INDUSTRIAL RELATIONS ACTS, 1946 TO 2004
SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990
- AND -
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
AER LINGUS CRAFT GROUP OF UNIONS
Chairman: Mr Duffy
Employer Member: Mr Murphy
Worker Member: Mr O'Neill
1. Reward and Recognition.
2. The Company and the Unions have been in negotiations on the "Reward and Recognition" issues arising from the Company's 2004 Business Plan. In response to the agreed level of changes within the Business Plan, the Unions submitted pay claims to the Company in 2005.The Company's position is that the Unions' claims would have a long term effect on its cost base and offered once-off lump sum payments to workers based on length of service and implementation of agreed change. The Company's offer was rejected by the Unions who sought an ongoing payment. The Unions' claims are outlined as follows:
(1) Increase in basic pay of 5%.
(2) Introduction of an additional Long Service Increment at 20 years' service.
(3) Death in Service Benefit to increase to 2.5 times Annual Salary.
(4) In the alternative to (1) above that workers should not have to pay the extra pension contribution of 2% for formal indexation which they have enjoyed without default for every year since the establishment of the Irish Airlines Superannuation Scheme.
(5) Resolution of the long-standing unresolved pension improvement agenda, the residual issues of which are:
-Removal of Co-Ordination,
-Early Retirement without Company consent,
-Definition of Pensionable Service to include completed months, and
-Inclusion of service as Apprentices for pension purposes.
The Company rejected the Unions' claims. The dispute was referred to the Labour Relations Commission. Conciliation conferences were held but agreement was not reached. The dispute was referred to the Labour Court on the 1st March, 2006, in accordance with Section 26(1) of the Industrial Relations Act, 1990. Subsequent to the referral the Company revised its offer and submitted amended proposals to the Unions, briefly summarised as follows:
3% increase in basic pay;
Payment of service based lump sum;
Improvement in Death -in-Service benefit;
Improvement in pension benefit for partners of deceased pensioners; and
Offer of permanent positions to over 600 fixed-term employees.
The offer was not acceptable to the Unions. A Labour Court hearing was held on the 27th July, 2006.
3. 1. All parties, including the Employer, accept the need for "Reward and Recognition" -the difference being one of "quantum" rather than principle. The Company's offer of 3% ongoing payment on salary is deficient because it falls short of similar payments for change elsewhere. The payment is significantly offset by the increased employee pension contribution of 2% arising from the Company's proposal on indexation. Even at 5%, as claimed by the Unions, this would still be offset by the 2% increase in employee pension contribution. The very significant efficiencies, savings and productivities afforded by workers require more tangible recognition than currently on offer.
2. There are four Long Service Increments which are applicable. This requires substantial service to be availed of. There is a substantial case to be made for an additional incremental adjustment with a further LSI based at 20 years to provide a reasonably modest incentive for loyalty to the Company.
3. In relation to Death in Service the Company offer has been to increase it from x1 times annual salary to 2 times annual ssalary. This fails to recognise that there are employees in the Company who have a higher benefit of approximately x 2.5 times annual salary or more. There is no excuse for such differentiation.
4. Removal of Co-Ordination. The number of staff who would be affected by Co-Ordination of Social Welfare Retirement Benefits is 2,700. The current practice to date is that the Employer picks up the strain cost of Co-Ordination removal from their own resources for the period to age 65. While recognising that the removal of same is not inexpensive and that a mechanism requires to be devised to facilitate same for Company employees it cannot be put on the "long finger". The Unions are seeking that the Employer commences with the removal of an initial tranche of 25% with an agreed programme to phase out the balance over time. The Unions have indicated their willingness to discuss the question of increased employee contributions on a mutually agreed basis.
5. Employee Contribution for Indexation. The current position with regard to increases of pensions in payment (indexation) is that it is at the discretion of the Trustees of the Scheme. The practice is that for every single year of the lifetime of the Scheme, the Trustees have exercised their discretion to apply CPI increases without exception. There is a reasonable expectation on behalf of workers to regard this as tantamount to a benefit.The Employer has offered to introduce formal indexation by virtue of the establishment of two separate funds. Fund A into which it is proposed to inject a sum of €70 million, catering for the "back service" of all actives, deferreds and pensioners. Fund B, into which it is proposed to inject a sum of €34 million, is designed solely to cater for future service(i.e. existing employees), subject to an increased employee contribution of 2%. Without prejudice to this, the Unions' position with regard to an Initial Public Offering (IPO); in the event that such comes about, the situation is as follows:
- Existing employees will now have to pay a substantial increase for a "benefit" which has accrued to all others year on year. The effect of this is not only to impose an extra cost on them but also to significantly erode the current pay increase offered for changes and productivity.
- Only existing employees will have to bear this cost, while those already retired will be covered by the injection of funds by the Employer.
Consequently the requirement to pay the additional employee contribution should be removed in respect of Indexation. In so doing it would not only have an impact insofar as the real value of any (improved) Company offer on productivity is concerned but would also free up extra employee contribution for the general pension improvement agenda, including Co-Ordination.
6. Pension Improvement Agenda. The Unions are seeking that the balance of the pension improvement agenda be addressed over time as funds become available.
4. 1. In addition to the Company's revised proposals it has tabled a benefits package in conjunction with the forthcoming Initial Public Offering (IPO). This package includes;
-An investment of €104 million into supplementary pension funds to deal with indexation of payments.
- 4% increase in employer pension contributions to deal with above issue.
- Proposals on a profit-sharing scheme to address anti-dilution of the ESOT shareholding which would arise following an IPO.
- Commitments on job security and future Company-Union relations.
2. These proposals more than adequately reward employees for the changes under the Business Plan. The proposals represent the maximum offer available given the expected growth in staff costs over the next three years and the continued competitive pressures the Company will face.
3. The Company continues to operate in a highly competitive aviation sector. To maintain competitiveness the Company must control costs. The Aer Lingus 2004 Business Plan was a further step along the process of repositioning the airline as a low cost, way better carrier.
4. The Company continues to be a top quartile employer. Workers in the Company have enjoyed, and continue to enjoy, pay growth significantly above the terms of National Wage Agreements.
5. The proposals tabled by the Company represent a fair and equitable reward for the implementation of the 2004 Business Plan.
The issues in dispute came before the Court against the background of proposals on significant restructuring within the airline arising from its Business Plan of July, 2004. The stated objective of this Business Plan is to bring about further improvements in staff productivity and cost effectiveness, thus underpinning the competitiveness of the Company and the security and quality of the employment which it provides. The Court acknowledges that considerable progress has been made in negotiations between the parties on the implementation of this programme. However, final agreement could not be reached and all outstanding matters of difference between the parties have been submitted to the Court and form the subject matter of this referral.
In formulating these recommendations the Court has had full regard to the careful and comprehensive submissions, both written and oral, made by all parties. Together with the matters already agreed, these recommendations are intended to provide the basis for full and final agreement and implementation of the 2004 Business Plan.
In considering the adequacy of the Company's offer the Court has had regard to the level of change already achieved and envisaged. The Court has also had particular regard to the impact of the proposed increase of 2% in employee contributions to the pension scheme necessary to secure indexation of benefits. Taking account of these considerations the Court is of the view that the proposed pay increase should be 4% together with the lump sum payments contained in the original offer. This increase should be implemented in two phases, as follows:
3.5% payable on 1st September, 2006.
0.5% payable on 1st April, 2007.
The Court recommends that the current arrangements regarding Long Service Increments (LSI's) be restructured as follows:
The current LSI payable at 25 years' service to be paid at 20 years' service.
The current LSI payable at 30 years' service should be paid at 25 years' service.
The current LSI payable at 33 years' service should be paid at 30 years' service.
The current LSI paid at 35 years' service should remain unaltered.
These adjustments should take effect from the next date on which the LSI's become payable.
Death- in- Service Benefit
The Death- in- Service Benefit should be increased to 2.5 times' salary.
Coordination of Pension Benefits
The Court does not recommend concession of the Unions' claim. However, in the event of a future actuarial surplus, the parties should accept that the amount of any such surplus could provide for additional benefits.
Signed on behalf of the Labour Court
1st August, 2006______________________
Enquiries concerning this Recommendation should be addressed to Tom O'Dea, Court Secretary.