FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : ROCHE IRELAND LIMITED (REPRESENTED BY IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION TECHNICAL, ENGINEERING AND ELECTRICAL UNION DIVISION : Chairman: Mr Duffy Employer Member: Mr Grier Worker Member: Mr O'Neill |
1. Pensions issues
BACKGROUND:
2. The Company is a subsidiary of the Roche Group and employs approximately 240 workers in the manufacture of medicines. The Company has offered a Defined Benefit Pension Scheme (DB Scheme) to all permanent full-time employees over the age of 25 since 1976. In 2005, a review of all Roche Group benefits was undertaken by Roche Corporate and the Roche Group Benefit Policy was undertaken in December, 2005. Following this the Corporate announced a switch to Defined Contribution Pension Scheme (DC Scheme). The DB Scheme was closed to all new entrants from 1st January, 2007. The Company is also proposing changes to the current DB Scheme. The Company's proposed changes are as follows:
- 1. The Company will continue and maintain support for the current Retirement & Death Plan for existing employees with the following changes:
a) The employee contribution rate will increase from 3% to 5% of pensionable salary
b) The current provision whereby members may, with Company consent, retire at age 62 without actuarial reduction will be discontinued. In future an actuarial reduction will be applied to early retirement (if approved) at any age prior to age 65.
c) The Defined Benefit Plan will be closed to all new members
d) Death-in-Service cover will increase from 3 times to 4 times salary.
- 2. A new Defined Contribution Pension Plan (Appendix 2 outlines the scheme) will be set up for all new employees with the following elements:
- a) Employees will have the option to contribute 4%, 5% or 6% of salary
b) The Company will match the employee contribution on a 2 for 1 basis up to a maximum Company Contribution of 12% of salary
c) The retirement age will be 65
d) The age threshold to join will be age 20
e) Death-in-Service will be consistent with the legacy DB plan.
The Company will offer existing employees the following options:
a) To increase their contribution to 5% of pensionable salary to the DB plan
b) To switch to the new DC Plan for future service
Or
c) To maintain their pension contribution of 3% of pensionable salary but switch to the new DC Plan with matching employer contribution of 6% of pensionable salary.
The Unions objected to the proposed changes and the dispute was referred to the Labour Relations Commissions. Two conciliation conferences took place but as agreement could not be reached the dispute was referred to the Labour Court on the 20th December, 2007. A Labour Court hearing took place on the 23rd April, 2008. - a) Employees will have the option to contribute 4%, 5% or 6% of salary
3. 1. The Roche Group is a multinational company whose Irish operations have been very successful over the years. The 2006 accounts show the Company in a strong financial position and much improved over the previous year.
2. The existing Scheme meets the minimum funding standard requirement.
3. The lifeblood of any DB Scheme is new members. Calculations going forward have been adversely affected by the decision not to allow new employees to join the Scheme since the 1st January, 2007. The Scheme is also affected by the age profile, with the average age getting older.
COMPANY'S ARGUMENTS:
4. 1. The decision to close the DB Scheme was taken at the highest level of Roche Corporation. The decision resulted because of increasing pension costs and increasing uncertainty about future costs. It has been implemented with agreement, where legally possible, in all countries in which the Corporation operates.
2. The new DC Scheme compares favourably to any other on offer within the industry, including schemes introduced with the agreement of the Unions.
RECOMMENDATION:
Given the current stance of the parties it is clear that any recommendation which the Court might make which definitively supports the position adopted by either side would not advance the resolution of this dispute. If a resolution is to be found it can only be on the basis of an accommodation between the opposing positions outlined to the Court.
The Court accepts that the factors which motivated the company in seeking to introduce the disputed changes are regarded as impacting on its vital long term interest. Consequently they must be fully taken into account in formulating any proposals to resolve the current impasse. Equally, the Unions are concerned at what they sees as the uncertainty inherent in a purely defined benefit scheme in relation to the final pension which will become available to their members. These concerns must also be addressed in any final settlement.
The Court accepts that the present employee contributions to the current Defined Benefit Scheme are low by normal standards and should be revised upwards. It is noted that this appears to be accepted by the Unions. Moreover, the current range of benefits should also be revised having regard to the need to contain funding liabilities.
With regard to the pension entitlement of new entrants to the employment, the Court is of the view that revised arrangements should be put in place which address the need to provide a clearly defined limitation on the funding liability of both the employer and employees. Provision should also be made for an appropriated apportionment of the risks associated with volatility in market returns and other factors affecting benefits and funding.
The Court recommends that the parties should now address these matters in an intense process of engagement with the assistance of an agreed facilitator. While the terms of reference of the process are a matter for the parties they should include the considerations referred to earlier in this Recommendation. That process should commence without further delay and should conclude within a period of three months. If final agreement is not reached within that timeframe the matter may be referred back to the Court for a definitive recommendation.
Signed on behalf of the Labour Court
Kevin Duffy
8th May, 2008______________________
CONChairman
NOTE
Enquiries concerning this Recommendation should be addressed to Ciaran O'Neill, Court Secretary.