Signs that prolonged pay freeze is beginning to thaw
Published: 2 April 2013
Since the onset of the economic crisis in Ireland in 2008, pay freezes have been the norm in the private sector. The collapse of national wage agreements came in tandem with the demise of the formal social partnership process in 2009. The last of the national wage deals – the Transitional Agreement (2.63Mb PDF) [1] – outlined a phased 6% (3.5% plus 2.5%) increase through 2008 and 2009. While some profitable companies honoured the agreement, other companies delayed or said they were unable to fund one or both of the phased rises.[1] http://www.taoiseach.gov.ie/attached_files/Pdf%20files/Taoiseach%20Report_web.pdf
A survey by the Irish Business and Employers Confederation reveals that pay rises in the private sector are expected in 39% of its affiliated firms in 2013. Meanwhile, one of the country’s largest retailers, Dunnes Stores, announced that it was to give 14,000 staff a 3% pay rise, the first increase in the company’s wages for six years. This could be a sign that private sector pay is slowly emerging from its ‘deep freeze’ which has been in place since the start of the economic crisis in 2008.
Crisis wage freeze
Since the onset of the economic crisis in Ireland in 2008, pay freezes have been the norm in the private sector. The collapse of national wage agreements came in tandem with the demise of the formal social partnership process in 2009. The last of the national wage deals – the Transitional Agreement (2.63Mb PDF) – outlined a phased 6% (3.5% plus 2.5%) increase through 2008 and 2009. While some profitable companies honoured the agreement, other companies delayed or said they were unable to fund one or both of the phased rises.
The Irish Business and Employers Confederation (IBEC) publishes an annual pay survey of employers. Surveys for recent years confirm that the trend among employers was to freeze pay during the first four years of the crisis.
| 2009 | 2010 | 2011 | 2012 | |
| Employers freezing pay | 54% | 73% | 68% | 69% |
| Employers cutting pay | 22% | 11% | 7% | 5% |
| Employers giving pay rises | 12% | 8% | 21% | 23% |
Pay freeze thaw
The most recent IBEC pay survey revealed an increase in the number of employers opting to award a pay increase – up 16% from the previous year to 39% of respondents, the largest annual jump in numbers since the crisis began. The 2013 survey also revealed a decline in companies saying they intended to freeze pay – down from 69% in 2012 to 58% this year. The median pay increase size for those employers who said they would apply increases was 2%.
With the publication of the 2013 pay survey results, IBEC’s Director of Industrial Relations, Brendan McGinty, said:
...pay expectations need to reflect economic realities. Most employers are still not in a position to award general pay increases and remain focused on regaining competitiveness and getting pay costs back in to line with our competitors. The ability of employers to sustain and create jobs must not be undermined in the pursuit of unrealistic pay claims.
McGinty signalled in 2010 that following the Transitional Agreement in 2008, there would be a five-year pay freeze in a majority of firms. He also said in 2010 that any pay rises before 2013 would be ‘unrealistic’.
However, just one union, the Technical, Electrical & Engineering Union (TEEU), explicitly stated that it was seeking a 5% increase for members at profitable firms for 2013. Pay increases of this size would generally be applied on a phased basis and/or for a period greater than 12 months. This suggests that most unions are still cautious about seeking pay increases for their members.
Sectoral pay increases
Some sectors, such as the pharmaceutical and medical devices sectors, have been increasing pay over the past year. Deals in early 2013, as reported by Industrial Relations News (IRN), were mostly at pharmaceutical companies. Pfizer awarded 400 workers 2% over 12 months, Merck Sharpe & Dohme settled on 4% over 24 months, and Rowa Pharmaceuticals agreed to 4% over 24 months for 25 of its workers.
While the retail sector has been hit hard by the crisis, three large retailers, Tesco, Marks & Spencer and Debenhams, all gave pay increases to staff during 2012. Tesco agreed a 2% increase over 13 months for 13,000 staff; Marks & Spencer agreed 2.5% over 12 months for 3,000 employees; Debenhams awarded a 2% increase to 1,400 employees.
Early in 2013, Dunnes Stores announced it was giving a 3% pay increase to its 14,000 staff. The 3% increase was above the median pay increase as indicated by the IBEC pay survey respondents.
Mandate is the largest union representing workers at Dunnes Stores. Assistant General Secretary Gerry Light told IRN he interpreted the Dunnes Stores 3% increase as being for 12 months. However, he also said that the size of the pay increase depended on the industrial relations environment at each company. He said where there was less security at a company – such as the number of hours available – a pay claim would be higher to compensate for the relative vulnerability of staff concerned.
Commentary
Only a minority of employers in Ireland are applying pay rises. But it is significant that large retailers such as Dunnes Stores – which has not increased pay since 2007 – are demonstrating their willingness to reward staff. This return to pay increases indicates a thawing of the pay freeze practice that has been commonplace in Ireland since 2008.
Brian Sheehan, IRN Publishing
Eurofound recommends citing this publication in the following way.
Eurofound (2013), Signs that prolonged pay freeze is beginning to thaw, article.
