Labour Court Database __________________________________________________________________________________ File Number: CD90266 Case Number: LCR12941 Section / Act: S67 Parties: ERICTRON LIMITED - and - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION |
Dispute concerning the introduction of a new system of payments and conditions of employment including 39 hour week and pension scheme.
Recommendation:
7. The Court has considered the submissions made by the parties.
On the underlying issue of the payments system intended to replace
the incentive scheme when the type of work changes the Court is of
the opinion, against an existing background which indicates that
in the present fixed bonus scheme average earnings are at 102% and
under the incentive bonus system average earnings are calculated
to be 111%, that the eventual figure of 107%, as a fixed rate, as
proposed in the I.R.O. terms for settlement, seems reasonable.
The Court therefore recommends the terms proposed subject to the
following amendments:-
106% of new fixed rate - with effect from date of acceptance of
this recommendation.
Compensation for future losses of earnings to be paid to the
amount of 18 months loss.
The reduction in the working week as provided for in the Programme
for National Recovery to take effect from 1st January, 1991
subject to acceptance of the overall terms of this recommendation.
All other elements of the I.R.O.'s proposals to stand.
However on the question of sick pay and other benefits the Court
is of the opinion that as a matter of good industrial relations,
the Company should plan to adjust the benefits to reflect the
changed nature of the payments system, if necessary one at a time,
over a period of time in the medium term future.
The Court so recommends.
Division: Mr O'Connell Mr McHenry Mr Walsh
Text of Document__________________________________________________________________
CD90266 RECOMMENDATION NO. LCR12941
INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
SECTION 67
PARTIES: ERICTRON LIMITED
(REPRESENTED BY THE FEDERATION OF IRISH EMPLOYERS)
and
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
SUBJECT:
1. Dispute concerning the introduction of a new system of
payments and conditions of employment including 39 hour week and
pension scheme.
BACKGROUND:
2. Prior to 1987 the Company was the manufacturing division of
L.M. Ericsson Limited and manufactured electro-mechanical
telephone equipment for the parent company. The Company operates
two systems of payment for production operatives. The first
system is an individual incentive based payment system for the
above mentioned product line whereby direct operators are paid a
guaranteed minimum rate (G.M.R.) plus a bonus for work produced.
Payments under this system (known as pay scale A2) range from a
minimum of #122.39 per week at 75% performance to a maximum of
#195.82 per week at 120% performance. In 1984/1985 it became
apparent that the supply of work from the parent Company would
progressively decrease due to changes in technology and
automation. To offset the reduction in workload local management
set a strategy to acquire new sub-contract work from companies
other than the parent Company. It was recognised at that time
that the existing individual incentive payments system would
result in a loss of earnings for the workers concerned. It was
therefore agreed to introduce a group based payment system for the
new product lines with payments ranging from a minimum of 90% to a
maximum of 110% of pay scale A2. Both systems are now in
operation together with G.M.R.'s for incidents such as, waiting
time, sick pay, maternity pay etc. The Company also operates an
agreement for compensation for loss earnings for workers
transferred from one production line to another.
3. It is likely that the old product lines will cease in 1992 and
therefore payments under the individual incentive based payment
system will be affected. The group based payment system has
proved unsatisfactory and there is general agreement between the
parties that a new fixed rate system of payment should be
introduced for those currently on the group based payment system,
and for those on the individual system when the old product lines
come to an end. The Union claims a fixed rate of 110% on the A2
scale with all the relevant conditions of employment payable at
that figure. The Company rejected the claim and as no agreement
was reached at local level the matter was referred on 9th
February, 1989 to the conciliation service of the Labour Court.
4. Conciliation conferences were held on 20th June, 1989, 22nd
February, 1990, 7th March, 1990 and 27th March, 1990 and the
Company made a final offer as a package, the individual elements
of which could be adjusted so long as the total effect of the
package remained the same:-
(1) (a) Basic rate of 104% on A2 scale from settlement date
in 1990.
(b) Basic rate of 105% on A2 scale from January, 1991.
(c) " " " 106% " " " " " 1992.
(2) No reduction in hours before expiry of Programme for
National Recovery (P.N.R.) re June, 1991.
(3) Sick Pay to remain at 75% on A2 scale.
(4) Maternity leave benefit payment to remain at 80% of
earnings as per the most recent P60.
(5) Compensation for loss of earnings as per existing
agreement.
(6) No consequential claims arising from settlement of the
dispute.
(7) The Company to match the Union's contribution to the
underfunding of the pension scheme.
(8) Christmas voucher to be one weeks basic pay.
The Union rejected this offer and agreement could not be reached
in relation to items (1), (2), (3), (4) and (5). Following
further negotiations the Industrial Relations Officer proposed
that item (1) should be amended as follows:-
(a) 105% from 1st April, 1990.
(b) 106% from 1st January, 1991.
(c) 107% from 1st January, 1992.
This proposal was rejected by the Union. As no agreement could be
reached the matter was referred on 25th May, 1990 to a full
hearing of the Labour Court which took place in Athlone on 26th
June, 1990.
UNION'S ARGUMENTS:
5. 1. The Union is satisfied that a fixed payment system should
be introduced. However the new system must take into account
its effect on the earnings of the two groups of workers on the
two different systems which are presently in operation.
Firstly, those on the individual incentive based payment
system will have their potential earnings reduced. Secondly,
those on the group incentive payment system who suffered a
potential loss of 10% when that system was introduced,
suffered a further loss as the commitment by the Company that
the workers could and would realise 110% was never realised.
The Union claim for a new fixed rate of 110% is modest and
realistic as:-
(a) it accepts a pronounced drop in the potential
earnings ceiling of 10%,
(b) the workers earnings would still be less than
earnings in the electronic, engineering, and
manufacturing industries.
2. Workers who are presently on a fixed rate of pay obtain
all their fringe benefits at that fixed rate. The two groups
of workers on the two incentive payment systems obtain all
their fringe benefits at pro rata rates. The Company's
proposals differentiate between the proposed new fixed rate
and other conditions of employment. This is unacceptable to
the Union as it would institutionalise a gross disparity
between workers employed in the same Company and would mean
that the workers concerned would compare very unfavourably in
terms of the benefits enjoyed by comparable workers in the
region and in the industry. The new fixed rate should be 110%
with all the relevant conditions of employment payable at that
figure.
3. In relation to the funding of pension scheme, the Union
has agreed to share the cost of the proposed increase in
contributions. The Company is refusing to implement the
required increase in funding of the pension scheme unless it
is part of an overall package. This is in breach of the
original agreement that the pension scheme should be funded
50% by the Union and 50% by the Company.
4. The Company has included issues in an overall package
although they have no intrinsic relationship with each other.
Thus it proposed that the 39 hour week be effective from June,
1991 i.e. the expiry date for the P.N.R. This proposal is
unfair as the Company is delaying the implementation of the 39
hour week for other workers not involved in the dispute. Also
the P.N.R. provided for modest wage increases and the workers
anticipated the 39 hour week would be introduced during the
P.N.R. i.e. January, 1990.
COMPANY'S ARGUMENTS:
6. 1. With the progressive decrease in demand for the old
product lines the Company will gradually change in business
direction. By 1992 it will be operating in a new environment
because of the rapid change in technology and the business
reality that customers expect price reductions over a period
of time and not price increases for the same product. The
Company is pursuing a strategy of survival for a new and
growing Company and cannot afford to add additional costs to
an already excessive cost structure.
2. It is the Company's intention to maintain average earnings
for incentive workers. The only real method of doing this is
that all direct workers should be paid a fixed rate i.e. a
fixed G.M.R. with a fixed bonus being paid on a weekly basis.
The Company's offer in relation to a fixed rate was made as
part of a package in order to keep costs from becoming
excessive. Any additional costs in relation to a fixed rate
cannot be sustained as this will impact on the already
significant costs the Company has to bear and will effect the
long term viability of the Company.
3. Bearing in mind the Company's aim to maintain average
earnings it is proposed to leave all incentive workers,
currently on the old product lines, on that incentive scheme
until those products no longer exist in January, 1992. All
other direct workers will move to the new fixed rate from the
date of settlement of the dispute.
4. The Company recognises that while the majority of direct
workers will benefit by changing to a fixed rate system, a
number of workers will have their earning potential affected.
This is the inevitable consequence of an 8/10 year old product
being no longer available to generate potential higher bonus
for some workers. There will be individual losers (who will
be compensated for their loss) but taken as a group the
workforce will gain as a whole under the new system.
5. In relation to the introduction of a 39 hour week under
the P.N.R. the Company's offer, in the light of other offers,
was to introduce it on expiry of the P.N.R. as applied to the
Company i.e. end of May, 1991. To concede the Union claim for
immediate implementation of the 39 hour week and a fixed rate
of 110% would put the future of the Company at risk.
6. In relation to the Company's pension scheme the Company is
prepared to contribute to the underfunding of the scheme on a
50/50 basis with the Union as part of the package.
RECOMMENDATION:
7. The Court has considered the submissions made by the parties.
On the underlying issue of the payments system intended to replace
the incentive scheme when the type of work changes the Court is of
the opinion, against an existing background which indicates that
in the present fixed bonus scheme average earnings are at 102% and
under the incentive bonus system average earnings are calculated
to be 111%, that the eventual figure of 107%, as a fixed rate, as
proposed in the I.R.O. terms for settlement, seems reasonable.
The Court therefore recommends the terms proposed subject to the
following amendments:-
106% of new fixed rate - with effect from date of acceptance of
this recommendation.
Compensation for future losses of earnings to be paid to the
amount of 18 months loss.
The reduction in the working week as provided for in the Programme
for National Recovery to take effect from 1st January, 1991
subject to acceptance of the overall terms of this recommendation.
All other elements of the I.R.O.'s proposals to stand.
However on the question of sick pay and other benefits the Court
is of the opinion that as a matter of good industrial relations,
the Company should plan to adjust the benefits to reflect the
changed nature of the payments system, if necessary one at a time,
over a period of time in the medium term future.
The Court so recommends.
~
Signed on behalf of the Labour Court
John O'Connell
_______________________
10th July, 1990. Deputy Chairman
A.S./J.C.