CHAPTER 6 - CHANGES IN OPERATIONAL REQUIREMENTS, WORKING ENVIRONMENT AND CONDITIONS OF EMPLOYMENT OF PUBLIC SERVANTS

6.1 Introduction

6.1.1 In its examination of public service pension arrangements the Commission's terms of reference require it to have regard to changes in the working environment and conditions of employment of public servants, as well as to changes in the operational requirements of each public service. This chapter outlines the implications of the traditional public service employment model for pension arrangements, and changes which have taken place over the last forty years. It considers current operational and manpower requirements in the public service, and outlines various modernisation initiatives which will impact upon the Commission's considerations.

6.2 Traditional Public Service Employment Model, and Implications for Pension Arrangements

6.2.1 Historically, one of the main reasons for public service pensions was to provide a means whereby those who had become incapable of performing their duties due to old age or infirmity could retire without hardship. In many respects, pensions were seen as a continuation of salary, albeit at a reduced rate. Pension costs were to be paid for out of the national budget on a pay-as-you-go basis in the same way as the pay costs of public servants.

6.2.2 The pensions model assumed "employment for life". Those joining the public service did so at a relatively early age and on the assumption that it would provide them with a lifetime career. Pension was payable after service of 40 years, provided the public servant had reached the minimum retirement age of 60, which was seen as the age when productivity often began to decline due to old age or infirmity. This was the basis also for the maximum retirement age of 65. For operational reasons, special earlier retirement provisions were available in respect of certain groups of public servants, including Gardaí, prison officers, teachers, the Permanent Defence Forces, and fire brigade personnel.

6.2.3 Pension benefits were related to length of total service (maximum 40 years) and were generally based on pensionable earnings at date of retirement (usually the highest rate of career earnings), subject to certain averaging provisions to deal with promotion immediately prior to retirement. Pensions were increased subsequent to retirement to maintain the former employee's standard of living.

6.2.4 Generally, no pension contribution was made by individual public servants, but for historical reasons, contributions applied in certain public service employments. Where contributions did not apply, for pay determination purposes, it was accepted in a number of arbitration findings that an implicit contribution was made through salary being set at a lower level to take account of the benefits payable under the pension scheme (see section 9.4 below).

6.2.5 On the introduction of the State Social Insurance system, the general approach was to leave public servants outside the system, as it was considered that they were adequately catered for under occupational schemes.

6.2.6 A more detailed review of current public service pension terms and their historical development is given in Chapter 2.

6.3 Changes in Public Service Pension Arrangements

6.3.1 The historical basis for public service pensions (i.e. as a form of extended salary) would probably be viewed today as anachronistic by many public servants and by the general public. An alternative view of pensions, which is more common in the private sector and is the view which underpins the Pensions Act, 1990, is that they represent a form of savings or deferred income. Thus, the individual employee "earns" his or her pension in the course of employment. A number of amendments made to public service pension arrangements over the past 40 years reflect both this changing view of pensions, as well as changes in operational requirements and in the traditional employment model for public servants.

6.3.2 Instead of having to meet both an age and service requirement to qualify for retirement pension benefits, a public servant now becomes eligible for preserved pension benefits after five years' service. This change was introduced first in the civil service in 1973. Among other things, preservation of benefits facilitated greater mobility between public and private sectors.

6.3.3 Greater mobility within the public service was also enhanced by the 1963 Superannuation and Pensions Act which enabled the establishment of the public service transfer network.

6.3.4 In 1963 provision was made for public servants to be credited with further pensionable service through the professional added years facility. In addition an arrangement agreed in 1973 allowed purchase of added years at full expense to the individual.

6.3.5 Specific provision was made for pension benefits in respect of the dependants of public servants, firstly, through the pensions allocation facility in the 1956 Superannuation Act, and secondly, and more importantly, through the introduction of spouses' and children's' contributory pension schemes.

6.3.6 In 1973, some provision was made to cater for atypical employment - for example, seasonal employment could be reckoned for pension purposes where that attendance, when required, was full-time. In addition, part-time service was made reckonable for pension purposes where the public servant subsequently worked full-time.

6.3.7 With the development of the State Social Insurance system from the 1960's on, pension schemes have been amended to allow integration of the occupational pension with Social Insurance benefits. Most recently, with effect from 6 April 1995, full Social Insurance cover has been extended to new entrants in all areas of the public service where the lower modified classes of PRSI applied to appointees before that date.

6.4 Current Operational and Manpower Policy Requirements

6.4.1 The standard public service pension terms are intended to cater, primarily, for the traditional public service employment model - full-time employment with forty (or more) years of unbroken service either within the one area or within a closely related group of areas - e.g. within the civil service or within the local authority service (temporary and part-time employment have always existed to a limited extent in certain areas of the public service).

6.4.2 While pension terms should continue to cater for the situation of individuals employed on a life-long basis, which it is anticipated will remain the primary model of public service employment into the short and medium term, it will be important to consider the implications for the existing provisions of such issues as:

* the growth in atypical employment which is expected in the public service:

- part-time work, with varying hours per week from eight upwards,

- temporary assignments, ranging from a few months to several years, and

- broken service employment, i.e. staff availing of one or more career breaks during the course of their careers;

* the evolving EU case law in the equality area, particularly in relation to the pay and conditions of employees in atypical work situations (who are, in the main, women);

* the likely removal of an upper age limit for the recruitment of most public servants;

* greater career mobility; and

* the likely opening up of public service positions to citizens of other EU member states.

6.4.3 The Commission will consider whether the existing terms, including the changes listed at section 6.3, are capable of accommodating the anticipated developments outlined above, and the extent to which they may need to be adapted to meet the changing environment.

6.4.4 The Commission will also consider, in the context of general improvements in living conditions, health and life expectancy, the extent to which existing pension terms continue to be appropriate for the full range of public servants having standard pension terms.

6.4.5 A number of public service groups have special pension terms which aim to meet specific operational requirements. The groups in question include the Garda Síochána, prison officers, the Permanent Defence Forces, psychiatric nurses and fire brigade personnel. The pension schemes of these groups allow, or require, retirement earlier than the standard retirement age, usually with more favourable pension benefits. Further details of the pension provisions involved are given in Chapter 2. These provisions are of long standing, dating back, for example, to at least 1919 in the case of prison officers and to 1909 in the case of psychiatric nurses - and were originally introduced with a view to maintaining the effectiveness of the service by maintaining a younger age profile than normal because the work was predominantly physical or dangerous.

6.4.6 In its examination of pension terms, the Commission will consider the impact of current and anticipated operational requirements both in the case of these groups and in the case of other groups which may face particular operational needs.

6.5 Modernisation Initiatives and Reviews in the Public Service

6.5.1 A process of reform is currently underway in the public service involving a number of modernisation initiatives (as detailed at 6.5.3 below). A number of reviews are also ongoing. The outcome of the public service reform process may not be completed by the date of the Commission's final report. In preparing its report, the Commission will take due account of the trend of reform, insofar as it will impact, or is likely to impact, upon public service pension arrangements.

6.5.2 Partnership 2000 notes that the public service has been adapting to the challenges and demands for change through improved responsiveness and flexibility in the delivery of services and in meeting the needs of the public. It states that the imperative is to build on these developments through a concerted and co-ordinated drive to improve further the performance of the public service at all levels and in all sectors. Equally, it notes, the process of modernisation must ensure that the public service responds better to staff aspirations for more fulfilling work and improved career paths and creates an organisational climate conducive to better job satisfaction, motivation and commitment of staff.

6.5.3 The various modernisation initiatives which have been taken or are currently under review in the public service include:

Strategic Management Initiative (SMI) and Delivering Better Government;

Better Local Government - a Programme for Change;

Shaping a Healthier Future: A Strategy for Effective Healthcare in the 1990s;

Charting our Education Future: White Paper on Education;

Efficiency Audit Group Review of the Defence Forces, 1995 and Defence Forces Review Implementation Plan (February 1996)

6.5.4 Delivering Better Government sets down a framework for change embracing a series of independent initiatives which, collectively, are aimed at improving the management of both the civil and public services. Commenting on the Human Resource Management (HRM) component of SMI, the Secretary, Public Service Management and Development, Department of Finance has said

"The public service is not immune to the rapidly changing social and economic environment. To ignore the impact of these changes on human resource management would lead increasingly to adverse impacts on economic competitiveness and social development. Under SMI, every significant aspect of HRM will be looked at including recruitment, training and development, performance management including rewards and sanctions, probation, promotion, multiple grade structures, and gender-related issues, and terms of employment. Greater flexibility in HR practices, will allow the civil service to respond efficiently and effectively to changing needs and demands."

6.5.5 In addition to human resource issues, the SMI has commenced a number of initiatives to develop better financial systems and to adopt a more devolved approach to expenditure management generally. This will impact upon the Commission's consideration of the most appropriate mechanism for financing public service pension costs.

6.5.6 Other reviews are currently underway. These include:

* Commission on Nursing, which was established in February 1997 to examine and report on the role of nurses in the health service including, inter alia, structural and work changes appropriate for the effective and efficient discharge of that role. The Commission is to issue an interim report within six months, and its final report within twelve months.

* Report of the Commission on Remuneration and Conditions of Service in the Defence Forces ("Gleeson Commission"), dated 31 July 1990, which recommended that revised superannuation schemes should be drawn up by the Department of Defence in consultation with the military authorities and the Army representative bodies. It is understood that a fundamental review of the Permanent Defence Forces superannuation schemes is currently underway. The Commission will monitor developments in relation to this review.