1999 Annual Review for IRELAND

This record reviews 1999's main developments in industrial relations in IRELAND

Economic developments

The Irish economy continues to perform exceptionally by EU standards. GDP grew by 8.9% in 1998 and 8.4% in 1999 and GNP grew by 8.1% in 1998 and 7.4% in 1999. The general government balance in 1999 was a surplus of 1.5% of GDP. In 1999, the exchequer surplus stood at IEP 1,192 million compared with IEP 747 million in 1998. Public debt as a percentage of GDP was 47% in 1999, compared with 49% in 1998. Inflation stood at 3.0% as of November 1999.

The robust performance of the economy resulted in strong employment growth, with 76,000 jobs created in 1999, consisting mostly of full-time positions. There were further reductions in unemployment during 1999 - as of December 1999 the unemployment rate stood at 5.1%, compared with 7.1% in 1998, and appeared to be continuing to fall.

Political developments

The current government consists of a coalition between the majority centrist Fianna Fail party and the small right-of-centre party, the Progressive Democrats (PD s). This coalition government has been in power since June 1997. The next general elections are not due until 2002.

Collective bargaining

Pay

A 1999 survey of 1,122 pay settlements in the private sector and the commercial semi-state sector by the Services Industrial Professional and Technical Union (SIPTU) showed that the level of adherence to the basic pay terms of the current national intersectoral agreement, Partnership 2000 (P2000), remained high, at 88% (IE9906280F). Of the settlements in the survey, there were 131 cases (11.6% of the total) where "above the norm" basic pay increases were agreed. In many of these cases, the extra increases were related to productivity improvements.

The majority of pay settlements have thus conformed to the terms of P2000. There has undoubtedly been a degree of wage drift, however, with companies operating in specific sectors concluding settlements above the terms set out in P2000. This is particularly evident in companies operating in tight labour markets and competing to attract and retain skilled workers, most notably in pharmaceutical, construction, electronics and information technology companies. On the whole, however, deals on a plant-by-plant basis appear to have largely conformed to the terms of P2000.

The government and the social partners have recognised that new forms of pay determination will need to be introduced in both the private and public sectors (IE9904276N). In the private sector, it has been generally accepted that a much greater emphasis than hitherto needs to be placed on promoting profit-sharing and gainsharing schemes at enterprise level. A perceived advantage of these schemes is that they allow employees to share in the gains of economic success, while helping to curb inflation.

Pay determination is a much more complex and problematic issue in the public sector. Growing wage pressures and high-profile industrial disputes in the public services were the most intractable issues in Irish industrial relations in 1999 (IE9909292N). The government's public sector pay policy has been put under serious pressure as a result. The nurses' strike in October 1999 starkly illustrated the tensions surrounding public sector pay (IE9910297N). Although the strike was resolved (IE9912202N), this by no means removed the possibility of other public service groups responding by pursuing "knock-on" pay claims in an attempt to bridge the "relativity gap". The government has emphasised that the existing system of public service pay determination, based on pay relativities, is outdated and that new ways will have to be found to reform it. (The proposed new national agreement reached in February 2000 - see below under "Outlook" - introduced a special one-off 3% "catch-up" pay award for almost 60% of public servants, aimed at restoring some parity with groups such as nurses, police and prison officers, who all secured higher increases under P2000. There will also be a new "benchmarking" body to allow public servants to seek comparisons of their pay and conditions with similar groups in the private sector.)

It appears likely that some form of performance-related pay (PRP) will be introduced in the public sector in the future. A four-tier system of PRP was proposed in a report commissioned by the government (IE9910295F) which was released at the end of 1999. There is likely to be some resistance to PRP from public sector trade unions, most particularly if it is introduced on an individualised basis.

Working time

There were no major changes in the duration of working time in 1999, with average collectively agreed normal weekly working hours remaining at 39.

The most recent evidence available on collective agreements on flexible working time is the Labour Court register of collective agreements under the Organisation of Working Time Act (which implemented the EU Directive on working time). This register shows that by the end of 1998, 112 collective agreements providing for variation of the provisions of the Act had been agreed. The provisions can be varied by either averaging out the Act's 48-hour weekly hours limit over a 12-month period (the reference period is normally two, four or six months, depending on the workers' situation) or by phasing in the 48-hour limit over two years, with limits of 60 hours in the first year and 55 hours in the second. Many of the agreements involved both types of variation. The three main sectors in which agreements were registered during 1998 were chemicals, metals and building.

Equal opportunities

In general, collective agreements that place an emphasis on issues such as equal opportunities, training and employment creation and retention are very limited in Ireland, as the vast majority of agreements tend to focus on pay rates and conditions and on changes in work organisation. Under the P2000 national agreement, a commitment was made to develop a strategy which enhances equality and counters discrimination in both employment and non-employment areas and to extend the principle of non-discrimination to wider groups. An expert working group on childcare issued recommendations in February 1999 for a national childcare strategy (IE9902269F). It also recommended the expansion of "family-friendly" policies to assist women in reconciling employment and family life, to encourage the involvement of fathers, and to help employers retain skilled employees.

Job security

Since 1991, the social partners have participated in area-based partnership schemes which are concerned with combating long-term unemployment and social exclusion. There are 38 of these partnerships operating in various geographic regions. More recently, four European Commission- sponsored Territorial Employment Pacts (TEP s) have been introduced. These TEPs complement and coordinate the area-based partnership initiatives.

However, the work of these bodies appears to have had little impact in terms of promoting collective negotiations over employment creation or retention in individual companies in Ireland. This largely reflects the fact that bargaining at company level is very rarely primarily concerned with employment creation and related issues in Ireland.

Training and skills development

The social partners have been involved in a number of training initiatives under P2000. The Training Awareness Campaign (TAC) was established in response to commitments in P2000. The TAC is funded by the EU ADAPT programme and ran from January 1998 to the end of 1999. It involved the setting up of sectoral TAC committees in seven sectors, whose task was to consider the particular training needs of their sector. The sectoral committees developed sectoral action plans and piloted a number of training schemes. These pilot projects were to be evaluated and the results disseminated and used to guide the development of other projects. The sectors covered by the programme were: food, retail, security, pharmaceutical, electronics, print and paper and engineering.

Furthermore, a new "partnership" training initiative jointly developed by the social partners in conjunction with the state-sponsored National Centre for Partnership (NCP) was announced in July 1999 (IE9907284N). It is entitled Working in partnership - a joint management/union training programme for partnership in competitive enterprises, and is intended to facilitate in a practical way the development of enterprise-level partnerships. The programme will incorporate joint training in areas such as: understanding and developing partnership in the manufacturing and services sectors; team skills; awareness of the changing world of work; reward and recognition systems; understanding financial information; improving the quality of working life; joint problem-solving; and consensus decision-making.

Legislative developments

The most significant legislative development in 1999 was the introduction of the Employment Equality Act 1998 (IE9909144F). The Act came into force on 18 October 1999 and has been described as one of the most significant pieces of Irish employment legislation in the last 20 years. The Act outlaws discrimination on seven new grounds, in addition to the existing grounds of gender and marital status. The new grounds are: family status, sexual orientation, religious belief, age, disability, race and membership of the traveller community. Thus, single parents, gay people, older workers and those with disabilities are among those who should see their access to jobs and promotion opportunities improve under the Act. The Act also defines sexual harassment and harassment for the first time in Irish law.

This legislation provides Ireland with one of the most far-reaching equality laws in Europe. Its success in promoting equality will be influenced by various social, political and economic factors, with initiatives within individual organisations continuing to be significant.

The government is committed to introducing a National Minimum Wage (NMW) by April 2000. All that remained in 1999 was for the social partners to agree a final rate (IE9907140F). A rate of IEP 4.40 per hour was proposed by the National Minimum Wage Commission (NMWC) in 1998. A report by the Economic and Social Research Institute (ESRI) concluded that a NMW set at this rate would have little impact on wage costs and employment levels. The final rate at which the NMW was a central issue in negotiations on a successor to P2000. (The proposed new national agreement reached in February 2000 - see below under "Outlook" - provided for an initial minimum of IEP 4.40 per hour, increasing to IEP 4.70 in July 2001 and IEP 5.00 in October 2002.)

The organisation and role of the social partners

There were very few real changes to the organisation and role of the social partners in 1999. One of the main issues concerning the social partners towards the end of the year was the negotiation of a new tripartite national agreement. Negotiations formally began in November 1999 following decisions on the part of both the Irish Confederation of Trade Unions (ICTU) and the Irish Business and Employers Confederation (IBEC) to enter into talks (see below under "Outlook").

One of the other main tasks of the social partners in a national context was involvement in the drawing up of the Irish National Action Plan (NAP) for employment. Although the social partners played an active role in the formulation of the 1998 NAP, ICTU in particular complained that its involvement in the 1999 Plan was restricted (see below under "National Action Plan (NAP) for employment").

Industrial action

The total number of working days lost through industrial action in 1998 was 37,374. During the first half of 1999, the figure stood at 28,191. In 1998, there were 33 industrial disputes in total, while there were 16 in the first half of 1999. The most serious disputes in 1999 occurred in the public services, particularly the high-profile nurses' dispute. The national strike staged by 27,000 nurses began on 19 October 1999 (IE9910297N) and constituted a major test of strength between the government and the nursing unions. The key issue for the nurses was their bid to enhance both their pay and professional status to a level that they felt was commensurate with their qualifications and the professional demands which are made upon them. The government, for its part, was fearful that further concessions would provoke "knock-on" pay claims elsewhere in the public sector. For this reason, the government was resolute in its determination to face down the nurses, partly in an attempt to dissuade other public sector workers from pressing their own claims. The strike was called off after nine days, after the nurses had secured some concessions that exceeded the terms previously offered following a Labour Court recommendation (IE9912202N).

National Action Plan (NAP) for employment

The social partners were active in drawing up the 1998 Irish NAP - they were asked for their assessment of the 1998 Plan, attended a seminar with the European Commission on the NAP and Employment Guidelines, and were also consulted on a bilateral basis by the Irish Department of Enterprise, Trade and Employment on the text of a draft of the NAP. The Department took account of the views of the social partners in formulating the final NAP. However, social partner input into the formulation of the 1999 NAP was effectively limited to commenting on the draft Plan presented to them. They did not participate in terms of deciding what should be included in the Plan. The limited social partner input into the development of the 1999 NAP partly reflected the restricted time which the Department had to prepare and submit the plan to the Commission, as well as the limited resources which the Department itself had to devote to developing it.

ICTU was dissatisfied with its input into the development of the 1999 Plan, maintaining that there was no meaningful opportunity for social partner involvement in the meeting with the European Commission. It also felt that its input was restricted to commenting on draft proposals prepared by the Irish government, rather than sitting down with the government to decide on the policies and priorities for the Plan. ICTU believes that, for participation to be meaningful, the social partners would have to be involved in consultations at least three months before the deadline for completion of the NAP.

IBEC also acknowledged that the consultation period for the 1999 Plan was very short and that opportunities for the social partners to contribute were limited, but was satisfied with its overall input into employment-related policy and initiatives, pointing to the example of the social partners' participation in employment-related initiatives within the context of P2000.

The limited input of the social partners in the development of the 1999 NAP should be assessed in the context of this participation in developing employment-related policy under P2000. There is a considerable degree of overlap between what is contained in the NAP and the Employment Guidelines, and what was already contained in P2000. This is significant because it shows that the social partners in Ireland have for some time been engaging in the kind of initiatives contained within the Guidelines.

The impact of EMU on collective bargaining and industrial relations

There was some debate over the impact of EMU on Irish industrial relations during 1999. For some commentators, the critical issue relates to Irish competitiveness in relation to the UK. In P2000, and the National Economic and Social Council report underpinning it, it is suggested that it is necessary if there is a rapid depreciation of the UK currency that there is sufficient trust between the social partners to tackle potential problems. Coordinated wage bargaining, in the context of a negotiated national social partnership, which extends to the level of the individual enterprise, is seen as the best way of addressing any potential problems. Profit-sharing initiatives are seen as affording significant benefits at a macro and micro level; for instance, in helping to absorb any shocks that may arise from a rapid downturn in sterling.

EMU is likely to promote the continuation of national agreements in Ireland, although future agreements are likely to be quite different from P2000. Paradoxically, while EMU is likely to promote the retention of national agreements, primarily because of their undoubted contribution to economic competitiveness, at the same time it could possibly make it more difficult to reach agreement during negotiations because it may facilitate wage transparency across the EU, influencing the tactics and actions of the bargaining actors.

At the moment, however, it is possible only to speculate about what might happen. As of yet, IBEC and ICTU have not made any explicit references to cross-national comparisons of wage or productivity data in national agreements. ICTU has been somewhat more active than IBEC with regard to communicating with confederations in other countries over the coordination of bargaining.

It is unlikely that explicit trans-European collective bargaining will develop in any formal sense in the foreseeable future, particularly over wages. The diffusion of European Works Councils (EWC s) within Irish-based multinational enterprises may, however, conceivably promote informal, "arms-length" bargaining in relation to non-wage issues such as training and health and safety.

Employee representation

Early in 1999, the "high level group" dealing with the thorny issue of trade union recognition in Ireland formally approved a breakthrough agreement on the issue, which was accepted by the social partners (IE9903135F). The agreement retains a voluntarist approach, with the Labour Court issuing legally binding recommendations on recognition only when an employer rejects or deliberately abuses the voluntary process. Consequently, companies have an either/or choice between opting for the voluntary route or rejecting it. In instances where companies reject the voluntary route, a trade union may refer the matter to the Labour Court for a recommendation. Ultimately, the Court cannot issue a legally binding recommendation on employers formally to recognise the union(s) concerned per se, but companies may be compelled to accept the Court's recommendations in respect of pay, procedures and conditions of employment. Further, individual employees will now be entitled to professional representation in instances of dispute and grievance with their employers.

The EU Directive on EWCs, implemented in Ireland by the Transnational Information and Consultation Act 1996, initially affected 271 Irish-based operations of multinationals. It has been estimated that the number of operations in Ireland that covered by the Directive has increased to roughly 550 as a result of the extension of the Directive to cover the UK from December 1999.

New forms of work

The implementation of the EU Directive on part-time work into Irish law has been the subject of tripartite discussions between ICTU, IBEC and the government. The discussions started in late June 1999, and while no date has been set for the publication of the relevant legislation, the deadline for implementation into Irish law was 20 January 2000.

Outlook

The issue which most preoccupied the social partners in early 2000 was the renegotiation of the national agreement which formally expires at national level at the end of March 2000. In November 1999, the social partners commenced talks on a new partnership agreement to replace P2000 (IE9911146F). Crucially, the context of social partnership negotiations has changed from "managing crisis" to "managing economic growth and rising expectations". This fundamentally different context has provoked a number of tensions, which revolve around two main and related issues: income distribution and social equity. These issues both relate to concerns that the wealth that has been generated by strong economic growth is not being distributed equitably.

Tensions over income distribution and social equity were further fuelled by the contents of the 2000 budget issued in December 1999, which was seen as disproportionately benefiting the better off at the expense of low-paid people. The 2000 budget was widely seen as providing the government with a perfect opportunity to develop further the pay/tax trade-off policy of recent years, improve the position of low-paid and marginalised people, and help bolster negotiations over a successor to P2000. In the event, the Finance Minister's budget provoked a great deal of controversy over the failure to improve the position of the low paid, as well as over moves to "individualise" tax bands.

The budget controversy exacerbated the obstacles and difficulties that already existed in terms of securing a new national agreement. A national deal was already going to be more difficult to achieve in the present context of economic boom and rising expectations than at any time since national programmes commenced in 1987. This was largely because the gap between employee and union expectations and what employers were prepared to concede was so wide. In addition, the issue of reforming public service pay determination was likely to prove to be very thorny.

Despite these undoubted obstacles, it seemed more likely than not that a deal on a new agreement would eventually be struck, albeit after considerable difficulty. This is largely because the social partners and the government generally perceive that the benefits of national agreements outweigh the costs. There is also a general feeling that the alternatives, such as a return to "free-for-all" local collective bargaining, are not practicable.

(A proposed new three-year agreement, the Programme for Prosperity and Fairness (PPF) was indeed reached in February 2000 (IE0002205N), and was expected to be endorsed by the members of IBEC and ICTU by late March. The central component of the PPF is a 33-month pay agreement which involves a minimum 15% pay rise (15.75% on a cumulative basis) for all employees as follows: 5.5% for the first 12 months; 5.5% for the next 12 months and 4.0% for the last nine months. There are to be minimum flat-rate weekly increases of: IEP 12 in respect of the first year's payment; IEP 11 for year two; and IEP 9 for the final nine months. This means that the lower paid will secure a higher overall increase than the basic 15% rise available to all employees. The PPF also provides for: the new NMW to be set at IEP 4.40 per hour, increasing to IEP 4.70 on 1 July 2001 and to IEP 5.00 from 1 October 2002; a separate "catch-up" pay award worth 3% for specific groups of public servants, payable from October 2000; voluntary negotiations at local level under the SECTION.HEAD of "partnership", which can include negotiations on issues such as work organisation and new forms of financial involvement; a new role for the Labour Court in deciding what constitutes a breach of the wage agreement; and a government commitment to tax cuts worth IEP 1.5 billion over the next three budgets, involving a projected additional average increase of 10% in take-home pay.)

In terms of the labour market, with the dramatic reduction in unemployment rate and a strongly embedded structural component to residual long-term unemployment, as well as a levelling-off of the increase in labour force participation by women, the supply of available workers has decreased somewhat, and there has been increasing evidence of labour and skill shortages. Labour shortages have particularly affected certain sectors of the economy, with companies in the software, retail and tourism sectors, for example, finding it increasingly difficult to recruit workers. As a result there has been upward pressure on pay in these sectors. Employers are increasingly looking to immigrants as a source of labour.