Labour Court Database __________________________________________________________________________________ File Number: CD89551 Case Number: LCR12587 Section / Act: S67 Parties: AER RIANTA - and - AIR RIANTA GROUP OF UNIONS |
Claim by the Union Group on behalf of approximately 1,660 workers for the payment of a bonus.
Recommendation:
6. Having considered the submissions made by the parties, the
Court is of the opinion that the case made by the Unions for the
introduction of a performance related bonus is not sustainable in
the absence of clear and agreed criteria for the calculation and
payment of such a bonus. The Court recommends that the parties
commence immediate discussions with a view to reaching agreement
on the introduction of a proper formal profit sharing or
performance related bonus payment system as soon as circumstances
permit.
Division: Mr O'Connell Mr Collins Ms Ni Mhurchu
Text of Document__________________________________________________________________
CD89551 RECOMMENDATION NO. LCR12587
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: AER RIANTA
and
AIR RIANTA GROUP OF UNIONS
SUBJECT:
1. Claim by the Union Group on behalf of approximately 1,660
workers for the payment of a bonus.
BACKGROUND:
2. In late 1988, the Union Group lodged a claim for a bonus of
one months salary. The Union Group based its claim on the fact
that profits in the Company have increased dramatically over the
last number of years, and that there was considerable increased
output and productivity during the same perid. The Company
rejected the claim on the grounds that it is prohibited under the
terms of the Programme for National Recovery (P.N.R.), and because
of its pay relationship with Aer Lingus. As the parties could not
reach agreement at a local level the dispute was referred on 10th
April, 1989, to the conciliation service of the Labour Court. No
agreement could be reached at a conciliation conference held on
18th July, 189, (the earliest date suitable to the parties), and
on 3rd August, 1989, the dispute was referred to the Labour Court
for investigation and recommendation. A Court hearing took place
on 13th September, 1989.
UNIONS' ARGUMENTS:
3. 1. The Company, which is highly profitable, can afford to pay
the bonus as claimed. Profits/surplus have increased from
#2.5m in 1980, to #23.2m in 1988. Cumulative profits for that
period amount to #95m. It is expected that profits for 1989
will be over #26m. Based on the "Revex Ratio" (ratio of
revenue to expenditure) Dublin Airport was the most profitable
airport in Europe in 1986.
2. The Company's improved performance over the last number of
years can largely be traced to the massive increase in
passenger throughput, (almost 50% in two years), which has
been serviced by a marginal reduction in labour. Each unit of
labour and unit of labour cost delivered massively increased
output during the period in question.
3. The Unions do not accept that the relationship with Aer
Lingus and the P.N.R. are insurmountable obstacles. The last
"special" pay increase achieved by staff was #4.70 in October,
1981. In the interim, most public sector employees have
received some catching up pay increases and very few could
demonstrate either increased productivity or ability to pay to
the same extent as these workers. Even before the most recent
round of "special" increases elsewhere in the public sector,
the Company's clerical staff had fallen from 4th to 12th in
the Quinn Tribunal league table and would require an increase
of over 9% to recover their position.
4. There is no reason why the parity relationship should
preclude payment of a bonus in the Company, where the
financial and productivity performance clearly justifies it.
In fact, Aer Lingus have paid nominal bonuses in the last two
years, which have never been claimed by the workers concerned
in the Company on a parity basis.
5. The P.N.R. does not preclude the payment of a performance
related bonus to staff. Bonus payments are already a feature
for some groups in the Company. Superintendents have for many
years had a bonus payment of up to #1,500. In addition, up to
half of the superintendent and management grades in the
Company received an equivalent amount as an additional bonus
in 1987. In early 1988, all the members of one particular
clerical grade received a sizeable bonus payment.
6. Some element of profit sharing/bonus payment/commission is
now fairly commonplace in industry generally. In the aviation
business numerous companies have paid bonuses ranging from the
nominal to the significant.
7. The Company cannot expect to maintain existing levels of
commitment from staff without some recognition of their
contribution to date. It is inevitable that as the workers
see the fruits of their labour continue to disappear into the
national exchequer they will attempt to claim back some of the
lost ground and quality of service will be the first casualty.
COMPANY'S ARGUMENTS:
5. 1. The nature of the parity relationship between the Company
and Aer Lingus is that changes in pay and conditions agreed in
Aer Lingus are then transferred to the Company. There has
been no claim lodged with Aer Lingus for a bonus based on
performance in 1988, and certainly there has been no bonus
payment made by the airline. Concession of the claim in the
absence of any such claim in Aer Lingus would alter the pay
relationship and would have consequences for the airline.
2. Both the Company and Aer Lingus are covered by the P.N.R.
and indeed its terms have been accepted by the Union Group.
It is totally at variance with the intent of the P.N.R. that
employees in the public sector should be seeking an extra
months pay.
3. During the 1970's the Company suffered a stagnation in
business and thus had a degree of overmanning. The Company is
currently experiencing an increase in business and revenue,
due largely to factors such as low air fares and capital
investment by the State, and the consequent taking up of
underutilised resources. The Company has also concessioned a
number of activities which were originally carried out by
direct labour thus reducing staff numbers. As the net return
from the concessionaires greatly exceed those formerly
achieved a false increase in productivity seems to be
achieved.
4. The performance of the Company must be seen in its overall
context and the peculiarities of the public sector accounting
conventions must be understood. The Company is simply an
agent for the Minister for Tourism and Transport and until
recently owned none of the assets at the three State airports.
Accordingly, the 1988 surplus of #23m does not provide for
interests and depreciation on fixed assets, rates, insurance
or taxation. If proper commercial accounting conventions were
used the real profits and retained earnings would be #6.6m.
These accounts do not include State services provided at the
airports such as air traffic control, meteorological services,
customs, etc...
5. Although #23m was the net surplus in 1988, the Company had
to borrow #14.3m in order to fund the capital expenditure of
#18.5m and an increase in working capital of #6.3m. In
addition, the Company also paid #11.7m to the Minister in
1988. Cash generated after paying the Minister has been
re-invested into the Company. There is a need for a capital
expenditure programme of #162m over the next five years to
ensure that future demand can be met. This investment has to
be funded from retained earnings as the Company does not have
access to private equity capital and given the current
conditions of the public finances, the State is unlikely to be
able to provide fresh capital to the Company.
6. Given the ongoing need for capital investment, which is
necessary to secure employment, there can be no question of
diverting, what is in essence, #2.3m of exchequer finance to
staff in the Company whose individual average earnings in
1988, were #15,500.
7. The pay and general conditions in the Company are governed
in the short term by the terms of the P.N.R. and by the
relationship with Aer Lingus. It is impractical that groups
of employees should be able to submit claims based on the
parity relationship and at the same time pursue claims outside
the pay structure. In these circumstances the Company is
satisfied that there is no case for a bonus payment as
claimed. However, the Company is not adverse to payment by
results and would be agreeable, on the expiry of the P.N.R.,
to discuss a performance related payment system.
RECOMMENDATION:
6. Having considered the submissions made by the parties, the
Court is of the opinion that the case made by the Unions for the
introduction of a performance related bonus is not sustainable in
the absence of clear and agreed criteria for the calculation and
payment of such a bonus. The Court recommends that the parties
commence immediate discussions with a view to reaching agreement
on the introduction of a proper formal profit sharing or
performance related bonus payment system as soon as circumstances
permit.
~
Signed on behalf of the Labour Court
John O'Connell
_______________________
6th October, 1989 Deputy Chairman.
B.O'N./J.C.