Crisis pushes workers to accept pay cuts

A wage restructuring agreement at a long-established Dublin cleaning company illustrates the nature of the competitiveness challenge facing businesses in the Irish economy. It demonstrates how at time of recession unionised workers are coming under pressure to accept falling pay and benefit levels to save their jobs. Union members at the company voted in favour of the wage restructuring package by over six to one. Other firms dependent on the local economy are also applying similar measures to remain competitive.

Members of the Services Industrial Professional and Technical Union (SIPTU) at the Dublin operation of Spring Grove Services voted in May 2011, by a majority of over six to one, to accept a major wage restructuring agreement. The result means that the basic pay rate for the existing main staff category (that is, ‘production’ workers) is to drop from €10.56 per hour to a new rate of €8.71 per hour. Existing ‘distribution staff’ (drivers) will see their hourly rate fall from €14.40 to €10.30.

New production staff will work a 35-hour week (with all breaks unpaid) and at a basic rate of €8.50 an hour, with no overtime, and their holidays will be based on the statutory minimum. New distribution staff will be paid a basic rate of €9.50 an hour.

Other changes include the elimination of a majority of paid breaks, the introduction of a flat rate of overtime (except for Sunday working), and a tightening up of holiday and sick pay schemes.

A limited level of financial recompense will be payable, as well as a modest voluntary redundancy compensation package for those who wish to leave. However, if new staff are brought in to replace those who take redundancy, the new and slightly lower rates will apply for these new workers.

Background

Spring Grove Services is one of Ireland’s leading textile rental companies, providing a wide range of floor care, washroom services, work wear and linen services. Its clients include major health care providers, including hospitals operated by the state’s Health Service Executive (HSE).

According to the specialist independent weekly, Industrial Relations News (IRN), the company’s clients were forced to examine costs due the ongoing recession, which in turn obliged companies like Spring Grove to cut all costs, including wages. In its Dublin location, where up to 120 people are employed out of Spring Grove’s nationwide workforce of over 600, human resources management were told last year that the plant faced closure unless it could match the labour cost competition of its main competitors. As a result, the company set about negotiating a major cost restructuring agreement with SIPTU.

Terms of the agreement

Other elements of the agreement include:

• The redundancy/severance package will be calculated on the basis of ‘statutory rights, plus two weeks plus 25% of (statutory) rebate’.

• A loss of earnings formula, in respect of the changes in earnings, will be a minimum of €1,000 for all staff regardless of service; an additional €400 per complete year of service; upper limit of €6,750.

• Should any member of staff wish to leave within six months, the agreement states: ‘we will offer statutory redundancy in addition to the above compensation [and] we will pay this as tax efficiently as possible’.

• Those staff ‘who currently are involved in regular and rostered overtime will receive an additional payment of one year’s value of the loss’.

• Staff who suffer a 10% cut will be compensated with €500, plus €200 per completed year’s service up to a maximum of €3,475.

• Staff with less than three years to normal retirement age will have their current conditions guaranteed ‘for the remainder of their employment’.

Commentary

The agreement at such a well-established service company provides an insight into the commercial and competitiveness pressures facing local Irish firms due to the continuing recession. The circumstances they face stand in marked contrast to both foreign-owned and indigenous exporting sectors of the economy, which continue to perform well and are paying modest wage increases. Firms dependent on the local economy, however, are either freezing pay rates or trimming costs through agreements like that formally agreed at Spring Grove.

Brian Sheehan, IRN Publishing