Labour Court Database __________________________________________________________________________________ File Number: CD88838 Case Number: LCR12206 Section / Act: S67 Parties: IRISH CEMENT LIMITED - and - GROUP OF UNIONS |
Dispute concerning the payment of savings for reduction in staff.
Recommendation:
The Court, in its consideration of this dispute, was mindful of
the acute differences between the parties in relation to the
life-span of an agreed method of division of savings resulting
from redundancies (known as "POT"). It is, in the Court's
opinion, regrettable that an item of such ongoing importance
within a survival plan was not the subject of a specific written
agreement.
In the absence of such written agreement and having considered the
submissions and arguments of the parties, it appears to the Court
that on balance an arrangement such as the "POT" would not be
introduced on the basis of being maintained ad-infinitum. On this
basis it would appear that such an arrangement could well be
terminated either as a result of bilateral agreement or as in this
instance the introduction of a further survival plan.
Insofar as the new survival plan is concerned the Court has noted
its contents in relation to redundancies, work-practices, Company
viability, etc. It has also noted that differences still exist
between the parties in relation to its full acceptance and
implementation.
In the context of the foregoing paragraphs it appears to the Court
that the present dispute could best be resolved by the inclusion
of all the redundancies up to July (inclusive) 1988 in the "POT"
and no further additions to "POT" from that date.
The Court so recommends.
Division: Ms Owens Mr Collins Mr Walsh
Text of Document__________________________________________________________________
CD88838 RECOMMENDATION NO. LCR12206
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: IRISH CEMENT LIMITED
and
GROUP OF UNIONS
SUBJECT:
1. Dispute concerning the payment of savings for reduction in
staff.
BACKGROUND:
2. In 1984, the Company and the Group of Unions agreed a
rationalisation programme in respect of the Company's plants at
Limerick and Drogheda involving job losses and changes in work
practices. The savings from the redundancies were to be shared
equally between the Company, the customers and the remaining
staff. The Company's proposals were based on one-third of the
nett savings going into a "pot" for distribution annually to the
remaining workforce. The calculations took account of the
redundancy costs and the cost of capital investment linked to
reduced staffing levels as an offsetting cost against the nett
savings. It was eventually negotiated that for each worker
leaving, #4.85 would be paid to each of the workforce remaining.
This was to be paid annually on the 31st July. A target figure of
210 redundancies was used. (The Unions' claim that that figure
was used for calculation purposes only and did not constitute
either a limit or target for the plan. This is disputed by the
Company). It was also agreed that this figure would be adjusted
each year for cost of living and that there would be a review in
July, 1989. This annual payment became known as the "pot".
3. In October, 1987, because of market difficulties, the Company
put forward a new survival package, part of which involved the
shedding of approximately 125 jobs (full details supplied to the
Court). However, the Company informed the Unions that these
further job reductions would not be added to the "pot" as that
rationalisation programme had terminated. By July, 1987 (the time
the "pot" payment for that year was made) 186 people had left
under the rationalisation programme and following discussions with
the Unions the Company agreed to bring the "pot" payment for July,
1988, up to the figure of 210. As of the date of the Court
hearing (2nd December, 1988) the number who had left was 288 and
the Unions are claiming that the additional 78 should be included
in the 1988 "pot" and that any further redundancies be included in
future years. The Company rejects this and is of the view that it
had agreed a payment for 210 people and has honoured its
commitment.
4. As the issue could not be resolved at local level it was
referred to the conciliation service of the Labour Court on the
20th October, 1988. No agreement was reached at a conciliation
conference held on the 27th October and the matter was referred to
the Labour Court for investigation and recommendation. A Court
hearing was held on the 2nd December, 1988.
GROUP'S ARGUMENTS:
5.1 The calculations for the "pot" payment took account of the
redundancy costs and the cost of capital investment linked to
reduced staffing levels as an offsetting costs against the
nett savings. The calculations were based on an estimated
reduction in job numbers amounting to 210. This figure was
used for calculation purposes only and did not constitute
either a limit or target for the plan.
5.2 It is important to note in the context of the present dispute
that if a higher number of job reductions were used in the
calculations then the payment per person for each job
reduction would have been significantly higher. In other
words, if more than 210 job reductions occurred, then the
savings are underestimated.
5.3 The Unions have looked at the potential savings arising as a
result of further job reductions as part of the new survival
plan proposed by the Company. Insofar as these continue to
involve job reductions, up to the level of about 210 since
1984, the savings per job reduction is approximately in line
with that calculated in the original "pot" system. Beyond
that level, however, the savings are appreciably greater. In
addition, during 1989, as job reductions continue under the
survival plan, the saving per job reduction will be greater
still. This results from the fact that the capital costs of
the original job reductions were amortised over five years
and the five year period will end in August 1989. The new
survival plan does not seem to involve heavy capital
expenditure in order to facilitate job reductions, and as a
result, the offsetting costs associated with job losses are
nowhere near as significant as was involved originally.
5.4 The Unions accept that strong competitive pressures will
result from the establishment of a new cement company in
Northern Ireland and from developments related to 1992, and
that these pressures, particularly when markets are
depressed, necessitate measures to protect the Company's
competitive position. They do not accept, however, that no
reward can be paid as in the past for the job reductions
which have taken place since 1987. These job reductions were
not only self-financing, the savings if the "pot" scheme were
to operate would still go primarily to the Company at least
in the ratio of 2:1 but, in fact, possibly in greater
proportion. The case for a continued sharing of the savings
is also based on the fact that remaining employees must
increase their productivity whenever reductions in staff
levels occur in their area. This is of greater relevance
under the 'Survival Plan' as unlike previously there is no
significant technological change occurring which is labour
replacing. Therefore, if efficiencies are to be maintained,
workplace and labour efficiency must increase.
5.5 It is also pertinent to refer to the fact that the market for
cement is now, for the first time in years, increasing. A
modest but sustained increase has been noted during 1988 and
economic predictions for 1989 suggest this will continue and
perhaps accelerate next year. Under capacity continues to
exist in the UK market and this should lead to increased
opportunities for exports which have been a significant
proportion of output this year. The likely increase in
tonnage produced this year subsequently creates further
demands in terms of productivity from the workplace. Indeed
the Group of Unions is seriously concerned about the
continued reductions in staff levels at a time when
production demands are increasing. This situation is
presenting particular problems in a number of departments.
For this reason the Group would be happy to see an end to the
continued policy of voluntary retirement in the Company.
However, insofar as job reductions have occurred and are
continuing, the reward system should continue.
COMPANY'S ARGUMENTS:
6.1 It was clear to everyone that the survival plan put forward
in October, 1987, was a totally different package to the one
negotiated in 1984. The whole thrust of the current plan was
to keep two factories in operation by acquiring export
tonnage of a marginal nature. This can only be done by being
competitive on employee costs. In addition, a new producer
has now begun operations in Northern Ireland and he has
stated that his labour costs will be only #3/ton.
Furthermore, he will not have the Company's restrictive
practices.
6.2 Imports account for approximately 8% of the home market and
are at their highest ever level.
6.3 The Company has met the sales target it set for itself in
relation to exports by purchasing market in Northern Ireland
and doubling its sales there. Clinker export sales have also
been doubled. To retain this position in the export markets,
which will be necessary should the home market decline, costs
must be reduced from their present level.
6.4 The claimants are among the best paid workers in Ireland and
among the dearest cement workers in Europe and among the
Company's competitors (details supplied to the Court). To
assume additional ongoing payments in the present competitive
situation would be totally wrong.
6.5 The Unions' claim appears to be based on a totally open-ended
programme for the 1984 rationalisation. This clearly was not
so. Correspondence supplied to the Court shows that the
Company is correct (details supplied). The Company had
agreed to a target of 210 people and has honoured that
agreement.
RECOMMENDATION:
The Court, in its consideration of this dispute, was mindful of
the acute differences between the parties in relation to the
life-span of an agreed method of division of savings resulting
from redundancies (known as "POT"). It is, in the Court's
opinion, regrettable that an item of such ongoing importance
within a survival plan was not the subject of a specific written
agreement.
In the absence of such written agreement and having considered the
submissions and arguments of the parties, it appears to the Court
that on balance an arrangement such as the "POT" would not be
introduced on the basis of being maintained ad-infinitum. On this
basis it would appear that such an arrangement could well be
terminated either as a result of bilateral agreement or as in this
instance the introduction of a further survival plan.
Insofar as the new survival plan is concerned the Court has noted
its contents in relation to redundancies, work-practices, Company
viability, etc. It has also noted that differences still exist
between the parties in relation to its full acceptance and
implementation.
In the context of the foregoing paragraphs it appears to the Court
that the present dispute could best be resolved by the inclusion
of all the redundancies up to July (inclusive) 1988 in the "POT"
and no further additions to "POT" from that date.
The Court so recommends.
~
Signed on behalf of the Labour Court
9th January, 1989 Evelyn Owens
DH/PG Deputy Chairman