FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : NORWICH UNION - AND - MANUFACTURING, SCIENCE, FINANCE DIVISION : Chairman: Mr Duffy Employer Member: Mr Pierce Worker Member: Mr O'Neill |
1. Dispute concerning interpretation of payments made under the Performance Related Bonus Scheme.
BACKGROUND:
2. In 1994, Norwich Union were involved in the rationalising of the administrative and clerical grades. Included in this process was the substitution of a Performance Related Bonus payment for the then existing "Profit Share" bonus system. There is a separate application of the bonus structure to Grades 1-3 and Grades 4-8. The claim concerns workers in Grades 1-3
At that stage the Company indicated in broad terms what management intended the new bonus structure to look like but stated that much work required to be undertaken before the scheme would be formally launched. The Union maintains that it accepted the draft document provided by the Company at the time and this was the only document voted on and agreed to by workers.
In 1995, the Company paid an across the board 3% to all staff as an interim measure in respect of 1994. A further 2% applied in 1996. In 1997, staff in Norwich Union Life and Pensions were awarded bonus in accordance with the Company's interpretation of the scheme. Staff in the General Insurance Company received no payment due to poor business results. The system is based on variable payments from 15% (outstanding) to 0% for less than acceptable performance.
In 1998, all staff qualified and, because of significantly better business results the General Insurance Company was included and bonus payments were applied ranging from 15% to 5%.
The claim itself concerns staff in Grades 1-3 and relates to approximately 90 workers affected to a varying degree in 1996 and 150 in 1997. It is based on a different interpretation of the application of the formula which determines the amounts paid. The formula shows X% equalling to good/above average performance.
The structure then revolved around this as follows:-
(a) Bonus X plus 50% - Outstanding
(b) Bonus X - Good/Above Average Performance
(c) Bonus X minus 50% - Acceptable Performance
(d) Bonus 0% - Less than acceptable performance
The Union's position in effect moves the X to acceptable performance and in consequence increasing the bonus award through the categories. The Company has rejected the Union's interpretation. The dispute was referred to the Labour Relations Commission and conciliation conferences were held on the 27th of August and the 1st of September, 1998. Agreement was not reached. The dispute was referred to the Labour Court by the Labour Relations Commission on the 22nd of March, 1999. A Court hearing was held on the 10th of June, 1999.
UNION'S ARGUMENTS:
3. 1. The Company's application of the bonus in 1997 (for the 1996 bonus) awarded staff whose performance was "good or above average" a fixed bonus of 3%. Workers rated acceptable got 50% of the bonus - 1.5% and workers rated outstanding got bonus + 50% - 4.5%. This application had the effect of a re-configuration of the original proposals (agreed in 1994). It introduced a further tier without consultation or the Union's agreement. The correct application should have been as follows:-
3% - Meets all job requirements
4.5% - Exceeds job requirements
1.5% - Does not meet job requirements
0% - Unsatisfactory
In 1997 no bonus payments applied to the General Insurance Company but to Life and Pension and Norwich Insurance Building Society only. The Company's approach to the bonus application in 1998 was also at variance with the 1994 agreement. In that the 'standard' bonus should have been 10% and the + or - 50% depending on individual performance should have been applied as follows:-
10% - Meets all job requirements
15% - Exceeds job requirements
5% - Does not meet job requirements
0% - Unsatisfactory
2. The new remuneration structure agreed in 1994 has as an integral part, the bonus payments structure. This is what was agreed and voted on by staff. The 1994 rationalisation resulted in reductions in staff numbers and significant changes to work practices. The Company received full co-operation from staff in this regard. The fact that the Company has emerged through these difficulties to healthy profit is in large part attributed to this co-operation. The expectation, in return, from staff was that the 'significant cash payments each year' proposed by the Company would become a reality.
3. However, the subsequent manipulation or re-configuration of the bonus structure, post the 1994 agreement, has raised issues of trust and credibility with regard to the 1994 agreement. If the Company believes that it needs to alter this configuration then it can do so within the procedures agreement and negotiate with the Union changes required for future years. If the bonus structure, as an integral part of the remuneration system, can be altered unilaterally by management, then staff argue that the whole remuneration structure should be re-negotiated particularly in light of the buoyant economy and tight labour market in financial services.
4. The Union believes that the Company should apply the '1994' bonus structure for 1996 and 1997 and it would then be prepared to enter into discussions on reviewing the bonus structure for future years.
COMPANY'S ARGUMENTS:
4. 1. In 1996, a 2% bonus was paid to all employees in Grades 1-3 because systems were not fully in place. In 1997, 113 staff were paid bonuses ranging from 4.5% to 1.5%. Only two workers did not receive bonus. In 1998, 121 workers received bonuses ranging from 15% to 5%. In 1999, 148 workers received bonuses ranging from 15% to 1.5%. Company performance in 1997 restricted the bonus actually paid to a range of 0 - 4.5%. 1998 and 1999 results justified threefold payment to the full range (0 - 15%). It is evident, therefore, that the available bonus for each of the bonus years had been paid out in full. A very equitable bonus distribution has been effected with this formula. The Company has not varied the practice.
2. The Union is endeavouring to have workers who were awarded a bonus for an acceptable level of performance to be uplifted to that of "Good/Above Average" level of performance. Were the Union's claim to succeed it would mean a complete revision of all bonus ratings, and the Company would have to re-think its policy on bonus payments generally to reduce its exposure to such claims.
3. The Company has paid out all the money from its profits that it had allocated for bonus in the years concerned. Were the Company obliged to revisit the bonus payouts there could only be consequences for current staff in future years vis a vis large numbers of workers who received bonuses in the period 1996-1999 and who left the Company.
4. The Company recently responded to a Union request to examine the performance ratings which would have applied to workers in the General Insurance Company (in which the complaint had arisen). A committee examined the performance of all workers in grades 1-3 in this Company in 1997 against the initial draft definitions and it found that there could have been grounds to alter the performance bonus of two staff members only. The Company offered to amend upwards the bonuses of the two workers concerned. The Union refused the offer.
5. The performance related bonus scheme operated by the Company has provided very generous bonuses to workers, particularly in the last two years. Management hopes to continue monitoring and developing the Performance Management System. The Company is one of the few within the Insurance sector to have such a scheme in place and recently attached an Employee Share Ownership Scheme to make it tax efficient and even more beneficial to workers. The Company sought and received the approval of the Revenue Commissioners for the above Share Scheme. Concession of the Union's claim would only damage what is a very progressive scheme already in place.
RECOMMENDATION:
Having considered the submissions of the parties the Court accepts that the circular issued by the Company dated the 22nd of June, 1994 was capable of bearing the meaning ascribed to it by the Union. The Company must, therefore, accept the main responsibility for the resultant misunderstanding as to how the performance bonus scheme was to apply.
In these circumstances the Court recommends that the parties should now carry out a review of the scheme and agree the terms of its application for future years. In light of the outcome of this review any anomalies identified in its past application should be corrected.
The Court further recommends that this review should be completed within two months of the date of this recommendation. Any matters not agreed between the parties should be referred back to the Court for final recommendation.
Signed on behalf of the Labour Court
Kevin Duffy
30th June, 1999______________________
T.O'D./D.T.Deputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Tom O'Dea, Court Secretary.