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Financial Website Directory Ireland

National Minimum Wage Negotiations at Advanced Stage

Author: Niall Byrne
Category: Government & Money
Date Added: April 28, 2011 04:11:40 PM
Page Views: 2420

Despite the guarantees from both Fine Gael and Labour in their programme for Government, the country is still waiting on feedback from the coalition on the terms of the proposed plan to reverse the €1 cut to the national minimum wage.

It is entirely the case that any €1 reversal in the national minimum wage will require a stamp of approval from the IMF-EU. When the previous Government negotiated the terms of the Irish bailout package, an IMF Memorandum of Understanding was drafted and this quite clearly stated that a key term of that package would be a commitment from the Irish Government to “reduce by €1.00 per hour the nominal level of the current national minimum wage.” It is quite clear that the IMF will not renege on that agreement simply upon the request of the current government, particularly at a time when the government is requesting a reduction in the interest rate charged on the €85billion bailout from 5.8% to 4.8%. As a result, it may be the case that Ireland is going to have to engage in a bit of tit-for-tat in terms of counterbalancing labour market reform measures. However, according to the Minister for Finance, Michael Noonan, the IMF and the EU are satisfied that Ireland’s fiscal programme is on track and that critical benchmarks for banking sector reform have been met and they are optimistic that such a reversal will be in place by the end of May 2011.

Counterbalancing Measures
So what counterbalancing measure will Ireland have to concede in order to seek IMF-EU approval to the national minimum wage reversal?

  • There will be a 50 per cent reduction in the PRSI that employers must pay on wages up to the level of the minimum wage. This will have the effect of reducing the cost on employers when employing new workers.
  • The current system of sectoral wage agreements that currently exists will have to be reviewed and mordernised.
  • The introduction of a new jobs initiative programme. It is envisaged that this programme will be presented to the Dáil in May of this year.
  • Further policies which have enthused the IMF-EU include the proposed establishment of an independent Fiscal Advisory Council and a Budget Review Council which will independently  assess Ireland’s public finances and evaluate fiscal policy outcomes relative to targets respectively.
  • There has been no feedback on any agreement in terms the bailout interest rate negotiations.

It has been proposed that the new terms to the IMF-EU deal will take place on May 15th and 16th.

Sectoral Wage Agreements
Perhaps the biggest issue arising from this IMF-EU deal will be the sectoral wage agreement review. These sectoral wage agreements are know as Employment Regulation Orders (EROs) and Registered Employment Agreements (REAs). REAs and EROs were originally enacted under the Industrial Relations Act with the aim of protecting vulnerable employees in certain industries through various agreements on basic pay and conditions. The REAs and EROs apply to a wide variety of industries such as, Construction, Electricians, Catering, Hotels, Hairdressers and Retail Grocery Shops and the minimum terms and conditions set out within are said to apply to somewhere in the region of 240,000 employees or roughly 14% of the Irish workforce. Any amendment to these agreements will likely target a reduction in the premium hourly rates that such employees are entitled to and as such any amendment is likely to result in huge protests from employees and unions alike. These agreements have been under independent review since the 25th February 2011. The review body consists of a Chairman of the Labour Court, Mr Kevin Duffy, and a UCD Economic Expert, Dr Frank Walsh, and it was expected that they would have submitted their conclusions by the 08th April 2011. However, there has been no sign of this review report as of now and there has been no indication as to when it will be submitted. It is generally accepted that the sectoral wage agreement is in need of such modernization. However, some corners are also advocating that the sectoral system should be completely scrapped in view of the fact that the system of sectoral agreements commenced before employment legislation such as the National Minimum Wage Act 2000 and the Organisation of Working Time Act 1997 were introduced. Essentially, it is being argued that there is no need to have specific sectoral agreements to protect traditionally vulnerable employees when they now have a wide variety of employment legislation guaranteeing minimum standards of terms and conditions. Either way, the impact of these ongoing negotiations with IMF-EU will have long-lasting effects on employees and employers alike and all sides should watch this space extremely closely. 

Employers should seek advice from Peninsula Business Services when faced with any query in respect of an ERO or REA. Please phone the 24 Hour Advice Service on 01 8555050 and one of our experienced advisors will be happy to assist.