AN POST, the postal and retail group, has agreed to pay €20m in arrears owed to its employees under the last national pay agreement. The chief executive Donal Connell’s move to end a long-running dispute is a softening of the line adopted by his predecessor, Donal Curtin.

“While the issue has yet to be agreed by the board, it marks a very good start by the new chief executive at building a working relationship with the unions,” said Steve Fitzpatrick, general secretary of the Communications Workers Union (CWU).

Under the three-year Sustaining Progress pay deal, hammered out by the social partners in 2003, An Post’s employees and pensioners were due a 3% pay increase on November 1 that year, and another 4% in August 2004. Curtin invoked an “inability to pay clause” as he sought to bring the struggling state-owned company back to profitability.

The contentious issue ended up before the Labour Court last year. The court recommended that An Post pay the increase, but backdated only to January 2005. It also said the overdue payments should be treated as a registered debt to be paid when the company reached a period of sustainable earnings.

The unions approached the new management team before the summer to have the arrears paid up after An Post announced a pre-tax profit of €40.9m for 2005, up from €11.6m in 2004 and a loss of €29.7m in 2003.

While the company had virtually no cash when Curtin took the reins, it had net funds of €185m at the end of 2005, helped by the sale last year of PostTS UK and PostTS Spain, two electronic payment subsidiaries, to Alphyra for €80m.

The company’s coffers were boosted further by €107m last May from the sale of its former SDS site on the Naas Road.

The company continued to refuse to pay the amount outstanding, saying it had not yet reached sustainable profitability. This prompted the unions to refer the issue to the Labour Relations Commission, where it remained as Curtin handed over to Connell at the start of July.

“I think Connell’s wise in giving himself some breathing space here by agreeing to sort this out once and for all,” said a senior executive at another trade union involved in the stand-off. “He understands that An Post is always going to incur heavy labour costs.”

Costs for the group’s 8,966 full-time and 377 part-time staff came to €514m last year, equating to 68.3% of turnover.