Labour Court Database __________________________________________________________________________________ File Number: CD89467 Case Number: LCR12603 Section / Act: S67 Parties: ERICTRON LIMITED - and - IRISH TRANSPORT AND GENERAL WORKERS' UNION |
Claims by the Union on behalf of 8 supervisors for: (i) an increase of 15% in respect of a 1981 productivity agreement, (ii) 2% increase in pay arising from the 26th wage round, (iii) operation of a merit bonus scheme.
Recommendation:
11. The Court having considered the submissions from both parties
finds as follows in relation to the three items in the claim.
(1) Productivity:
The Court recommends that both parties meet immediately
to evaluate what increased productivity if any has been
achieved by the claimants in the period from 1981. These
talks should take place under Clause 7 of the Agreement
of 1981 and be based on factual information which should
be supplied by Management.
(2) 26th Pay Round:
The Court does not recommend concession of the additional
2% claimed.
(3) Merit Bonus:
Whilst recognising the Union's unease at the method in
which the merit bonus has been arrived at over the years
the Court nevertheless does not recommend concession of
the claim for a lump sum payment. The Court recommends
that in future full details of appraisal be given to the
claimants.
Division: Ms Owens Mr Brennan Ms Ni Mhurchu
Text of Document__________________________________________________________________
CD89467 RECOMMENDATION NO. LCR12603
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: ERICTRON LIMITED
and
IRISH TRANSPORT AND GENERAL WORKERS' UNION
SUBJECT:
1. Claims by the Union on behalf of 8 supervisors for:
(i) an increase of 15% in respect of a 1981 productivity
agreement,
(ii) 2% increase in pay arising from the 26th wage round,
(iii) operation of a merit bonus scheme.
GENERAL BACKGROUND:
2. The Company is a subsidiary of L.M. Ericsson Limited and
produces telecommunications equipment. It employs 265 people at
its plant in Athlone. The present claims were discussed at local
level and at a conciliation conference held on the 20th June,
1989. As no agreement was reached the dispute was referred to the
Labour Court for investigation and recommendation on the 26th
June, 1989. A Court hearing was held on the 5th October, 1989.
Claim (1) Claim for a 15% increase - 1981 Productivity Agreement
BACKGROUND:
3. At a productivity agreement concluded between the parties in
1981 provision was made whereby the Union would initiate a claim
if productivity levels increased (clause 7). The Union argues
that it now has a valid case to claim an increase of 15% because
there has been a reduction in the number of supervisors, a change
in the nature of product manufactured and also in the type of work
undertaken. The Company rejects the claim stating that such
changes are inevitable in a high technology industry and cannot be
linked to pay scales.
UNION'S ARGUMENTS:
4. 1. Since 1981 the whole production process has undergone
significant change which has produced benefits by way of at
least 15% for the operative grades, while their colleagues in
the service department enjoy a high basic wage. The workers
concerned however are on the same salary scales in existence
since 1981. The Company has refused to reward them for the
enormous changes that have occurred in the intervening period.
2. The significant change in the variety of product now
manufactured in the Company has increased the burden
considerably on the workers concerned in terms of the range of
products, variety of new materials and multiplicity of skills
and training. The changes in respect of the operative grades
were reflected in the introduction of a revised and much
improved bonus scheme. However the workers concerned were
excluded from this benefit.
3. Because of the changes in products manufactured the ratio
of supervisors to the supervised has increased by 76% alone,
mostly through the loss of two posts as unit managers and four
supervisory positions. While the workload and complexity of
the job has increased, the actual number of supervisors to
cover same has fallen. The Union assesses the total increase
in productivity achieved since 1981 as being in excess of 30%,
and believes that they should share half of this saving i.e.
15%.
4. The bonus scheme introduced on behalf of the operative
staff has yielded 15% plus to the operatives. The workers
concerned in this claim have made significant contributions to
the whole productivity process and accordingly should now be
rewarded with a 15% adjustment to their salary scale (details
of current scale supplied to the Court).
COMPANY'S ARGUMENTS:
4. 1. The changes that have taken place since 1981 are primarily
of a technological nature, and affect the environment in which
all jobs in the Company are carried out. The fundamental
nature in terms of direct accountability with regard to the
supervisors' jobs has not altered significantly, and certainly
not in such a way as to constitute grounds for productivity
payment.
2. The span of control in the supervisory job is a variable
one and is offset considerably by technological advances,
automation and management technique. It cannot therefore
constitute grounds for productivity payment in these
particular circumstances or in the simple manner advanced in
the claim.
3. The Union's claim must be considered in the context of the
overall remuneration package currently enjoyed by the
supervisory grade. The average actual earnings includes basic
salary, Christmas bonus (2% of salary net of tax),
non-contributory pension scheme in which the Company
contribution is 17.5% of salary, and paid overtime. This
level of earnings compares very favourably in real terms with
earnings of similar employees in the electronics industry.
4. The Company has to consider any claims made in the light
of the impact on its cost structure. Currently the Company is
engaged in a survival strategy where the overhead cost
structure is playing a critical role. Available resources are
being invested in essential development areas and the Company
is not in a position to sustain this claim.
Claim (2) Claim for a 2% increase in pay arising from the 26th
wage round
BACKGROUND:
5. In discussions between the parties agreement was reached on an
increase of 5% on basic pay in respect of the 26th round.
Discussions were also held to see if a way could be found to pay
the increase to the supervisors in a tax efficient manner. A
voucher system ("smart card") for paying for canteen meals was
considered but was rejected by the Revenue Commissioners. A
possibility of extending health insurance through the pension
scheme was explored without success. The Union claims that the 5%
offered was only part settlement and that the 2% claim now
submitted is reasonable. Management rejected the claim.
UNION'S ARGUMENTS:
6. 1. In discussions on the 26th wage round the Company clearly
acknowledged that there was a need to do something extra for
the supervisory grades. The value of the "smart card"
solution is hard to quantify but the Union would contend its
minimum value is 2%.
2. The value of fringe benefits given to operative grades,
those supervised by the workers concerned, is 3% to 4%. It
was this gap which led to the negotiations on the "smart card"
and needs to be bridged by a 2% increase. Independent of
in-house wage round development, many external settlements
were in the order of 7% particularly in the electronic
industry.
3. Out of a total of 706 settlements monitored by the Union's
research department under the 26th wage round, the cumulative
increase was 6.8%. It is not unreasonable for the Union to
claim that an additional 2% is justified with effect from 1st
June, 1986 i.e. a total wage round settlement of 7%.
COMPANY'S ARGUMENTS:
7. 1. The terms of settlement of the 26th wage round were
uniform across the Company (5%). There were no extra
concessions to any group. To alter the settlement at this
stage would have a major impact across the Company which would
prove intolerable.
2. The Company did not link the 5% concession in a contingent
manner to methods of payment. It simply gave an undertaking
to explore legitimate methods of making payment. It is
therefore spurious to link the two in the manner proposed by
the Union.
3. The claim, as with other claims lodged by the Union,
involves a considerable cost and given the current
circumstances of the Company this would not be acceptable.
The Company went to considerable lengths to discharge its
undertaking to examine payment methods and feels that it has
fulfilled its obligations on this matter.
Claim (3) Operation of a merit bonus scheme
BACKGROUND:
8. The Company operates a merit bonus scheme in respect of
supervisory and clerical employees which is paid twice annually.
It is based on a performance appraisal and takes place between the
worker and his/her immediate supervisor. In theory the scheme
could yield up to 10% bonus twice yearly. The Union claims that
irrespective of the rating achieved by workers the Company has
kept the bonus figure at a predetermined level in order to reduce
overall costs. The Union says it has a memo from Management
confirming this position. The Company rejects the claim stating
that there was no deliberate policy of distortion in relation to
the scheme.
UNION'S ARGUMENTS:
9. 1. It is quite obvious from the original agreement of 1981
and subsequent memo from a member of Management that the
Company are guilty of a blatant breach of the 1981 Agreement.
The Union is aware that in 1985 each individuals performance
and hours were adjusted downward by approximately 3/4%. It is
quite possible that this position has obtained for eight years
in which case the cumulative loss is 12%.
2. That Management should have attempted to water down the
workers' concerned entitlement under the Agreement is
surprising and the Union would request the Court to underwrite
the 1981 Agreement whereby bonus will be paid based on an
individual's performance of 0-10%. This should be done to the
exclusion of any factor that was not a feature of that
Agreement.
3. The loss incurred by the workers concerned is estimated at
12%, as exact figures for the eight years were not available.
The Union is claiming a lump sum of 12% of salary in respect
of the estimated losses.
COMPANY'S ARGUMENTS:
10. 1. The internal memo was issued by a manager responsible for
manufacturing during a period when factory performance was
below budget. The overall performance in the factory for the
period was amounting to a financial loss stemming primarily
from production backlogs. The manager concerned
understandably took the position that it would be inconsistent
to pay higher bonuses in the circumstances. The memo does not
refer to any other performance or bonus periods and no further
memos of this nature have been issued.
2. With a scheme that yields 0-10% applied to approximately
75 people twice annually over a period of years it is not
surprising that a normal distribution of yields would occur
around the 5% level. For the workers concerned in this claim
during the period 1984/89 yields have ranged from 2.94% to
6.86%. The Company never gave a guarantee of a specific
percentage bonus and it could fluctuate depending on the
individuals concerned. When the overall product of the scheme
is considered then it is fair to say that employees concerned
have benefited well from it.
3. The scheme has an appeals mechanism where an individual,
if dissatisfied with the outcome of an appraisal or if in
disagreement with his/her manager over details of the
appraisal, can appeal. If the individual can substantiate his
position then the manager has leeway to review and/or change
the appraisal. This facility is appropriate to such a scheme,
has been and is utilised, and is more consistent than making
general claims of an overall nature. The operation of the
scheme involves individual acceptance or rejection of the
outcome and subsequent resolution of differences.
RECOMMENDATION:
11. The Court having considered the submissions from both parties
finds as follows in relation to the three items in the claim.
(1) Productivity:
The Court recommends that both parties meet immediately
to evaluate what increased productivity if any has been
achieved by the claimants in the period from 1981. These
talks should take place under Clause 7 of the Agreement
of 1981 and be based on factual information which should
be supplied by Management.
(2) 26th Pay Round:
The Court does not recommend concession of the additional
2% claimed.
(3) Merit Bonus:
Whilst recognising the Union's unease at the method in
which the merit bonus has been arrived at over the years
the Court nevertheless does not recommend concession of
the claim for a lump sum payment. The Court recommends
that in future full details of appraisal be given to the
claimants.
~
Signed on behalf of the Labour Court
Evelyn Owens
_____________________
19th October, 1989. Deputy Chairman
T.O'D/J.C.