LCR13810

Subject:
Dispute concerning the operation of a bonus scheme.

Recommendation:
5. The Court has considered the views of the parties and the
analysis of the scheme in operation.


Recognising that the scheme is a broad based scheme, and that
given the variable factors involved, there will be fluctuations in
the pay performance index achieved, it is the view of the Court
that the scheme as proposed by the Company should be implemented
for a period of 24 weeks (3x8 week cycle) on a trial basis.


The operation of the scheme should be jointly monitored and any
amendments necessary to the improvement of the scheme implemented
during this trial period.


For the period of the trial payment should be based on the
following:



1st eight weeks - Index achieved plus 3 points


2nd eight weeks - Index achieved plus 2 points.


3rd eight weeks - Index achieved plus 1 point.


The actual index achieved to count for pay purposes thereafter.


The Court so recommends.

Division: MrMcGrath Mr McHenry Mr Rorke

Text of Document__________________________________________________________________

CD92477 RECOMMENDATION NO. LCR13810

INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990


PARTIES: ARKLOW POTTERY LIMITED
(REPRESENTED BY THE FEDERATION OF IRISH EMPLOYERS)

and

SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION


SUBJECT:
1. Dispute concerning the operation of a bonus scheme.

BACKGROUND:
2. In 1986, a new group bonus scheme was introduced which
replaced the old individual scheme. The new scheme calculated a
plant-wide performance bonus index based on best quality ware
produced and recorded in the finished goods warehouse. The index
is calculated each week by taking the amount of finished 'bests'
and multiplying it by the relevant standard minute values. This
is then divided by the actual number of hours worked in the
factory and expressed as a percentage. The bonus is activated at
73% output of best quality. The Union claims that the 73%
standard is too high and should be set at 67% and that this would
enable workers to achieve reasonable earnings for their efforts.
The parties have held numerous meetings over the past number of
years on the operation of the scheme and could not agree on the
figures used in the calculation of the index. In 1990, the I.P.C.
was commissioned to carry out an extensive review of the scheme
and its report was published in December, 1990 (details supplied
to the Court). The Union contends that the I.P.C. report confirms
its claim that the workers are not being adequately rewarded for
effort. Management rejected the claim. The issue was referred to
the Labour Relations Commission on the 21st October, 1991.
Conciliation conferences were held on the 8th April and 10th July,
1992 but no agreement was reached. The dispute was referred to
the Labour Court by the Labour Relations Commission on the 17th
August, 1992. The Court investigated the dispute on the 9th
September, 1992. The hearing was adjourned to enable both the
Company's and Union's industrial engineers produce further
statistical data for the Court on the operation of the bonus
scheme. A further hearing was held on the 24th September, 1992.




UNION'S ARGUMENTS:
3. 1. Over the years the Union has pointed out serious
operational problems with the bonus scheme and the initial 4
week moving average was extended to 8 weeks in an attempt to
remove unacceptable fluctuations in payment levels. Quality
levels fluctuated by significant degrees. The Union
maintained that there was little control over production
planning, resulting in imbalances where high work content and
low work content were unevenly processed leading to "planned"
inefficiencies. The Company required increased quality levels
with a resulting drop in yield levels and a drop in bonus
levels. The Company's production charts for 1988 and 1989
indicated that the finished goods yield had been erratic over
the period. While the scheme was built on the assumption that
a finished goods yield of 73% was consistently achievable,
production statistics indicated that this level was not being
achieved. The Union's proposed figure of 67.8% is much more
realistic. Had the lower figure been used the index of
performance and bonus payments would have been higher from the
inception of the scheme.


2. The I.P.C. report highlighted the fact that the
productivity of the workers concerned had not been adequately
remunerated. The additional three points which the Company
added to the index proves the validity of the Union's claim.
The report also clearly identifies problems and makes
recommendations which must be taken into account by the
Company. The majority of the workforce have a basic weekly
wage of #117. A substantial percentage addition is necessary
to achieve a reasonable level of earnings.


COMPANY'S ARGUMENTS:
4. 1. The Company cannot accept the Union's proposal that
planned yields should be used in the calculation of the index
rather than the standard expected yields. It is normal
practice to use standard yields for bonus purposes. In 1989
the Company added 3 additional points to the index to take
account of various changes in the process i.e. paper
separation between the plates, and more rigorous biscuit
inspection. The Union claimed that this was an insufficient
adjustment and subsequently the I.P.C. report was
commissioned. The cost was borne by the Company. The report
clearly indicated that there was nothing fundamentally wrong
with the scheme and that it provided a reasonable return of
approximately 26.6% of basic pay.




2. The Company carried out its own study in 1991 and its
findings were in line with the I.P.C. report with some
increases and some decreases in values. The Company proposed
some changes including input values at two points i.e. biscuit
inspection and final product stage. Management believes this
would improve the index. The Company believes that the bonus
scheme is constituted fairly and the I.P.C. report confirms
this view. The real problem appears to be fluctuations in the
index on a weekly basis and the Company's proposal to amend
the scheme by inputting values at two points would address
this problem.


RECOMMENDATION:
5. The Court has considered the views of the parties and the
analysis of the scheme in operation.


Recognising that the scheme is a broad based scheme, and that
given the variable factors involved, there will be fluctuations in
the pay performance index achieved, it is the view of the Court
that the scheme as proposed by the Company should be implemented
for a period of 24 weeks (3x8 week cycle) on a trial basis.


The operation of the scheme should be jointly monitored and any
amendments necessary to the improvement of the scheme implemented
during this trial period.


For the period of the trial payment should be based on the
following:



1st eight weeks - Index achieved plus 3 points


2nd eight weeks - Index achieved plus 2 points.


3rd eight weeks - Index achieved plus 1 point.


The actual index achieved to count for pay purposes thereafter.


The Court so recommends.
~

Signed on behalf of the Labour Court

Tom McGrath
___________________
29th October, 1992. Deputy Chairman
T.O'D./J.C.

Note

Enquiries concerning this Recommendation should be addressed to
Mr. Tom O'Dea, Court Secretary.