FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : FULFLEX INTERNATIONAL (REPRESENTED BY THE IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Mr Flood Employer Member: Mr Pierce Worker Member: Ms Ni Mhurchu |
1. Indexation of Pension Scheme.
BACKGROUND:
2. Fulflex International has been operating in Limerick for over 28 years. It manufactures rubber elastic products, primarily for the European market and employs approximately 150 people.
The Company operates two pension schemes, a scheme for hourly paid workers and a scheme for members of staff. The scheme for hourly paid employees is a defined benefit scheme of 66% of pensionable pay which is integrated with social welfare for which the employees make a contribution of 5% of pensionable salary. In addition, the scheme provides for a Death-in-Service Benefit of four times salary.
While both schemes are similar the staff scheme provides for Spouses' Pensions and is a non-contributory scheme.
The dispute before the Court concerns the Union's claim on behalf of 95 hourly paid employees for an improvement in the pension scheme by way of the introduction of a 3% annual indexation rather than a periodic review.
The Union argues that staff members have a substantial benefit over the workers concerned and that the Company's approach to the critical issue of pension benefit is discriminatory. Local level discussions failed to resolve the issue and the matter was
referred to the Labour Relations Commission. A conciliation conference took place on the 18th of February, 1998. As agreement could not be reached the dispute was referred to the Labour Court on the 4th of March, 1998 under Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place in Limerick on the 23rd of April, 1998.
UNION'S ARGUMENTS:
3. 1. The pension plan of the hourly paid employees is substantially out of line with a comparable pension scheme within the Company. Management refuse to acknowledge that its approach to pension benefit is selective and discriminatory.
2. Craftsmen and other staff up to and including senior management , enjoy a free pension plan. The claimants pay 5% of personable pay for an inferior pension. While the reduction occasioned by integration with social welfare is exactly the same in both schemes, management's pensionable pay is substantially higher than hourly paid staff, consequently their occupational pension will be considerably higher.
3. It is the Union's understanding that the Fulflex Pension Scheme is performing well and that pension funds in general have recorded good returns. Performance charts issued by Irish Pension Trust and Mercer Pensions Managers (details supplied to the Court) demonstrate how well these funds are performing. It is reported that in the first quarter of this year the funds continue to perform well, presenting an ideal opportunity for the Company to address the workers' claim.
4. The workers' claim is well founded. It is supported by surveys carried out by reputable organisations. The cost is not prohibitive, particularly when one considers the cost of 2.6% is advised by Irish Pension Trust.
COMPANY'S ARGUMENTS:
4. 1. Clause 4 of Partnership 2000 states: "having regard to the cost ... of pension schemes, negotiations on these matters shall be governed by the capacity of the enterprise to absorb the costs involved".
2. Employees at Fulflex enjoy excellent pay and conditions of employment. Any claim for additional increases in labour costs must take cognisance of the fact that employees are already at a comparatively high level of earnings and benefits.
3. The Company is coming under increasing competitive pressure, particularly from its major customer, which accounts for almost 60% of production at the Galvone plant. Customers have embarked on a programme of reducing elastic consumption to cut costs. Accordingly, the weight of elastic per diaper is only 42% of previous levels with consequent reduced volumes for the Galvone plant. Volumes are down 17% on 1996 levels and productivity is down significantly on 1996 levels. In addition, there is increasing low cost competition from the Far East with consequent downward pressure in prices.
4. The trend in the industry is a move away from elastic to lycra with consequent loss of volume for Fulflex. It should be noted that the Company's major customer has confirmed a move to lycra for all diaper production in the US from July, 1998, which will have a negative impact on Fulflex in the US. Developments in Europe are bound to follow likewise. Accordingly, in the light of increasing vigorous pressure on costs, the Limerick plant can ill-afford to exacerbate its already high cost base.
5. Clause 4 of Partnership 2000 is absolutely clear on the justification for pension improvement claims - the existing scheme must be "substantially out of line with appropriate standards in comparableemployments". This is not the case in this country where 65% of manual employees nationally are members of a pension scheme, Fulflex operates a 66% Defined Benefits Scheme, which is well in line if not above the best available. With regard to the Union's claim for indexation of
pensions, it is clear that comparable schemes do not provide for same. Indeed, an IBEC National Survey confirms that 74% of such schemes have no formal increasing provision. There is no basis for the Union's claim in the context of the criteria provided for in Clause 4.
6. Bearing in mind the provisions of Partnership 2000 and the competitive pressures on the Company, it respectfully requests that this claim be rejected.
RECOMMENDATION:
It would appear that due to the positions taken by both parties, little if any meaningful discussions have taken place on options available to fund an agreement on indexation of pensions, even to an agreed level.
The Union did indicate its willingness to explore all options including the employees contributing to minimise the Company contribution.
The Court having considered all the information supplied recommends that:-
A. the employees accept the Company's offer in relation to Spouses' Pensions
AND
B. the parties meet to explore whether a scheme to include index linked pensions even to an agreed minimum level, can be financed by the parties, in the future.
Signed on behalf of the Labour Court
Finbarr Flood
15th May, 1998______________________
F.B./D.T.Deputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Fran Brennan, Court Secretary.