Airport Authority agrees to novel employee repayment scheme

A novel scheme that will allow for the repayment of savings made as a result of pay cuts is part of a €40 million cost-reduction programme agreed between the Dublin Airport Authority (DAA) and the three trade unions representing airport workers – Services, Industrial, Professional and Technical Union, the Irish Municipal Public and Civil Trade Union and Mandate trade union. The agreement will cover over 2,000 workers across the three airports run by DAA – Dublin, Cork and Shannon.

As part of an agreement reached between the Services, Industrial, Professional and Technical Union (SIPTU), the Irish Municipal Public and Civil Trade Union (IMPACT) and the union of retail, bar and administrative workers Mandate, airport staff have accepted pay reductions of an average of 5.5%. Workers earning less than €30,000 a year will not take pay cuts, but overtime rates will drop to time-and-a-half and uncertified sick leave days are to be reduced from four to two days.

A pay freeze will also be in place until the middle of 2011. However, increments will continue to be paid and annual leave and bank holiday entitlements will remain unchanged. In addition, under the terms of the agreement, a €1 million once-off fund will to be set aside and paid to participating staff, if the agreed cost recovery target is met.

Under an innovative scheme known as the Employee Recovery Investment Contribution (ERIC) scheme, money that has been deducted from workers’ earnings can be reimbursed to staff if certain targets are met. Thus, pay levels may be restored in the future.

ERIC scheme designed to counteract pay cuts

Essentially, the ERIC investment scheme, which is based on the value of a DAA worker’s earnings, turns what would be a straight pay cut into a potential dividend, but only if things turn around substantially for the company.

According to SIPTU’s civil aviation sectoral organiser, Dermot O’Loughlin, the investment scheme means that

a percentage of total value earnings would be deducted, however, when certain and realistic targets were met in the future employees will get, in the first instance, a 50% or 100% payment to cover the monies they contributed to the scheme from the start of year three.

Furthermore, pay will be fully restored after a reasonable period of sustained profitability.

To ensure an opportunity of having pay restored within a reasonable timeframe, a financial trigger was accepted as the best possible opportunity for the restoration process. Return on Equity (ROE) is a financial accounting measurement concept and an indicator of profitability. Restoration can commence after two years when the following targets are met:

• ROE achieves between 4.75% and 6.75% (or the company achieves €60 million profit after tax): a once-off lump sum to the value of 50% of ERIC will be paid;

• ROE achieves above 6.75% (or the company achieves €80 million profit after tax): a once-off lump sum to the value of 100% of ERIC will be paid;

• pay will be restored by 50% when ROE achieves between 4.75% and 6.75% for three consecutive years;

• pay will be restored by 100% when ROE achieves over 6.75%;

• if ROE fails to meet the target in any given year, but meets the target in subsequent years, then the lump-sum system will resume;

• a continuous review mechanism will monitor the financial progress of the scheme.

Job cuts

As part of the agreement, a total of 275 permanent jobs and 100 temporary positions are to be cut in Dublin, Cork and Shannon airports. The severance formula is based on 6.75 weeks’ pay per year of service. The agreement will also mean the non-replacement of close to 150 contract positions. The company is to negotiate new pay terms and conditions for all new permanent staff members.

Internal disputes tribunal

An internal disputes tribunal is to be established, which will comprise one senior trade union official, one senior manager and an independent chairperson. The purpose of the tribunal is to adjudicate on any disputes between the parties regarding the agreement.

The agreement, which secures €40 million worth of savings for DAA, was concluded against the background of a number of challenges confronting the company. These include the current financial crises, maintaining sustainable levels of employment into the future, as well as the need to eliminate inefficiencies and maintain a viable business. Furthermore, the company needs to curtail the escalating costs in Terminal 1 in Dublin, Cork and Shannon airports, as passenger numbers fall.

Brian Sheehan, IRN Publishing