Electricity workers back €140m job cuts

Employees at Ireland’s state-owned Electricity Supply Board have voted by an overwhelming majority to back a cut of €140 million in the wage bill over the next five years. The agreement was not recommended by union bosses, but they did outline the plan at nationwide meetings. The vote will mean 1,000 job losses, and a 20% cut in pay for the remaining workers. Of the job cuts, 700 are to come through voluntary redundancy or early retirement, and 300 from natural wastage.

Background

The five unions at Ireland’s state-owned Electricity Supply Board (ESB) won an agreement to maintain basic wage rates, avoid the introduction of new entry rates for new recruits and a commitment to company-wide terms and conditions.

In return, union leaders agreed to present a restructuring plan to the ESB’s workers that will involve cutting the wage bill by 20%, amounting to around €140 million, over the next five years, resulting in 1,000 job losses.

The plan was put to a ballot and was backed by a two-to-one majority of the 5,000-strong workforce. The Secretary of the ESB unions, Brendan Ogle, said the agreement was the best that could have been achieved, describing the ballot result as ‘appropriate’ in the current economic climate.

The company’s Executive Director of Sustainability and Human Resources, John Campion, said the agreement will ‘ensure that the company can continue to invest in infrastructure while remaining competitive in electricity and gas markets’.

ESB said that the agreement is part of a wider cost-reduction programme that will see its cost base reduced by €280 million by 2015. The company issued a statement on payroll cost base proposals shortly after the result of the workers’ ballot was announced, commenting: ‘With today’s vote, ESB staff accept the implementation of comprehensive payroll reduction proposals that will deliver 20% (€140 million) savings in annual payroll costs.’

The bigger picture

The plan sets out payroll savings totalling €56.4 million through measures such as changes in profit share arrangements and performance-related payments, reduced overtime, reduced allowances, lower subsistence rates and the continuation of a pay pause to March 2014.

Voluntary redundancy will contribute the remaining €83.6 million to the €140 million total savings. Severance payments will be based on seniority and years of service, with a common six weeks’ pay per year of service and a pension at age 65, where applicable.

The agreement also unlocks a ‘frozen’ profit-related payment, worth an average of €2,000 per employee. This payment had been withheld when talks on the agreement stalled in the months before the final breakthrough.

A central element of the plan is an ‘interlock mechanism’. This will require business units within ESB that fall short of savings targets to make up losses. This could mean further cuts within non-performing areas.

However, should savings targets overshoot projections, there will be ‘collective bargaining’, suggesting some form of performance-related payment.

Accountants Grant Thornton, who independently assessed the €140 million target for both the ESB and the unions, will regularly report to a joint management-union committee on progress.

Government intervention

In a separate development, the ESB unions expressed disappointment over the announcement earlier this year by Pat Rabbitte, the Minister for Communications, Energy and Natural Resources, who has overall responsibility for ESB, that some of its power stations could be sold by the government under its EU/IMF/ECB bail-out programme.

However, the same unions welcomed the minister’s decision to keep electricity generation within ESB. EU deregulation and competitiveness rules, however, mean that transmission assets must be administered by a separate company. To comply with this, a separate state-owned company, EirGrid, will administer the transmission system, although ownership stays with ESB.

Commentary

By keeping ESB in charge of power generation, Mr Rabbitte altered the policy of successive governments, which had been to transfer ownership of transmission assets to EirGrid. The decision (backed by the Fine Gael-Labour coalition government) was seen as a significant victory for the ESB unions and management.

The union decision to accept the €140 million cuts plan has been helpful to Mr Rabbitte, given his broad support for the union and management preference on ownership of the transmission assets and his wish to retain the ESB’s ‘vertically integrated unit’ (VIU) structure.

Brian Sheehan, IRN Publishing

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