FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : LOCTITE IRELAND LIMITED (REPRESENTED BY THE IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - MANUFACTURING, SCIENCE, FINANCE SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION TECHNICAL, ENGINEERING AND ELECTRICAL UNION DIVISION : Chairman: Mr Flood Employer Member: Mr Pierce Worker Member: Ms Ni Mhurchu |
1. Improved pension entitlements.
BACKGROUND:
2. The issue before the Court concerns the Unions' claim for improvements to the Company's main pension scheme which is a non-contributory defined benefit scheme. In 1995, during negotiations on a Company/Union Agreement, the M.S.F. Union initially sought improvements to the scheme. In Labour Court recommendation LCR14815 the Court recommended that "the parties should agree to set up a small working party to examine and cost the improvements sought by the Union". This did not happen and in July, 1995 an Actuarial Valuation found that the scheme was marginally under-funded. However, by 1998 the fund had more than doubled in value and had a surplus of 52%.
In March, 1999, the Unions became aware that a new Senior Executive Pension Plan had commenced in April, 1998 and that £4.3 million had been transferred from the main scheme to the new scheme. As there was a surplus in the main pension scheme the Company had also reduced its contribution to the main scheme from 11.1% to 4.0% . The Unions submitted a claim for improvements to the main pension scheme and the issue was the subject of several conciliation conferences under the auspices of the Labour Relations Commission. As agreement was not possible, the Unions requested referral to the Labour Court in accordance with Section 26(1) of the Industrial Relations Act, 1990. The dispute was referred to the Court on the 18th of April, 2000, and a Labour Court hearing took place on the 5th of July, 2000, the earliest date suitable to the parties.
UNIONS' ARGUMENTS:
3. 1. In March, 1999, the Unions discovered that the Company had secretly transferred £4.3 million to a new pension scheme for 15 senior executives. The Unions had not been consulted. The Company had also reduced its contribution to the main pension scheme from 11.1% to 4.0% to eliminate the surplus in the main scheme rather than to improve benefits. In contrast, the rate of contribution to the Senior Executive Scheme is 53.5% per annum. In addition, a further lump sum of £295,000 was transferred from the main scheme to the new Executive Scheme without explanation.
2. The two Company trustees who are members of the new scheme have refused to step down from their positions on the Board of Trustees of the main pension scheme. They should be replaced by non-members of the Senior Executive Scheme as there is clearly a conflict of interest.
3. The Unions are seeking the abolition of integration as it discriminates against the lower paid. Currently the level of integration represents an offset of 1.5 times the Social Welfare pension for a single person. An individual with full pensionable service earning £200 per week currently suffers a reduction of 66.8% of their company pension. However, an individual earning £1500 per week has a reduction of only 8.9% of their company pension.
4. The Unions are also seeking a reduction in the normal retirement age from 65 years to 60 years and a reduction in the early retirement age to 50 years of age. This is the general trend in industry, particularly in the chemical industry where the working environment is considered hazardous. The death-in-service benefit should also be increased to four times' annual salary. This would help to compensate the families of the deceased at a minimal cost.
5. The Company should make a commitment to maintain an agreed minimum rate of funding and to use any surplus for further improvements to the main pension scheme. The immediate introduction of the entire package of improvements sought by the Unions would cost £5.5 million with an ongoing servicing cost of £356,000 per annum. As the current surplus is estimated at £8.8 million the Unions' demands are quite reasonable.
COMPANY'S ARGUMENTS:
4. 1. The Unions' claim arose due to the revelation of the setting up of the Senior Executive Pension Plan. However, the creation of the new plan and the subsequent transfer of assets in no way diminished the benefit entitlements of any member of the main pension scheme.
2. Following conciliation the Company offered to make enhancements to the main pension scheme at a considerable additional cost to the Company. This places the scheme in the upper quartile ranking of such schemes in similar companies. The benefit improvements have given rise to an actual increase of between 20% and 31% in SIPTU employees' pensions; an actual increase of between 10% and 26% for MSF employees and 12% for TEEU employees.
3. The Company has responded to the Unions' original claim as follows:-
Integration: The single persons social welfare offset factor will be reduced from 1.5 times to 1.0 times over a six year period.
Retirement age: Normal retirement age will remain at 65 years of age. Early retirement age will be reduced from 55 years to 50 years of age. The overall vesting factors have been improved by one per cent.
Death-in-service benefit: This has been improved from 3 times to 3.5 times salary at time of death.
Pension increases after retirement: This has commenced with a 0.75% increase for current pensioners.
The Company regards these improvements as both substantial and reasonable and requests the Court to find accordingly.
RECOMMENDATION:
The background to this claim lies in the Company decision to split the Pension Scheme, by creating a new Senior Executive Pension Scheme, without informing the employees or their representatives.
This was done as a means of improving the Senior Executive package and has been a very emotive issue within the workforce.
However, the Court in examining the specific claims before it, is satisfied that the Employee Pension Scheme is not substantially out of line with comparable employments and, therefore, does not recommend concession of the Unions' claims. The Court notes that the Company has made some improvements to the existing scheme.
The Court is concerned at the background to this case. While the pension issues arising from the split of the scheme are not before the Court, and are being considered elsewhere, it is a matter of serious concern that the employees only found out about the split in the scheme when reading the Company Annual Report.
This situation and other related matters have resulted in a position where there now exists a complete lack of trust between the employees and the management and this should be addressed as a matter of urgency.
Signed on behalf of the Labour Court
Finbarr Flood
27th July, 2000______________________
D.G./B.C.Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Dympna Greene, Court Secretary.