AXA Insurance and SIPTU agree major pay and restructuring deal

In the context of Ireland’s recent economic downturn, AXA Insurance and the country’s largest trade union, SIPTU, agreed a major pay and restructuring deal in July 2008. The new deal involves the restructuring of pay scales, a review of the performance-based pay system, a revamped profit-sharing scheme and 120 voluntary redundancies with an early retirement option for those aged over 50 years at the time of leaving the company.

Like other companies in the Irish insurance sector, AXA Insurance has experienced competitive difficulties in recent months. In July 2008, the company and the Services, Industrial, Professional and Technical Union (SIPTU), Ireland’s largest trade union, reached consensus on a restructuring deal in response to competitive pressures. The deal comprises the restructuring of pay scales, a reformed profit-sharing scheme and 120 redundancies. At present, AXA employs 800 people.

The main terms of the AXA-SIPTU restructuring agreement, entitled ‘Reduce costs, enable growth and secure employment’ are outlined below.

New pay structures

New pay structures have been agreed between AXA and SIPTU, consisting of seven pay levels, which will replace the existing extended four-band salary model:

• L10 (corresponding to a salary of €20,850–€33,000), which replaces band 1;

• L9 (salary of €25,000–€47,012), which replaces band 2;

• L8 (salary of €28,738–€52,472), which replaces band 3 specialist;

• L7 (salary of €31,612–€58,949), which replaces band 3 team leader;

• L6 (salary of €34,773–€71,494) and L5 (salary of €45,285–€79,379), which replace band 4;

The highest new L4 grade is described as ‘market driven’.

The minimum and maximum new pay levels will be increased in accordance with national wage agreements, or local bargaining processes if no wage agreement is in place.

Performance pay review

Under the new agreement, the performance-based pay system based on personal performance commitments (PPC) is up for review, with the agreed process due for implementation in 2009. The new PPC process will contain five business objectives and five behavioural objectives. Five rating levels will also be defined, where R5 represents ‘Outstanding’ and R1 represents ‘Unsatisfactory’. Furthermore, arriving at a PPC rating will involve multiplying the business objective outcome by the behavioural objective outcome, so that the final result rewards the desired behaviours and inputs. The actual award received will be determined by the overall PPC result on a sliding scale of 0%–10%. Target performance remains at 7%. The staff distribution level of 80% of employees receiving a bonus of 7% or above will be maintained.

AXA has committed to ensuring that staff at salary Level 10 will receive a full-time base salary of at least €25,000 after three years of service, subject to a satisfactory PPC rating. This salary will be arrived at through a combination of national wage agreements and local pay progression. The pay progression provision will be directly linked to the PPC.

Profit-sharing changes

Current AXA profit-sharing calculations take account of a measurement of company profit against a predetermined objective set with the shareholders. Under the new agreement, the company will implement a profit-sharing calculation process based on an additional three indicators of company performance, as well as profit: customer satisfaction, premium income and total operating expenses. The AXA Group shareholders set annual targets for each operating company under these four indicators. The new agreement stipulates that, from 2008 (with payment in 2009), the profit-sharing scheme will be calculated using both criteria: the new four-measure process and the existing profit-alone measurement. The highest figure from the two calculations will be applied. This process of using the best of both figures will be repeated in 2010. Thereafter, the four-measure calculation will apply.

The target profit-sharing pot will remain at 5% and the maximum pot will be 10%. The new payment calculation will operate as follows:

• achievement of the maximum performance for any indicator will achieve a 2.5% payment;

• achievement of the targeted performance for any indicator will achieve a 1.25% payment;

• achievement of the threshold performance – minimum acceptable performance level – for any indicator will achieve a 0.625% payment;

• achievement of below-threshold performance for any indicator will mean no payment under that indicator.

The payments under each indicator will be added together to give the total profit-sharing payment. For example, maximum performance in one indicator, plus targeted performance in two indicators, with below-threshold performance in a fourth indicator will give the following result: 2.5% 1.25% 1.25% 0% = a payment of 5%.

Employee distribution of the profit-sharing payment going forward will be directly aligned to individual PPC.

Voluntary redundancies

AXA is seeking 120 staff to apply for voluntary redundancy or early retirement. Voluntary redundancy will involve a formula of six weeks’ basic pay per year of service. The weekly pay calculation will include base pay and an appropriate average of the PPC bonus award for the last three years. The redundancy payment will be inclusive of statutory entitlement, up to a maximum of €250,000.

The early retirement option will only be available to people over 50 years of age at the time of leaving the company. The objective of the early retirement package is to provide an immediate pension and cash lump-sum based on actual service, minus an annual early retirement actuarial deduction of 2% per year of potential service, including up to five years of additional added service.

This latest restructuring measure by AXA has also been reported by Eurofound’s European Restructuring Monitor (ERM) – see AXA factsheet 11270.

Tony Dobbins, IRN Publishing