CCWU, pharmaceutical company in discussion on new pension scheme
Employee share ownership mooted
August 26, 2002
The Clerical and Commercial Workers Union (CCWU) and the management of the New Guyana Pharmaceutical Corporation Inc (NGPC) are in discussion on setting up a new pension scheme and the possibility of issuing shares to workers.
Relations between the two sides deteriorated initially when the company exited the existing Sugar and Trading Enterprise Pension Scheme (STEPS) in August 2001 and did not consult with the union.
President of CCWU, Roy Hughes, told Stabroek News last week that the union was conducting "healthy" discussions with NGPC on the establishment of a new scheme.
He said the idea has been floated by the union to convert the contributions owed to the scheme by the company to shares for the workers.
Hughes explained that the company deducted money from the employees' salaries from May 2000 to August 2001 but this money was not remitted to the Guyana National Corporation Bank Trust Company.
The money was retained in an escrow account.
After the decision was made by the board of directors to exit the scheme as of August 2001, the employees were offered the 15 months money they had contributed but this was not placed in the trust fund plus four per cent interest.
This was accepted by most of the workers against the advice of CCWU.
The company's contribution to the scheme was just above 40% of what the workers had contributed but this, too, was not placed in the trust fund.
Hughes said the union's suggestion regarding the conversion of the money owed by the company to workers' shares was under discussion with the Privatisation Unit and the company.
Hughes stated that the future of NGPC looks bright and this was the ideal opportunity to start up an Employee Share Ownership Plan (ESOP) with such a company.
He said meetings were held with the union's branch committee at NGPC and the members agreed that the possibility of starting up an ESOP should be pursued.
Hughes said when the union and management met on a new scheme proposed by management, the union informed NGPC that it was not interested in the proposal.
Hughes explained there were two pension schemes - a defined contributory scheme, and a defined benefits scheme.
For the latter, contributors would know up front what benefits they would accrue from the scheme.
But for the defined contributory scheme, the contributor would have to depend on the investments made by the trust company for their benefits to be known.
And any deficits the scheme suffers would be borne by the workers and the contribution by the company to the scheme would be negligible.
Hughes disclosed that Demerara Mutual Life has submitted a proposal to NGPC and the union had no objection to it.
He said both unions representing workers at NGPC have decided to support the establishment of a defined benefit scheme.
The other union is the Guyana Labour Union.
Hughes described the negotiations between his union and the company as cordial and said there was no need for intervention from the Ministry of Labour since the talks did not break down.
Permanent secretary of the Public Service Ministry, Dr Nanda Gopaul, had written to the Inter-American Regional Association of Workers, stating that by way of a letter from the organisation, government was being made aware for the first time that there was a breakdown in discussions between the unions and NGPC.
"It [government] has also not been advised that the matter has been referred to the Ministry of Labour as is required where there is a breakdown. That this matter has been brought to your attention and not first to the Ministry of Labour suggests that the established procedure for the resolution and settlement of industrial matters have been circumvented," Gopaul stated.
Gopaul said government is fully cognisant of its responsibilities to Guyanese workers and continues to take an interest in NGPC. It also continues to have representation on the company's board of directors. Government's shares in the company were sold to the Ramroop family.
He explained that STEPS was a contributory pension scheme and has as its members, employees from a number of state corporations, many of which are now privatised.
Gopaul said NGPC received a copy of an actuarial report in 2000, which revealed that STEPS was in deficit to the sum of $999 million.
He said the huge deficit gave rise to serious concerns for the management of the company, especially when it considered the implications for its employees who were contributors of the scheme.
The problem was referred to the board of directors, which included representatives of the government.
Hughes has pointed out that NGPC had only a $32.5 million deficit out of the $999 million, and said this would have been serviced over a 20-year period instead of the company opting out of the scheme.
The board of directors unanimously resolved that it would be in the best interest of its employees if NGPC exited STEPS and implemented an independent pension scheme.
"Regrettably, the new management of the company was unaware of the need to discuss this decision with the two unions representing certain categories of its employees," Gopaul stated.
He said since then the company has accelerated discussions with both of the recognised unions in an effort to implement a new scheme.
The management has received proposals for a new scheme, he said, which it has submitted to both unions and has met with the unions' central executives and branch representatives to discuss early implementation.
Gopaul said that one of the two recognised unions has agreed in principle to a proposed scheme and expressed its desire to proceed with it as early as possible.
He stated the other union has rejected the proposed new scheme and has asked the company for proposals from other agencies, which management is now pursuing.
He said the company is anxious to implement a new pension scheme but is reluctant to do so without the full cooperation and support of both unions. (Andrew Richards)