Essar Steel seals wage deal with Algoma union

In a breakthrough over the weekend, Essar Steel Algoma (in Canada) renegotiated a collective wage agreement with its 3,000 personnel, averting a strike threatened by one of the workers’ unions starting Sunday.

A new contract for the collective wage agreement was necessary before midnight of July 31, else the 600-odd white collar workers’ union, USW L2724, representing technical, professional and frontline management staff, had threatened to go on strike at the plant in Sault Ste Marie, Ontario, from August 1.

Five days earlier, Algoma had renegotiated a revised wage settlement with the other workers’ union, USW L2251, representing 2,300 blue collar personnel or the plant workers.

Essar had acquired Algoma Steel (annual capacity, four million tonnes) in a $1.6-billion deal in 2007. They were after productivity savings in this wage round and have made progress on this. With the bigger blue collar personnel, Essar Steel has negotiated a three-year agreement, while the white collar professionals have agreed on a four-year contract. “This agreement reflects the progressive nature of the US workers’ union, who are also aware of productivity issues, cost savings and of the other realities of steel markets today,” said a senior Essar Steel official.

For the blue collar staff, Essar Steel has agreed upon a three per cent cumulative wage hike in the next three years. All existing workers will continue with their defined benefit pension programme but all new ones will be moved to a defined contribution-based pension scheme. Essar has also managed to add the “contracting out clause” in the agreement. Earlier, any work within the plant facility had to be done through the unions and no outsourcing was allowed. Any special case had to be ratified by them. Now, with the contracting out clause, Essar can outsource ‘non-perennial and low-skilled work’ on economic considerations.

These steps alone will lead to a $10-million savings for Essar over three years.

For the white collar workers, the wage revision will be an identical three per cent over the first three years (Aug 2010-Aug 2013). In their fourth and final year, beginning August 2013, they will get a similar amount to what their blue collar counterparts will renegotiate as their new wage after a three-year expiry.

In another significant development, in the supervisory category, workers’ progression and career growth will be determined on merit by the company and not just by the union body. Keeping in mind the global portfolio of Essar Steel as well as the entire group, certain white collar jobs such as payroll, information technology and accounting have been included in the shared services category.

“Such shared services can now be distributed among our group companies, like Aegis. Everything need not be in the plant site,” said the Essar official.

The separate agreements between management and the two unions is thought to make the latter unlikely to go on strike, as one side’s wage revision will be linked to the renegotiated terms of the other.

Analysts believe this development will be noted across the sector, as many Indian steel majors have had issues with labour unions when they tried to restructure businesses after acquiring assets in high-cost Western markets.