Five hundred staff at Bank of Ireland's life assurance arm are pushing for performance-related pay increases of at least 5% despite an 81% collapse in the bank's profits and the recent €3.5bn capital injection from the government

The bank, which has €5.3bn worth of impaired loans, has refused to grant the pay increases to the staff at New Ireland Assurance, arguing that such a move would not be justified in its current financial position.

According to their union, Unite, the bank has a contractual obligation to pay out this year's bonuses, irrespective of the bank's financial position.

In previous years, the staff received pay increases and performance bonuses equivalent to around 20% of their annual salary.

The union's campaign has been backed by the Labour Court, which believes the pay rises are due under a joint agreement between staff and the bank, which cannot be withdrawn until it is "altered, renegotiated or abandoned by agreement".

"The increases are just part of the agreement that BOI signed up to and have to be paid regardless of whether the economy is in a mess. For instance, the civil service is still receiving increments," said Unite regional officer Colm Quinlan.

Quinlan admitted that the union's pay campaign was unlikely to receive public support due to the public's anger towards the banking sector.

"These people aren't bankers – they are in a life assurance business that happens to be owned by a bank. I wouldn't be confident of winning public sympathy for them but there is a contractual issue at stake," he said.

The staff involved in the dispute opted out of the company's traditional pay scale in 2001 in favour of a complex performance-based system, which including two different cash bonus schemes.

A bank spokesman said the bank was "considering the Labour Court recommendation and will be reverting to the trade union".