FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : GUINNESS IRELAND GROUP LTD - AND - GUINNESS STAFF ASSOCIATION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Pierce Worker Member: Mr Rorke |
1. Improvements in pension scheme in relation to abatement.
BACKGROUND:
2. The dispute concerns the Union's claim for improvements in the Guinness Ireland Group pension scheme. The claim covers five issues:-
(i) Improvements in the pension scheme for staff who joined the Company prior to 1974.
(ii) Improvement in spouses' pensions.
(iii) Improvements in the pension arrangements for staff employed since 1986.
(iv) Improvements in the pension in relation to the Company's practice of discounting the employee's PRSI contributions.
(v) Improvements in the calculation of pension for staff who have been or will be made redundant.
The matter was the subject of a conciliation conference held under the auspices of the Labour Relations Commission. As agreement could not be reached the dispute was referred to the Labour Court on the 29th of November, 1999, under Section 26 (1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on the 26th of January, 2000.
ISSUE 1
The Union is seeking that staff who joined the pension scheme prior to 1974, have abatement linked to service from 1974 only.
The Company abates pension entitlement by up to the full amount of the State Old Age Pension for a single person.
UNION'S ARGUMENTS:
3. 1. There are currently a small number of employees who joined the Company prior to 1974 and will be unfairly treated by the Company when they retire.
2. Employees who joined the Company prior to 1974 are disadvantaged because the Company only introduced pension abatement for most staff in 1974.
3. The Company is unfairly treating staff by abating their pension, including those years when pension was not subject to abatement. It is the Union's view that, if there is to be abatement, it should only apply from 1974. Guinness are out of line with industry generally on this matter.
COMPANY'S ARGUMENTS:
4. 1. Until April, 1974, all personnel except staff with earnings above a specified limit were compulsorily insured under the State Social Welfare System and qualified for a range of benefits including the State Old Age Pension. After April, 1974 all personnel were included in the State social welfare system regardless of pay levels.
2. Abatement of pension has been a feature of the pension scheme since 1948, when it was first structured as a funded pension scheme. Pre-1974 staff are treated exactly the same as post 1974 staff for the purposes of calculating pension and abatement.
3. When an employee of the Company becomes entitled to a State Old Age Pension, regardless of status or contribution record, then the rules of the Guinness scheme provide for abatement of the pension at the single rate of State pension where pensionable service is 40 years and pro rata for shorter service.
4. Some staff employed before 1974 and who retired before or shortly after that date and who do not have entitlement to a State old age pension are not subject to abatement.
ISSUE 2
The Union is seeking that abatement should not impact on spouses' pensions and/or that the spouses' pension entitlements be increased from 50% to 66.67% of the employee's pension.
UNION'S ARGUMENTS
5. 1. Employees are led to understand that, in the event of death, their spouse/partner receives half of their pension. This is not the position due to abatement, which is at the level of the State old age pension and is replaced by a widow's pension which is approximately £12 per week less.
2. Main Board members have a spouses' pension arrangement of two-thirds of pension. It is the Union's view that either the Company increase the 50% to two-thirds or cease the abatement or preferably both. The least that the Company should do is to increase the spouses' pension by £12 per week to rectify the anomaly between the State pension rate and that of the dependants' widows' pension.
COMPANY'S ARGUMENTS
6. 1. The methods of calculation of spouses' pension is identical to that used in pension schemes generally, where the State pension is integrated with the scheme pension. The spouse would be entitled to the State widow(er)'s pension and when combined with the Guinness spouse pension, total income would be more than 50% of the member's pension income for employee and spouse when alive.
2. The Union has made reference to the arrangement for the Diageo main board members where the spouse receives 66.67% of pension on death of the scheme member. The Company wishes to state that this arrangement is part of the benefits package for the UK based main board of directors of Diageo PLC.
3. The cost of improving this element of the scheme would be significant, e.g. to increase spouses' pension from 50% to 66.67% would result in significant cost increase:
(i) Annual contributions for future service would increase by circa £500,000.
(ii) Capital cost of past service for existing employees is estimated at £10.1 million.
(iii) Capital cost of applying the change to spouses of existing pensioners is estimated at an additional £27 million.
(iv) If extended to existing spouses' pensions the capital cost is estimated at an additional £15 million.
ISSUE 3
The Union is seeking that staff who are contributory members of the pension scheme i.e. those employees who commenced employment since January, 1987, should get some recognition for their pension contributions and abatement should be reduced proportionately.
UNION'S ARGUMENTS
7. 1. It is unreasonable for employees to make a significant financial contribution and then be abated fully. There should be some recognition by the Company of their contributions and abatement should be reduced proportionately. Another unfair element is that these employees are abated earlier than the non-contributory staff.
2. Non-contributory staff are abated at age 66. Contributory staff, those employed after 1987, are abated one year earlier at age 65 and up to 16 years earlier if they retire during the current re-organisation plan.
3. If the Court decides to make no significant change to the pension scheme then the least it should recommend is to apply the same conditions to contributory staff that currently apply to non-contributory i.e. abatement at age 66.
COMPANY'S ARGUMENTS
8. 1. It has been a condition of employment for staff employed since January, 1987, that they contribute to the cost of providing pensions and that is reflected in employment contracts and pension booklets. It is standard practice in the majority of contributory pension schemes to abate for State Old Age Pension. To eliminate abatement for post 1987 personnel with regard to future service would increase the Company's contribution rate by 2% costing circa £300,000 per annum. The Company, therefore, rejects this element of the claim.
ISSUE 4
The Union is seeking improvements in pension in relation to the Company's practice of discounting the employee's PRSI contributions.
UNION'S ARGUMENTS
9. 1. The Company pays 52% and the employee pays 48% of PRSI contributions. This payment provides the basis for the Old Age Pension for the employee and is the amount abated by the Company. It is unreasonable for the Company to recover the entire 100% when it only contributes 52%.
2. The Company should reduce the amount abated to take into account the employee's contribution of 48%.
3. The position is exacerbated by the fact that the Company multiply the old age pension by 1.5 times and then abate two-thirds of the figure. This is out of line with the Guinness UK scheme, where only two-thirds of the State Pension is taken back.
COMPANY'S ARGUMENTS
10. 1. This element of the claim is without basis. The level of contributions to the State Social Welfare Scheme made by the employee is not a factor taken into account by the Company when calculating pension. Abatement applies when the individual is entitled to a State Old Age Pension regardless of his/her contribution record.
ISSUE 5
The Union is seeking improvement in the calculation of pension for staff who retire early under the various re-organisation programmes. An element of these packages has been a credit of additional years of service for pension purposes.
UNION'S ARGUMENTS
11. 1. Staff who retire early under the current productivity plan which is similar to the situation in the past will suffer unreasonably in relation to pension. Someone retiring at age 55 will eventually be abated based upon a calculation that takes into consideration the years from age 55 to 65 even though that person could be paying PRSI elsewhere or indeed not at all.
2. It is unreasonable that the Company seeks to recover PRSI contributions for a period when the individual is not working in the Company and indeed may be working elsewhere. In those circumstances, Guinness are recovering PRSI contributions made by another Company.
3. Guinness has unilaterally introduced this change to the scheme in recent years. In the past it has not used the above arrangement for some staff. For example staff who retired early during the Development Plan (1972-1977), were not abated for the period after they retired from the Company.
COMPANY'S ARGUMENTS
12.1.The Union is claiming that these individuals are suffering unreasonably in relation to pensions. This is not the situation and the claim is based on error. Regardless of whether an individual is retiring under a redundancy package or not, the key factor determining the level of abatement is years of pensionable service. If an individual's pensionable service is 40 years, then irrespective of any years of service credited, the level of abatement is the amount of the State Old Age Pension.
2. To do otherwise would be unfair, as it would result in the pension of individuals, all of whose pensionable service was worked being less than those with identical pay and service, part of which was granted under a redundancy scheme.
3. Personnel retiring under redundancy packages are treated generously insofar as pension benefits are concerned. The Company argues that it is consistent in its approach to this issue in that the temporary supplement which is payable until the individual pensioner qualifies for the State Old Age Pension is calculated by reference to all pensionable service i.e. actual service plus any years credited for redundancy or other reasons.
UNION'S POSITION
The Guinness Staff Union is requesting the Court to recommend that:-
1. Guinness should discount any service before 1974 for abatement purposes.
2. Guinness should improve the spouses' pension by either increasing the percentage, reducing the abatement, preferably both or making good the £12 a week widow's shortfall.
3. Guinness should abolish or reduce the abatement for staff employed after 1987 to take account of the fact that the scheme is now a contributory scheme. Failing that, Guinness should apply the same arrangement to contributory staff as to non-contributory staff.
4. Guinness should reduce the abatement to take account of the fact that it only pays 52% of PRSI compared to the employee who pays 48%. Failing that, Guinness should apply the same abatement for this group of staff as they do for staff in the Guinness UK Pension Scheme.
5. Guinness should discount those years after a member of staff has retired early.
COMPANY'S POSITION
1. The Company believes that this claim is not valid under Clause 4 of Partnership 2000 (P2000). The Guinness Ireland Group (GIG) pension scheme has a generous package of benefits which compares favourably with comparable industries. Therefore, it is not "substantially out of line with appropriate standards in comparable employments". The Union's claim is outside the scope of what was intended in the agreement. Furthermore, the non-pension benefits available to employees (medical and beer) are also significant and should be taken into account.
2. In 1999 the Company was the subject of two Labour Court Recommendations namely, LCR 16212 and LCR 16245. Both cases were taken under Clause 4 of P2000. In the Recommendations issued, the Labour Court found that the Guinness Pension Scheme was not out of line with comparable employments.
3. When the Company was negotiating P 2000 with the GSU (and other Trade Unions), in 1995, the issue of pension improvements including the elimination of abatement was raised. The claim regarding abatement was rejected by the Company and that position was accepted albeit reluctantly by the GSU. The Company feels that the claim should not therefore be raised within the lifetime of P2000. As part of the negotiations of P2000, a guarantee was introduced from January 1st, 1995, when death occurred within five years of commencement of pension. The Company agreed that a lump sum would be payable to the spouse representing the difference (for the balance of the 5 year period) between the actual long term pension payable to the member and the spouse pension (if any) payable on the member's death.
4. The Court should be aware that Guinness staff pensioners have for a number of years sought the elimination of abatement. While this claim is being taken on behalf of serving staff, the Company believes that any concession made in respect of abatement would result in pensioners actively pursuing this issue. The capital cost of eliminating abatement for existing pensioners (including spouses) is estimated at £121 million.
RECOMMENDATION:
The Court has given serious consideration to the written and oral presentations made by both sides and also to the additional documentation submitted at the request of the Court.
In the context of these submissions the Court examined the details of the Guinness Pension Scheme, and concluded that the benefits of the scheme are not out of line with the benefits provided by comparable employments. Therefore, the Court does not recommend concession of the Union's claims.
The Union allege that an anomaly exists in the scheme in relation to the Widow's pension. On this point, the Court recommends that the parties should meet and discuss the claim to clear up any misunderstanding which may exist.
Signed on behalf of the Labour Court
Caroline Jenkinson
29th February, 2000.______________________
FB/BCDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Fran Brennan, Court Secretary.