Special Report 103 - Handling of remuneration for certain senior staff in the University of Limerick and Institute of Technology Sligo
Published on 27 November 2018
This report is about remuneration of certain senior staff members in the University of Limerick and the Institute of Technology Sligo. Issues examined include the award of professional added years for pension purposes in the University of Limerick, the admission of staff of a subsidiary company to the University of Limerick’s pension scheme and the handling of severance payments at both the University of Limerick and Institute of Technology Sligo.
Award of professional added years
Certain public sector pension schemes provide, in exceptional circumstances, for discretionary awarding of ‘professional added years’ for pension purposes. These provisions are designed to compensate for the inability of certain professional or technical staff to qualify for a full pension based on 40 years service by mandatory retirement age.
Professional added years are a form of remuneration, which for universities is subject to the sanction of the Department of Education and Skills and the Department of Public Expenditure and Reform.
For historical reasons, professional added years in the five ‘older’ universities are approved on a case-by-case basis by the Minister for Education and Skills and the Minister for Public Expenditure and Reform. Up to late April 2018, the newer universities – Dublin City University and the University of Limerick – operated separate, independent frameworks for the award of professional added years.
Based on the analysis of awards in those two universities between 2012 and 2016, this examination has found that the University of Limerick awarded more employees more generously in that regard than was the case in Dublin City University.
In Dublin City University, professional added years were awarded only to academic staff. In the University of Limerick, 18% of the awards were to non-academic/ managerial staff.
Following circulation of a draft of this report, the Higher Education Authority wrote to inform both universities that all applications for professional added years awards for the benefit of university employees will now be approved by the Pension Unit of the Department of Education and Skills, with effect from 30 April 2018.
Admission of senior staff of subsidiary to university pension scheme
The Exchequer funds universities to allow them to meet their obligations under statutory defined-benefit pension schemes for their staff.
In general, subsidiary companies are used by third level education institutions as a means of managing non-core functions in a manner that separates their business affairs from those of the institution. This allows the non-core functions to be run on commercial lines, and subsidiary employees to be remunerated on competitive market terms. Subsidiary companies usually provide for employees to receive pension entitlements on a defined-contribution basis.
An arrangement put in place in late 2012 in the University of Limerick resulted in two executives employed by a subsidiary company being admitted to a University defined-benefit pension scheme that was about to close for new entrants. This resulted in the executives being granted additional pension benefits including professional added years for pension purposes. Those benefits have been valued actuarially at over €1.2 million.
Claims that the two executives had been promised benefits equivalent to those of employees recruited to the University at the same point in time were not documented.
Handling of severance cases
University of Limerick
In November and December 2011, the University of Limerick agreed with two senior managers that their employment would cease on 29 February 2012 on a severance basis, and severance payments were made on that date.
However, prior to their severance, arrangements were put in place with each of the senior managers to continue to make their services available to the University on a consultancy basis. Separate contracts for service were put in place in late 2011 between limited liability companies owned by each senior manager and the University.
Relative to what the two managers would have received had they continued in employment to the standard minimum retirement age, the combined severance/ consultancy arrangement put in place resulted in additional costs to the University of Limerick (including recurrent pension payments) estimated at €310,000 in net present value terms.
The process involved in implementing the two severance deals in the University of Limerick was reported on in a previous special report. In the course of the earlier examination, the University misrepresented the circumstances around the severance deals to the Office of the Comptroller and Auditor General and, in particular, failed to disclose that consultancy contracts had been put in place by the University with both managers at the same time that the severance deals had been implemented. Subsequently, certain matters related to the two cases were also misrepresented to the Department of Education and Skills and at a hearing of the Committee of Public Accounts.
Institute of Technology Sligo
A severance arrangement by Institute of Technology Sligo in 2016 significantly exceeded the sanction received from the Department of Education and Skills, when account is taken of a sum incorrectly classified as payment related to sabbatical leave.