Labour Court Database __________________________________________________________________________________ File Number: CD89877 Case Number: LCR12773 Section / Act: S67 Parties: ROYAL LIFE (IRELAND) LTD - and - MANUFACTURING SCIENCE FINANCE |
Claim by the Company to bring commission arrangements for four workers into line with those of other workers.
Recommendation:
5. Having considered the submissions and arguments made by the
parties, the Court is satisfied that paragraph 13.2 of the 1986
agreement (with the exception of the final sentence) should be the
basis on which commission will be paid to the claimants on a
red-circle basis.
Division: CHAIRMAN Mr Collins Mr Devine
Text of Document__________________________________________________________________
CD89877 RECOMMENDATION NO. LCR12773
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: ROYAL LIFE (IRELAND) LTD
and
MANUFACTURING SCIENCE FINANCE
SUBJECT:
1. Claim by the Company to bring commission arrangements for four
workers into line with those of other workers.
BACKGROUND:
2. 1. The workers concerned are senior sales consultants who
worked with the Law Union and Rock Insurance Company Ltd until it
was taken over by Royal Life Ireland Ltd. The workers transferred
to the new Company in 1986, having negotiated an agreement whereby
their existing salaries would be retained on a personal basis and
uplifted in line with other staff salaries as agreed.
The following commission arrangement was agreed:-
"A threshold will be applied to existing staff and will
be related to the percentage of total business
(excluding Direct Business not credited to the
Consultants) targeted to come from products launched
after 1.10.1986. For example, if 25% of the total new
business is expected to come from new products the
threshold for existing staff will be 25% x the senior
consultant threshold. This will be adjusted annually
when targets are established. Except that for the
period up to the first formal review of commission,
this percentage will not exceed 50% of Senior
Consultant Threshold".
The agreement also stipulated that:-
"Salaries, commission and production bonus rates will be
reviewed at least once every three years with the first
formal review due for the 1990 business year."
2. 2. Additional sales consultants were appointed following the
establishment of the new Company. They were appointed on lower
rates of pay and with different commission arrangements to those
of the existing consultants.
3. 3. In 1989, a dispute arose, when during the first formal
review (as per agreement) the Company proposed to bring the
commission arrangements for existing consultants (four who
transferred) into line with those of the consultants recruited
since 1986. The Company contend that this was the agreed
intention of the review. The Union rejected the Company's
interpretation of its purpose and would not accept any reduction
in the earnings of the workers concerned. The dispute was the
subject of a Labour Court conciliation conference on 21st
November, 1989. As no agreement was reached the Company sought a
full Court hearing. The Union agreed and the Court investigated
the dispute on 5th January, 1990. The hearing was adjourned to
allow for the submission of additional information on the salary,
commission and production bonus arrangements operated in respect
of the four existing consultants. The resumed hearing took place
on 15th February, 1990.
UNION'S ARGUMENTS:
3. 1. As consultants with Law Union Rock Insurance Company the
workers were paid commission on all products sold on a sliding
scale basis, without having to achieve a threshold.
The 1986 agreement in relation to commission provided as follows:-
13:2 Position of Existing Staff.
"A threshold will be applied to existing staff and will
be related to the percentage of total business
(excluding Direct Business not credited to the
Consultants) targetted to come from products launched
after 1st October, 1986. For example, if 25% of the
total new business is expected to come from new
products, the threshold for existing staff will be 25%
x the senior consultant threshold. This will be
adjusted annually when targets are established. Except
that for the period up to the first formal review of
commission, this percentage will not exceed 50% of
Senior Consultant Threshold".
3. 2. Management are now in breach of the 1986 Agreement, and
are attempting to abolish the commission earnings payable to
the four existing workers. The workers were assured that
their commission earnings on new products would increase in
line with the re-organisation of services. It is unreasonable
for management now to expect the four workers to accept less
commission than that which they have been guaranteed.
3. 3. Salaries and commission arrangements are not out of
line with those of competitors. In many cases competitors
have better commission schemes available to their consultants.
The four consultants concerned with the dispute would not have
accepted the 1986 agreement if there had been any hint that
the Company would use it to reduce their remuneration package.
COMPANY'S ARGUMENTS:
4. 1. The Company proposed the 1986 agreement (Paragraph 13.2)
as a temporary concession to existing consultants and agreed
it as a settling in period only. This was to assist the
consultants in adjusting to their new position and was made in
goodwill by the Company. The agreed intended purpose of the
review was to bring the existing consultants commission and
production bonus rates into line with those of new
consultants.
2. Consultants are selling new style "Union linked"
products. These are a new market product for the Company.
Prior to 1986 the Company was uncommercially paying bonuses to
sales personnel before any quota had been reached. In Royal
Life Ireland this quota is called "Threshold". Threshold is
defined as the point where the costs of putting a worker on
the road are covered and any business sold in excess attracts
commission. It was agreed at the time that for the existing
consultants (i.e. those transferring from Law Union & Rock
Insurance Company), commission earnings would commence on
attainment of 50% of the threshold. Existing consultants
should now have the same threshold and commission arrangements
as the other sales consultants (recruited since October, 1986)
i.e. their commission earnings should commence on attainment
of 100% threshold.
3. It is inequitable and unreasonable to have consultants
(those recruited since 1986) operating a commerically viable
package and being unfairly disadvantaged by the uneconomic
package arrangements for the four existing consultants who are
concerned with the dispute. The arrangement can have a
demotivating effect and can be seen as unfair advantageous
terms being operated in respect of some workers.
4. The maintenance and annual review for the last three
years of the basic salaries of the four existing consultants
has provided more than market protection to their remuneration
package. Management gave prior notice within the 1986
agreement of the 1990 business year review and no changes were
made over the three year period. For commercial reasons a
change is now overdue.
RECOMMENDATION:
5. Having considered the submissions and arguments made by the
parties, the Court is satisfied that paragraph 13.2 of the 1986
agreement (with the exception of the final sentence) should be the
basis on which commission will be paid to the claimants on a
red-circle basis.
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Signed on behalf of the Labour Court
Kevin Heffernan
9th April, 1990 ----------------
M.N./U.S. Chairman