Labour Court Database __________________________________________________________________________________ File Number: CD/87/836 Case Number: LCR11614 Section / Act: S67 Parties: PACKARD ELECTRIC (IRELAND) LIMITED - and - IRISH TRANSPORT AND GENERAL WORKERS' UNION;AMALGAMATED TRANSPORT AND GENERAL WORKERS' UNION |
Claim for improvements in the current pension scheme.
Recommendation:
17. The Court, having considered the submissions made by the
parties, recommends as follows -
(a) Death in Service benefit.
The Court recommends that the claimants accept the Company's
offer.
(b) Definition of final pensionable salary.
The Court recommends that the claimants should accept that
the present arrangements are in line with general practice.
(c) Application of fixed ratio of pension contributions.
Noting that the Company is currently paying 8% of payroll to
the scheme, the Court does not recommend concession of the
claim for a fixed ratio of contributions.
(d) Appointment of employee trustees.
Given that there are many groups of employees, some of whom
are members of other unions, in membership of the scheme, the
Court considers the proposal put forward by the Company to
meet this claim to be a reasonable one and recommends that it
be accepted by the claimants.
Division: Mr Fitzgerald Mr Shiel Mr O'Murchu
Text of Document__________________________________________________________________
CD87836 RECOMMENDATION NO. LCR11614
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: PACKARD ELECTRIC (IRELAND) LIMITED
(Represented by the Federated Union of Employers)
and
IRISH TRANSPORT AND GENERAL WORKERS' UNION
AMALGAMATED TRANSPORT AND GENERAL WORKERS' UNION
SUBJECT:
1. Claim for improvements in the current pension scheme.
BACKGROUND:
2. The Company, a subsidiary of General Motors, was established
in Ireland in 1975. It is based in Tallaght and manufactures and
assembles wiring harness for Opel/Vauxhall and Austin Rover cars.
3. The pension scheme was set up in 1977 and except for some
slight modifications, the basic scheme, which is contributory, is
unchanged and provides for a 66% integrated pension after forty
years. The current value of the fund (as at 31st December, 1986)
is #1.7m and there are currently 550 members. Members'
contributions are fixed at 5% of basic and the Company currently
pays approximately 8% to 9%.
4. The Unions first raised the issue of a review in 1986 and it
formed part of their 26th wage round claim which came before the
Labour Court in November, 1986. In LCR10845 the Court stated
inter alia that it " recommends that the Company's offer to review
the pension benefits be accepted". During 1987, the Union lodged
the following five claims -
- death in service benefits to be increased to four times
basic salary.
- Elimination of all discriminatory clauses.
- Employer contributions to be a fixed ratio of employees (a
minimum of 2 to 1).
- Provision for election of trustees from among the Unions'
members.
No progress was made at local level discussions and on the 17th
September, 1987, the matter was referred to the conciliation
service of the Labour Court. At a conciliation conference on the
30th October, the issue of the elimination of all discriminatory
clauses was settled but no progress could be made on the other
issues and on the 4th November they were referred to the Labour
Court for investigation and recommendation. A Court hearing was
held on the 1st December, 1987.
Claim (a) - Improved Death in Service Benefits
BACKGROUND:
5. The current benefits are as follows -
Married Men : One year's salary plus 50% pension
Women/single men : two years' basic annual salary.
The Unions are seeking four times annual basic salary for
everybody. In response, the Company has offered to improve the
benefit to two years' basic salary plus 50% pension for married
men and three years' basic salary for single people.
UNIONS' ARGUMENT:
6. 1. The Company has argued that concession of this claim
would cost an extra #47,000 per annum. The Unions are not
disputing this figure but believe that a benefit of four
times basic is not exceptional in the private sector schemes
they have surveyed (details supplied to the Court).
COMPANY'S ARGUMENTS:
7. 1. The Company considers its offer to be a very satisfactory
proposal and sees no justification for further improvement.
In a recent FUE national survey on pensions, involving over
250 employments, it was shown that the vast majority of
companies offered two years benefit to both married and
single employees (details supplied to the Court).
2. The cost of the improvement offered by the Company is
#20,000 per annum and it is not in a position to increase
this.
Claim (b) - Pensions to be Based on Final Year's Salary
BACKGROUND:
8. The current scheme provides for retirement benefits based on
the average of pensionable salary over the preceding three years
prior to retirement. The Unions want pension entitlements to be
based on the final year's salary. This is unacceptable to the
Company.
UNIONS' ARGUMENTS:
9. 1. The Unions contend that the pension should be based on
the final year's salary only, thus ensuring that the value of
the pension is improved and a reasonable standard of income
equating to pre-retirement income is maintained.
2. The Company has claimed that that concession of this
claim would cost #35,000 per annum and that the benefits
available under the scheme are in line with the norm
elsewhere in industry. The Unions reject this and argue that
the costs are minimal and that calculation based on final
year's salary is common throughout industry (details
supplied).
COMPANY'S ARGUMENTS:
10. 1. Quoting again from the survey mentioned at 7.1 above, 49%
were based on the average of the last three years and a range
of other definitions related to the last five and ten years'
service accounted for approximately 30%. Therefore, the
Company would argue its position is well in line with the
national position.
2. Concession of the Unions' claim is estimated to cost
#37,000.
Claim (c) - Contribution Ratios
BACKGROUND:
11. The employees' contributions are fixed at 5% of basic and the
Company currently pays between eight and nine per cent. The
Unions' claim is that the minimum employer contributions should be
double the employees, i.e. 10% or a ratio of 2:1.
UNIONS' ARGUMENTS:
12. 1. While the Company has argued that it will always ensure
sufficient funding to provide for the benefits, the Unions
believe that a minimum 2:1 ratio is necessary as a healthy
fund can provide a degree of flexibility in the future.
Furthermore, in an uncertain financial world, pension funds
are always vunerable to market fluctuations.
2. Pensions are a form of deferred wages and there is no
reason why the value of the Employer's contributions should
not be a fixed minimum.
COMPANY'S ARGUMENTS:
13. 1. The Company is totally opposed to this claim. This idea
would suggest that a pension fund is a container into which
is put any surplus which the Company might have. The Company
must have profits to survive and develop and out of profits
it has to finance future investments and should also pay
dividends. It cannot pre-commit money to pension funding
beyond what is prudent in terms of having adequate profit
available for dividend and investment nor can it pre-commit
money in excess of what is needed to fund the particular
benefits provided by the scheme or improved benefits
where these are agreed between the Company and the employees.
2. Having a pre-determined ratio of contribution takes away
a choice which both the Company and its employees should be
able to retain. It is quite possible that both parties at
particular points in time might wish to reduce contributions
where current contributions are over-providing for benefits.
In a fixed ratio situation this may not be possible as the
equations may not be possible. It is in effect a strait
jacket for both sides and one into which the Company is
certainly not prepared to go.
3. The Company estimates that concession would cost it
approximately #200,000 (2%).
Claim (d) - Provision for the Election of Trustees from among the
Unions' Members
BACKGROUND:
14. The Unions are seeking greater involvement of the employees
in the management of the pensions fund and at least two trustees
elected to the board of management.
UNIONS' ARGUMENTS:
15. 1. The lack of information regarding the operation of the
pension scheme has for long been a major source of grievance.
Annual Reports were never issued and individual members were
unaware of how they stood in relation to benefits. The
Unions argue that their members should as a right be given
all relevant information on a regular basis and, that the
election of shop floor representatives to serve as trustees
should be agreed.
2. The recent report from the National Pensions Board
covered this point when considering the proposals for the
future supervision and monitoring of pension schemes. By a
majority, it recommended as follows -
"that the commitment of members would be improved and
their long-term interest best served by providing them
with statutory right in relation to the appointment of
trustees".
3. It has been a long established demand of the union
movement that members of pension schemes should have the
right to appoint/elect trustees to oversee the operation of
the fund. A number of companies and industries already
operative schemes where such a degree of worker participation
exists (details supplied to the Court).
4. The Company has admitted that the dissemination of
information to the members has been poor and has agreed to
rectify this. However, in relation to worker trustees,
despite accepting the inevitability of such a development,
Management has argued that there should be a gradual
progression towards this objective over a number of years.
The Unions do not accept the need for any delay and believe
that this objective is easily achievable, costs nothing, will
re-assure the workers, restore their confidence in the
pension scheme, and will bring the Company into line with
other major employments.
COMPANY'S ARGUMENTS:
16. 1. Irish Pensions Trust are the sole trustees of the fund at
present. There are no employee trustees from any level in
the Company. The claim is from a particular segment, albeit
the majority, of employees but there are others, represented
by other unions, both technical and craft and a group
including management which is not represented by a union.
The practical reasons for the Unions' claim is related to
being reassured as to the liquidity of the fund i.e., that
the agreed contributions go into the fund and that there are
sufficient funds to meet the scheme's liabilities. It is the
Company's contention that these objectives can be achieved
without trusteeship.
2. The question of employee trustees should not be
considered in respect of one group of employees only. If the
question of nominees is to be pursued it should be available
to all employees to nominate people for consideration.
3. It should not be assumed that there is common interest
within the Company between all employee groups whether craft,
technical, clerical production etc. In such circumstances,
member trusteeship could give rise to conflict between
trustees. A trustee has to play a totally objective role.
He or she will be involved in decisions relating to
particular individuals and their entitlements under the
scheme and it is not therefore desirable that trustees be
union-nominated people. In fact in certain cases it could
prejudice a union's position in representing a member if a
union nominated person were a trustee.
4. The concerns put forward by the Unions can be adequately
dealt with by the Company's offer, i.e. a formal information
structure providing for two named representatives to liaise
with the trustees and to receive information on the key
issues of contributions in the fund and adequate funds to
meet the scheme liabilities. There has been recent
information provided to the Union on those aspects and the
Company proposes that the next update with the two
representatives should take place in six months time (June,
1988) and thereafter annually. Management also operates a
similar liaison arrangement with Irish Pensions Trust.
5. With reference to the recent national survey, quoted at
7.1 and 10.0 above, the vast majority of companies had no
employee trustees (details supplied to the Court).
RECOMMENDATION:
17. The Court, having considered the submissions made by the
parties, recommends as follows -
(a) Death in Service benefit.
The Court recommends that the claimants accept the Company's
offer.
(b) Definition of final pensionable salary.
The Court recommends that the claimants should accept that
the present arrangements are in line with general practice.
(c) Application of fixed ratio of pension contributions.
Noting that the Company is currently paying 8% of payroll to
the scheme, the Court does not recommend concession of the
claim for a fixed ratio of contributions.
(d) Appointment of employee trustees.
Given that there are many groups of employees, some of whom
are members of other unions, in membership of the scheme, the
Court considers the proposal put forward by the Company to
meet this claim to be a reasonable one and recommends that it
be accepted by the claimants.
~
Signed on behalf of the Labour Court
11th January, 1988 Nicholas Fitzgerald
D.H./P.W. Deputy Chairman