Labour Court Database __________________________________________________________________________________ File Number: CD9145 Case Number: LCR13306 Section / Act: S67 Parties: BOART EUROPE LIMITED - and - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION |
Claim for an improvement in the pension scheme.
Recommendation:
5. The Court has considered the submissions made by the parties
and, having regard to the existing terms of the pension scheme,
does not consider that the amendment as sought by the Union is
warranted. The Court does not therefore recommend concession of
the Union's claim.
Division: Mr O'Connell Mr Brennan Mr Rorke
Text of Document__________________________________________________________________
CD9145 RECOMMENDATION NO. LCR13306
THE LABOUR COURT
INDUSTRIAL RELATIONS ACTS 1946 TO 1990
SECTION 67, INDUSTRIAL RELATIONS ACT 1946
PARTIES: BOART EUROPE LIMITED
(Represented by the Federation of Irish Employers)
AND
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
SUBJECT:
1. Claim for an improvement in the pension scheme.
BACKGROUND:
2. In 1979 the Company and the Union entered into negotiations
on the introduction of a contributory pension scheme. The new
scheme took account of the fact that bonus earnings were not
reflected in the definition of pensionable earnings. Since 1974
the Company has operated an incentive bonus scheme which is
performance related. Standard performance is at 100% which
equates to 36.6% of basic pay with a ceiling of 115% equating to
56.9% of basic pay. Standard performance (100%) was used as the
add-on to each worker's basic pay. The Union claims that
pensionable earnings should be increased to more adequately
reflect the fact that bonus earnings generally exceed the standard
level of 100%. The Union claims that the consistent average bonus
over many years is 115% and that this figure should be used in the
calculation of pensionable earnings. Management has rejected the
claim. No agreement was reached at local level discussions and
the issue was referred to the conciliation service of the Labour
Court on the 5th October, 1990. A conciliation conference was
held on the 23rd November, 1990 but no agreement was reached. The
dispute was referred to the Labour Court on the 15th January,
1991. A Court hearing was held in Limerick on the 14th May, 1991.
UNION'S ARGUMENTS:
3. 1. The scheme can be described in its overall terms as a
reasonable one; however, there is one glaring anomaly and it
relates to the amount of bonus calculated into the scheme to
determine final pension.
2. There are seven grades within the production area
ranging from top of grade pay scales of #157.29 at grade A to
#233.03 at Grade F. Production bonus above the 100% level is
calculated as follows:-
Bonus Percentage of basic pay
100% 35.6%
101% 37.02%
102% 38.45%
103% 39.87%
104% 41.3%
105% 42.72%
106% 44.14%
107% 45.57%
108% 46.99%
109% 48.42%
110% 49.84%
111% 51.26%
112% 52.69%
113% 54.11%
114% 55.54%
115% 59.96%
3. As can be seen from the above table the difference between
the bottom and top point is 24.36%. At top of grade A (#157.29)
100% equals #56.00, 115% bonus would be #89.59. At grade F
(#233.03) 100% equals #82.96, 115% bonus would be #132.73. The
production bonus forms a significant part of workers' earnings and
as the consistent average bonus for a sustained number of years
has been at 115% (56.96% of basic pay), therefore, it is
reasonable that it should be reflected in final pension
calculations.
COMPANY'S ARGUMENTS:
4. 1. The Company has had an actuarial assessment of the
additional liability which would be incurred if the maximum
bonus of 115% were incorporated, based on earnings as at 1st
January, 1991 (does not take account of 4% increase from 1st
February, 1991). Should the Union's claim be upheld, an
immediate injection of #321,000 would need to be invested
in the Pension Fund to meet the additional past service
liability arising. In addition, the liability in respect of
future service would amount to #459,000 in respect of the
claimants involved. Furthermore, should an anticipated
knock-on claim from staff for inclusion of their annual bonus
be granted an additional immediate investment of #423,000
would be required, The total immediate contribution into the
Pension Fund to maintain the discontinuance basis of funding
would therefore be #744,000. The liability for future
service in relation to the inclusion of the staff bonus would
be #370,000. An additional cost would also have to be met by
the Company as the life cover would of necessity also
increase. The actuary calculates that the present value of
the total liability for all members which would be incurred
by the change to pensionable earnings definitions is equal to
#1,783,000.
2. The Programme for Economic and Social Progress states
under Clause 4 that Unions are not precluded by Clause 3 from
making claims for the introduction of a pension scheme where
none exists. Since Boart already has a pension scheme and
this claim is of a cost-increasing nature, it is disallowed
under point 5 - stabilisation. It was also disallowed under
the prior Programme for National Recovery.
3. In any survey on Pension Schemes which the Company has
participated in, the Pension Fund has always been found to
come out in the upper quartile of "best" Schemes. A single
Pension Fund operates for all workers. The annual bonus paid
to "Staff" employees is excluded for pension purposes.
4. The Company's trading position has deteriorated
significantly since mid-1990 because of a severe worldwide
recession. Forecasts for 1991 indicate there will be no
improvement in this position. The Company has had to effect
a cost-cutting programme, involving early retirement of
workers, redundancies and non-replacement of workers who have
left.
RECOMMENDATION:
5. The Court has considered the submissions made by the parties
and, having regard to the existing terms of the pension scheme,
does not consider that the amendment as sought by the Union is
warranted. The Court does not therefore recommend concession of
the Union's claim.
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Signed on behalf of the Labour Court
5th June, 1991 John O'Connell
T.O'D / M.O'C. _______________
Deputy Chairman