FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 2004 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : PERMANENT TSB - AND - MANDATE AMALGAMATED TRANSPORT AND GENERAL WORKERS' UNION SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Doherty Worker Member: Mr Nash |
1. Discretionary Bonus.
BACKGROUND:
2. In April, 2001 TSB Bank was acquired by Irish Permanent plc with the intention of merging it with I.P. Prior to this in TSB discretionary Bonuses were paid to managers based on a review of performance against a number of factors including financial targets across a range of products, overall contribution to the branch profitability etc. There was no agreed basis on which bonuses would be paid as it was entirely at Management's discretion. The Bank's Chief Executive, in consultation with the Head of Branch Network determined the amount of bonus paid to each individual manager. Bonuses were typically in the range 0%-15%. Bonuses would vary from year to year depending on performance of the branch. In Irish Permanent a formalised Performance Related Pay system existed for Branch Managers which included a performance bonus in the range 0%-30%. Subsequent to the merger and completion of amalgamation of the branch network the Company decided that bonuses in respect of 2003 would be paid on the range 0%-30%. As a consequence some managers benefitted, some saw their bonus reduced and others did not receive a bonus payment. The Unions are claiming that the previous discretionary arrangement i.e. up to the period 2001 be maintained as an on-going option pending the negotiation of an accepted scheme. The Company rejected the claim..The dispute was referred to the Labour Relations Commission. A conciliation conference was held but agreement was not reached. The dispute was referred to the Labour Court on the 13th May, 2005 in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Court hearing was held on the 28th July, 2005.
UNIONS' ARGUMENTS:
3. 1. Workers have built up over many years an expectation in relation to TSB bonus scheme, based on the way in which it was operated and the fact that the benefits have been consistent. Management's unilateral change to the scheme in 2003 has had the effect, without discussion or consultation, of disadvantaging managers in that some received a reduced bonus and a number of managers did not receive any bonus. Managers were not warned that their bonus might be reduced or that they might not receive one. In effect Management sought to impose the former Irish Permanent bonus system onto managers resulting in substantial losses to a number of managers.The change in the bonus scheme also contravenes a commitment given in a letter to the Unions in July, 2002.
2. In the former TSB there was no formal link between the completion of the annual performance review and the awarding of a bonus payment. The decision as to the amount of the bonus to be paid was made in November of each year prior to completion of the performance review. During 2003 Management changed the methodology used to determine managers bonuses and did so in the absence of discussion or consultation with the Unions.
3. The matter has been the subject of conciliation during which Management proposed a new Pay Related Performance System which incorporates the new bonus scheme. During discussions the Company confirmed it would red circle existing managers wishing to remain on the old discretionary scheme but refused to elaborate further.
4. The Unions are seeking a recommendation from the Court that the earnings of managers in the year to March, 2003 (as paid in March 2004) be at least the equivalent to the earnings of the previous year taking into account the rate of inflation. Any shortfall in the earnings of any managers from the date of the introduction of the new bonus scheme be paid at 100% with immediate effect. Any manager who wishes to remain on the old scheme should receive a bonus not less than the average received in the years 2001, 2002 and 2003 ( after the payment of any shortfall) going forward.
That the parties should return to conciliation immediately with a view to the introduction of an accepted scheme. Pending the introduction of a new or amended bonus scheme managers would operate the present scheme under protest and the Company should pay the shortfall in earnings to any affected manager as a consequence of the alteration of the scheme.
COMPANY'S ARGUMENTS:
4. 1. Following the merger in 2001 a number of issues needed to be addressed including the question of the two bonus systems which could not be maintained in the long term. The bonuses paid to ex-TSB managers in respect of 2001 and 2002 were made under the 0% -15% system. Management decided that bonuses in respect of 2003 would be paid in the range of 0%- 30%.
2. The same criteria as had been used previously when reviewing the TSB branch offices were applied to former TSB branch managers. However, while the total value of bonuses paid was in excess of that which had been paid in previous years, some managers received less than they might have expected under the 0%-15% range, while others obviously received more, much more in some cases. In 2004 total bonuses paid in respect of 2003 performance was approximately 13.2% of the total managers payroll.
3. In the TSB Bank, when the bonus range was relatively narrow at 0%-15% differentiation on performance did not generate significant increases in bonus. However, bonuses did go down as well as up. The Company acknowledges that some managers had a significant reduction in their bonus, but these reductions are a reflection of the performance of the individual concerned. These bonuses would have reduced regardless of the bonus range applicable.
4. The Company has made a judgment in relation to the 'discretionary bonus' and acted in a manner that has paid a significantly higher bonus to a large portion of its managers. As was always the case some managers received smaller, or no bonuses for their performance.
RECOMMENDATION:
This case relates to the application of the annual discretionary bonus scheme to former TSB managers now integrated into the merged Irish Life and Permanent known aspermanent tsb.
The Unions are of the view that Management unilaterally changed the "discretionary bonus scheme" and contravened a commitment given that there would be no significant changes in the operation of the system inpermanent tsbto that which applied in the former TSB. The Unions are of the view that the new scheme is a linking of the appraisal system with the old discretionary bonus scheme.
Discussions are currently ongoing between the parties under the auspices of the Labour Relations Commission on a review of the totality of management remuneration.
Having considered the views of the parties expressed in their oral and written submissions, the Court recommends that pending agreement between the parties on a new management remuneration system, the old discretionary scheme should be reinstated, and those who lost out in 2004 for the year 2003 in comparison to that paid out in 2003 for the year 2002, should be paid the difference.
Signed on behalf of the Labour Court
Caroline Jenkinson
11th August, 2005______________________
todDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Tom O'Dea, Court Secretary.