Ireland: Private sector pay emerges from the recession
As the Irish economy recovers, there is evidence that the rate of private-sector pay settlements is increasing, with modest wage rises the norm where agreements have been negotiated locally in the absence of any national-level agreement.
The rate of wage settlements in the private sector has been gradually increasing in tandem with an improving economic outlook, with a broad consensus among the social partners that locally negotiated company-by-company agreements are indicative of the gradual normalisation of wage bargaining.
The government, trade unions and employers appear to be comfortable with this situation for the time being, with little appetite for a return to the sort of centralisation that characterised the social partnership era (1987–2009). Nonetheless, the social partners retain the option to return to some form of consensus-based national bargaining in the future, should wage pressures make that approach a more attractive proposition.
In 2013, the country’s largest union, the Services, Industrial, Professional & Technical Union (SIPTU), estimated that around three-quarters of their members in the chemicals and pharmaceuticals sector had received a pay increase between 2010 and 2013 under the union’s local bargaining pay strategy in the sector. Two-thirds of the union’s membership of over 200,000 are in the private sector. The SIPTU strategy was to select a 2% annual target by reference to German pay settlements in the chemicals sector as one of the influencing factors, also 'citing pay deals covered in the European Foundation’s European Industrial Relations Observatory (EIRO) database.'
In a review by the specialist weekly Industrial Relations News (IRN) of over 70 wage settlements, which IRN published and verified in 2013, it was clear that sectors outside of pharmaceuticals and medical devices were also concluding wage deals. Firms in sectors such as food, drink and tobacco, electronics and engineering, and retailing were gradually attaining the 2% ‘benchmark’ (in IRN 14-2013).
Revealingly, in 2013 a 3% pay rise was recorded at Ireland’s largest retailer, Dunnes Stores – the first since 2007 – covering around 14,000 employees. In July 2014, IRN reported that Dunnes (which does not negotiate directly with trade unions but does employ thousands of union members) implemented another 3% increase in respect of 2014.
The Irish Business and Employers Confederation (Ibec) largely concurred with IRN that 2% was about the average level of pay rises agreed where agreements were negotiated in 2013.
Differences emerge between larger and smaller companies
A more recent (February 2014) joint survey by the Chartered Institute for Personnel Development (CIPD) and IRN, covering 660 firms of all sizes – large firms (250+ employees), medium-sized firms (51–250) and small firms (50 employees or fewer). It found that pharmaceuticals/chemical/medical devices paid 2.4% in 2013; food/drink and agribusiness manufacturing/processing averaged 1.8% in 2013; and information technology firms, 3%.
For the current year, 2014, the CIPD-IRN private-sector pay survey showed that larger firms, in general, were more likely to pay a wage rise this year, but that average wage rises will be more modest than some of the wage rises in smaller and medium-sized firms. A small minority of small firms were also more likely to implement wage cuts, which for the survey as a whole, however, promise to be very limited.
Large and medium-sized firms were more likely to grant a rise this year, compared to small firms, with this last category split almost evenly between pay rises and pay cuts (though a majority of these small firms either intend maintaining the status quo, or have yet to decide what to do).
Of the close to 200 firms that have decided to implement a pay rise in 2014, the average comes out at 2.5% with non-union firms at 2.8%, compared with unionised firms at 1.9%. Again, the steady trend among large firms is apparent, coming out at 2.2%, compared to 2.4%, for medium-sized firms.
The CIPD-IRN survey showed more similarities between large and medium-sized firms than between these two categories and small firms. 'In fact, the survey showed that the latter group displays characteristics of a sector that is still struggling to get into the sort of growth narrative that seems justified when looking at larger and medium companies', IRN reported.
The survey sample was composed of roughly 60% non-union firms and 40% unionised firms, but taking large companies only, some 56.4% of this group are unionised compared with 43.6% that are non-union.
In terms of wage cuts in 2013, only 5.1% of large firms imposed a cut, compared with 9.2% of small firms; only 1% of medium-sized firms did so.
Commenting on the survey, CIPD-IRN said 'There is certainly no sense that a large majority of firms feel the economy is now on a strong current of recovery, rather that some continue on an already steady course, some are optimistic they are set to join a steady path toward recovery – and a good number remain very cautious'.
Wage rises in key players in retail sector
Reported wage agreements in IRN in the retail sector in 2014 to date indicate that wage rises are continuing to spread beyond manufacturing. The Irish multinational Penneys (trading as Primark internationally), negotiated a new comprehensive agreement with the retail union, Mandate, which includes a 3% pay increase (as did Dunnes Stores, see above), as well as a new banded hours’ system, which aims to provide enhanced security of earnings.
Other pay agreements in the retail sector include increases of 2% at Superquinn (now SuperValu), Argos, Debenhams and Brown Thomas. Up to 15,000 staff in some 150 Tesco stores were offered a new wage deal worth 2%, following negotiations with the Mandate and SIPTU unions. Around 1,000 workers at Heatons department store agreed a deal for the restoration of a 3% pay cut applied in 2012, as well as a 2% pay increase in October 2015.
Ibec and government argue against national-level agreement
In January 2014, Richard Bruton, the Minister for Jobs, Enterprise and Innovation, said he did not believe a national-level agreement would be feasible, adding that this would likely remain the situation for a further '18–24 months'. Private sector unions, for now, broadly favour these local bargaining agreements, although there are indications that some – including SIPTU – would welcome parallel discussions on living standards.
The Ibec position is very similar to that adopted by Finance Minister Michael Noonan. Earlier this year, the Minister observed that if there were a national bargain, this could mean wage rises that were 'too high for some sectors' but in others 'lower than would be justified'.” Ibec has stated that up to 50% of its members are likely to award pay increases over the next two years, but Danny McCoy, its Chief Executive Officer (CEO), said that 'companies are at very different stages and now is not the time for any central wage direction'.
The current position of wage bargaining in the private sector is no longer of the ‘one-size fits all’ variety recorded under successive national agreements. It could be characterised as ‘targeted’ local bargaining, governed by voluntary dispute resolution protocols agreed between the lead social partners organisations – ICTU and Ibec. These protocols have been useful in a process to manage pay disputes, and fit seamlessly into Ireland’s voluntarist industrial relations tradition.
The steady and gradually increasing number of wage settlements suggests there is no immediate danger of a wage ‘explosion’, especially with inflation in Ireland mirroring low inflation across the EU. The comment by Ibec CEO Danny McCoy – that the pattern of pay development in 2014 in the private sector is indicative of the 'economic normalisation' of the economy – may be the most apt description of the current situation. Nonetheless, the social partners will be aware that historically, national wage bargaining tends to be the default position in Ireland, and could return were critical factors, such as inflation and labour market demand, to change dramatically.