Strike action averted in face of insurance company’s offshoring plan

In July 2008, members of the Unite trade union who are employed by the insurance company Hibernian threatened industrial action over the company’s plan to offshore 580 ‘back office’ jobs to India. The company has attributed its offshoring plans to cost savings and profit differentials. For the moment, talks underway between the company and trade union have averted the threat of strike action and work stoppages.

Employees at the well-known insurance company Hibernian, which has three regional centres in Dublin, Cork and Galway, as well as 27 branches nationwide, voted in July 2008 to take industrial action in support of a campaign by their trade union, Unite, to ‘maximise the number of sustainable jobs in Hibernian Group Ireland’. Their decision followed Hibernian’s announcement in June that it plans to shed some 580 jobs from its Irish workforce of 2,200 employees over the next three years.

Scheduled to begin in early 2009, the offshoring initiative will initially affect up to 80 positions in the Dublin, Cork and Galway branches. Over the next three-year period, up to 500 positions are likely to move to Bangalore in southern India.

Justification for offshoring plan

The company claims that most of the jobs concerned, which mainly involve lower skilled administrative back office functions, can be conducted anywhere in the world and can therefore be offshored to India. Hibernian’s owner, the UK insurer Aviva, already has a presence in Bangalore.

Hibernian outlined that its decision to reorganise its Irish operations was taken after analysis of the challenging commercial and economic conditions facing the company and after all other options were considered, including relocating within Ireland. The company concluded that: ‘The result showed clearly that gradually moving roles to India, and preferably without the need to make staff redundant, was the best outcome for long-term sustainability and growth for Hibernian’.

A key factor underlying the decision is the relative cost differentials between Ireland and India, and between the profits that can be accrued in the two countries. It is understood that Hibernian expects to generate cost savings of between 50% and 70% from its proposal to move back office jobs from Ireland to India.

Talks avert threat of industrial action

Unite’s proposed industrial action was to consist of non-cooperation with transfer activities and short one-hour stoppages, which could have commenced at any time from 18 July. However, talks between the two sides looked set to avert any industrial action.

The National Officer with Unite, Jerry Shanahan, claimed that the union was mandated, if required, ‘to organise one-hour stoppages to bring the message home that these proposals in their current form are not acceptable. If there are cost/profitability issues to be dealt with, creative solutions can be found on this island’.

Hibernian welcomed, what it described as, the willingness of Unite to enter into talks on maximising the number of sustainable jobs throughout its business in Ireland. The company claims its reorganisation plan will help to secure sustainable growth.

While the company described the ballot result as ‘clearly disappointing’, it added that it was ‘committed to engagement with Unite and all of Hibernian’s 2,200 staff to avoid the one-hour stoppages and other industrial action’. The company suggested that its decision to reorganise its business ‘has no impact on its nationwide branch network, which is central to Hibernian’s customer service in Ireland’.

Restructuring measures

Over the next three years, Hibernian highlights that it will continue to focus on its three regional centres and 27 nationwide branches. The company expects to employ up to 1,600 people, and possibly even more depending on growth, at the end of its three-year reorganisation initiative.

Hibernian expects to implement its restructuring programme on a phased basis by minimising external recruitment activities, and through re-training, redeployment, normal staff turnover and other voluntary methods. The company adds that the recent launch of its new plan, ‘Hibernian Health’, will also provide new career opportunities for employees. Hibernian envisages that most of the job cuts can be achieved through natural turnover: annual staff turnover at Hibernian is estimated to be at between 10% and 15%.

The company has also expressed its willingness to discuss a voluntary redundancy programme with Unite, if appropriate. In a previous restructuring/voluntary severance agreement, management at Hibernian and Amicus (now Unite) agreed voluntary severance terms of eight-and-a-half weeks’ pay for each year of service, which included statutory entitlements, for over 100 workers.

Commentary

Hibernian’s recent announcement is yet another indication of the growing threat to lower skilled employment in Ireland – a threat which is spreading from traditional manufacturing activities to financial services. This has put the focus on the need for the upskilling of workers if the Irish economy is to prosper in today’s tougher global environment.

Brian Sheehan, IRN Publishing