments of the parties at the hearing of the case 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__________________________________________________________________
CD87634 THE LABOUR COURT LCR11499
CC871210 INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
RECOMMENDATION NO. LCR11499
Parties: TARA MINES LIMITED
(REPRESENTED BY THE FEDERATED UNION OF EMPLOYERS)
and
AMALGAMATED UNION OF ENGINEERING WORKERS
TECHNICAL ADMINISTRATIVE AND SUPERVISORY SECTION
Subject:
1. 26th wage round and cost reduction plan.
Background:
2. The Company issued a notice (dated 8th January, 1987) to all
employees containing a review of the Company's operations, future
prospects and proposals for a cost reduction plan and changes in
work practices. At a local level meeting the Company outlined the
proposed 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). On the 22nd January, 1987 the Company issued a further
notice to all employees which outlined in more detail the
Company's proposals in relation to the cost reduction plan. (See
appendix A for details).
3. The Union's position on the cost reduction plan was that any
measures discussed and/or introduced should be done so across the
board and equitably distributed among all workers. For this
reason the Union requested that the issues of: incremental
payments; and augmentation of the bonus scheme which do not apply
to the whole workforce should be removed from the general
discussions on the plan so that all unions could discuss the
proposals from the same starting point. This was unacceptable to
the Company. The issue of increments was referred as a separate
item by the Union under Section 20(1) of the Industrial Relations
Act, 1969, to the Labour Court which recommended that they be
withdrawn from the cost reduction plan, L.C.R. No. 11327 refers.
The Union also considers that the increased efficiency resulting
from redundancies etc is a significant contribution by the workers
and justifies an 8% salary increase. Any changes in the bonus
scheme should not result in any reduced payments to the Union's
members.
4. The Company's position is that unless the cost reduction plan
is implemented in full 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 the workers are excessively well paid
and it cannot agreed to any further labour cost increases.
5. As no agreement could be reached at local level the matter was
referred to the conciliation service of the Labour Court on 29th
July, 1987. A conciliation conference took place on 19th August,
1987 at which agreement could not be reached and on 20th August,
1987 the matter was referred to the Labour Court for investigation
and recommendation. The Court investigated the dispute on 26th
August, 1987. At this 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 for the Company to implement the cost reduction plan
in order for the Company to be viable, etc.
6. Proposals relating to pay and plant bonus have not been
resolved, proposals relating to other items have been resolved or
are being discussed at local level.
Union's arguments:
7. (i) As a result of redundancies the workforce is now only
83% of the early 1986 figure. The Company is now
expecting a reduced workforce to produce 104% of last
year's tonnage. In addition, the proposed 14 month pay
pause is equivalent to an 8% reduction in wages and
together with the reduction in bonus that would arise
from the Company's proposals, means in effect that the
Company is seeking between 40% and 45% greater
efficiency.
(ii) The Company is seeking to implement many cutbacks
because of its financial situation. However there are
a number of question marks relating to its financial
decisions at this time. Most new machinery and spare
parts are now purchased in Finland at a higher price.
New offices and some housing have been purchased by the
Company. In addition, the Company suspended foreign
exchange dealings in September, which if it had
continued to deal would have resulted in an increased
profit of #3m in 1986.
(iii) The increased efficiency resulting from the
redundancies justifies an increase in wages of 8%. Any
changes in the bonus scheme such as withdrawal of
augmentation must be equitable and should not result in
reduced payments to these workers.
Company's arguments:
8. (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 favourable
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, that one plant bonus scheme is introduced and
that augmentation no longer applies.
RECOMMENDATION:
9. (a) Wage Increase:
The Court, having given careful consideration to all the
arguments of the parties at the hearing of the case 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
UM/PG Chairman
APPENDIX A
COMPANY'S NOTICE OF 22ND JANUARY, 1987
PROPOSAL UNDER COST REDUCTION PLAN
A. Pay
There will be no pay increases from the expiry of the 25th
Wage Round, October 31, 1986 until December, 1987, a total of
14 months. This means no increases on basic wages, bonus
schemes, differentials or merit increments.
B. Plant Bonus
(a) The upper payment on plant bonus would be limited to the
equivalent rate of 2.52m dmt of mill feed per year.
This is equivalent to a maximum of 6,981 dmt per day
during 1987.
(b) (i) There will be one plant bonus scheme to cover all
those who receive payments under the heading of
plant bonus.
(ii) The staff augmentation will no longer apply.
However, staff who are entitled to overtime
payments would receive bonus on overtime hours
worked.
C. Bonus Payments to Miners
The current bonus schemes are complex and difficult to
implement or monitor. The current rates would be adjusted to
provide a single rate for all the activities currently
carried out under each scheme. This will permit greater
flexibility and utilisation of resources in carrying out the
variety of activities conducted by Miner I's throughout the
operation. As new equipment is introduced a revision of
existing standards would take place, however the additional
productivity will not have a negative impact on existing
bonus earnings but will not necessarily lead to any
increases.
D. Work Practices
Flexibility is required in employees duties in line with new
equipment and or technology which will be introduced. This
would include the setting up of a transportation system for
underground employees to travel to and from the Mine Dry to
designated places underground. This will supplement the
shaft system as the means of transporting employees and will
be run on a scheduled basis throughout each shift.
There will also be a general tightening of time-keeping,
especially with regard to the start/finish of tea breaks and
work periods.
Certain changes in current work practices are considered
essential, but not necessarily limited to the following:
1. Mine
(a) Development: Current crew strengths and operating
methods would be altered.
(b) Production: Demarcation between production and
development crews would be removed/and the concept of
free interchangability introduced.
(c) Support crews: Services, pipes and ventilation will be
installed by support crews thereby allowing Miner I's to
concentrate on drilling, loading, blasting, etc.
(d) Miner II's would be used on such jobs as mucking,
especially trucking.
2. Processing
(a) Reduce shift crew to 9 persons and reduce minimum
manning levels on shift to 8.
(b) Reorganise pairing arrangements for meal reliefs etc.
(c) Reorganise reagent operation to day work only and reduce
the reagent crew to 2 people.
(d) Unloading of reagent trucks to be done by day crew.
(e) Unloading of acid lorries to be done by the delivery
driver.
(f) Reschedule the shift pattern for the loading crews to
suit the train time table.
3. Engineering
(a) Transfer the bit shop to the mine department
underground.
(b) Strict adherence to tea break schedules.
4. Warehouse
(a) Changeover at end of shifts on a one for one person
basis.
(b) Level of cover, particularly Bank Holidays would be
determined by store management.
(c) Reorganisation - underground stores change from 3 to 2
shift cycle i.e. no cover on 12 to 8 shift.