Controversy over pay increase awarded at state electricity firm

The state-owned electricity company, the Electricity Supply Board (ESB), has paid the first phase of the current national pay agreement despite strong criticism from the media, and even from two senior government ministers. ESB defended its decision, stating that it was obliged to honour the national pay agreement. The company is, however, seeking a deferral of the second phase of the agreement. Meanwhile, ESB faces a major deficit in its pension fund.

The board of Ireland’s state-owned Electricity Supply Board (ESB) has sanctioned a 3.5% wage increase for 8,500 workers in accordance with the first phase of the national pay deal (IE0901039I, IE0810019I). However, the company announced that it will be seeking agreement from its trade unions on a deferment of the second phase of the pay deal, involving a 2.5% pay increase, which is not due until later in 2009.

In agreeing to honour the national wage agreement, ESB was adhering to the formally negotiated social partnership pact, known as the [Transitional Agreement (2.8Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Taoiseach Report_web.pdf), which was ratified by the social partners on 17 November 2008 (IE0812019I).

As a semi-state commercial company, ESB operates under the private sector agreement in the context of national social partnership pay deals, and has done so since the early 1990s. This means that payment of the 3.5% for the workers concerned was due from 1 November 2008, after a nationally agreed three-month pay pause.

The trade unions covered by the sanctioned payment operate as a formally constituted ‘group of unions’ under the umbrella of the Irish Congress of Trade Unions (ICTU).

Media and political criticism of pay rise

News that ESB sanctioned the national pay agreement was sharply criticised, however, by some media outlets. In particular, Independent News and Media PLC – which publishes Ireland’s largest daily newspaper, the Irish Independent – expressed disapproval; its staff accepted a 10% pay cut in late 2008 (IE0901059I).

Separately, the Minister for the Environment, Heritage and Local Government, John Gormley of the Green Party, stated that there was ‘widespread concern’ within the government about ESB’s decision to give the 3.5% pay rise. His comments were backed by Justice Minister, Dermot Ahern, a member of the majority coalition partner, Fianna Fáil. However, the Minister for Communications, Energy and Natural Resources, Eamon Ryan of the Green Party, who is directly responsible for ESB, suggested that the company could absorb the increase:

In agreeing wage increases, it is always open to the board to seek greater productivity and efficiency measures. In the current ... economic climate, I would urge that wage increases be accompanied by improved productivity arrangements so that all in ESB can play their part in our national recovery.

A review of the electricity sector in 2006 called for staff reductions at ESB, as well as continued improvement in flexible working practices and culture, and better performance (IE0610039I).

ESB defends pay rise

ESB is one of some 60 or more companies that formally confirmed payment of the first phase of the national pay deal, in advance of a call by the executive of the main employer organisation, the Irish Business and Employers’ Confederation (IBEC), that the agreement be formally deferred for at least 12 months. In a statement, ESB explained that, as a party to the national social partnership process, the company would, as it had always done, have to honour a national agreement:

ESB is a party to the national wage agreement that was ratified last year. Under that agreement, signed by all the social partners, ESB has always been deemed to be a member of the private sector.

Under the deal, the three-month pay pause that applied in the private sector expired on 1 November 2008 in the case of ESB, and a 3.5% pay increase fell due to its employees from that date.

Because ESB is a profitable company, it could not plead inability to pay under the terms of the Transition Agreement. On that basis, it was necessary to pay the 3.5% pay increase due to employees or risk breaking the national agreement. About 50 other private sector companies have also paid the 3.5% to their employees under the agreement.

On 1 November 2008, no difficulties were raised by any of the social partners in relation to honouring the national wage agreement, including the government, ICTU and IBEC.

Pension deficit

In a separate development, the independent weekly journal Industrial Relations News (IRN) has reported that ESB faces a major deficit in its pension fund, believed to be around €1.3 billion. Only three years ago, a special arrangement negotiated between management and trade unions plugged a €511 million hole in the same fund (IE0603029I).

The size of the deficit this time was revealed to the fund’s members in an internal ESB newsletter by pension trustee, Joe LaCumbre. Mr LaCumbre, a retired trade union official, is a former deputy chair of the company and a former worker director. IRN speculated that the outstanding 2.5% national pay rise, which is not due for payment until the summer of 2009, could be used to start covering the new €1.3 billion deficit.

Brian Sheehan, IRN Publishing