2000 Annual Review for Ireland

This record reviews 2000's main developments in industrial relations in Ireland.

Political developments

The current government comprises a coalition between the majority centrist Fianna Fail party and the small right-of-centre party Progressive Democrats (PD s). This coalition government has been in power since June 1997. The next general election is not due until 2002, although there has been some speculation that there could be an election some time in 2001.

Collective bargaining

Pay

There were a number of significant pay developments during 2000. In March 2000, the social partners formally endorsed a new tripartite national agreement, the Programme for Prosperity and Fairness (PPF) (IE0003149F), which was the fifth successive national agreement to be concluded since 1987. The Irish Congress of Trade Unions (ICTU) endorsed the PPF by a majority of two-thirds, with 251 delegates voting in favour and 112 against at a special meeting. On the employers' side, a comfortable majority of the Irish Business and Employers Confederation (IBEC) general council endorsed the deal. As well as IBEC, employers were represented in the negotiations by organisations such as the Construction Industry Federation (CIF), the Irish Farmers? Association (IFA) and the Small Firms? Association (SFA). The voluntary and community sector was represented by the Irish National Organisation of the Unemployed (INOU), Congress Centres for the Unemployed, the Community Platform, the Conference of Religious of Ireland (CORI), the National Women?s Council of Ireland (NWCI), the National Youth Council of Ireland (NYCI), the Society of Saint Vincent de Paul and Protestant Aid. The PPF embraces a broader range of social and economic issues than any of the four previous national agreements.

The central component of the PPF is a 33-month pay agreement providing a minimum 15% pay increase, or 15.8% on a cumulative basis. This contains the following elements:

• a 5.5% rise (with a minimum increase of IEP 12 per week) in the first year;

• 5.5% (with a minimum increase of IEP 11 per week) in the following year; and

• 4.0% (with a minimum increase of IEP 9 per week) for the final nine months.

In addition, the agreement provided for a separate one-off "catch-up" pay award of 3% for civil servants and teachers, payable from October 2000, because, as so-called "early-settlers" under previous agreements, their pay fell behind other public sector groups which settled later (IE0002206N). Furthermore, in an effort to escape the "stranglehold" of pay relativity claims within the public sector, the government and the social partners agreed to set up a new "benchmarking body" with a remit to establish fair comparisons between the pay of public service workers and similar groups in the private sector. Finally, there was a commitment to introduce a national minimum wage of IEP 4.40 per hour in April 2000, which is due to rise to IEP 4.70 from July 2001 and IEP 5.00 from October 2002.

The PPF also contains three key income tax commitments. First, there will be overall increases in net take-home pay of some 25% or more over the lifetime of the PPF - as a result of combined pay and tax provisions. A second commitment is to remove all earnings below the minimum wage threshold from the tax net. A third commitment is to ensure that 80% of taxpayers do not pay tax at the higher rate.

There was increased evidence of wage drift in the private sector during the course of 2000, with numerous employers awarding pay increases above the basic terms of the PPF. This was influenced by the fact that many employers were experiencing labour and skill shortages (IE0006152F) in a tight labour market, and were finding it difficult to recruit and retain staff. The mounting pressure on pay was exacerbated when inflation started to rise rapidly and the PPF was soon subject to considerable pressure as workers and unions pushed for compensation for increases in the cost of living (IE0010159F). This pressure was accompanied by widespread industrial conflict in the public and semi-state sectors (IE0004149F). By November 2000, the rate of inflation stood at 6.8%, and the pressure from workers and unions for compensation built up to such an extent that IBEC eventually agreed to a review of the pay terms of the PPF. The pay review was finalised on 4 December 2000, just two days before the contents of the 2001 state budget were unveiled (IE0012161F). The unions were seeking a combined pay review and budgetary compensation package that would restore the value of improvements in living standards provided for in the PPF.

The pay increases in the pay review amount to an additional 3% over the remaining lifetime of the PPF. First, workers will receive an additional 2% from April 2001, which means that the second-phase pay award of the PPF will increase from 5.5% to 7.5%. Second, workers will receive a further 1% pay award from April 2002. An important concession to public service workers was the "fast-tracking" of the public service benchmarking process, which was set up to compare public service pay rates with those in the private sector pay. The benchmarking body is now due to report by June 2002, rather than the original deadline of June 2003.

Employers secured some compensation in exchange for the additional pay award. First, they obtained a reinforced industrial peace clause that will be monitored by a new National Implementation Body (NIB). Second, they secured the reinforcement of the "inability to pay clause" contained in the PPF for firms in "vulnerable" sectors such as clothing and textiles, which are exposed to difficult competitive conditions. Such firms will not automatically be expected to make additional pay awards. At the other end of the competitive spectrum, employers which have already paid over and above the terms of the PPF will not be expected to award another increase. All employers are entitled to secure various productivity concessions from workers in exchange for any additional pay award. Disputes over the application of the pay review will be referred to the existing dispute resolution bodies, the Labour Relations Commission (LRC) and the Labour Court (LC).

Turning to the main contents of the 2001 budget, the standard rate of income tax was cut by two points, from 22% to 20%. The top tax rate was also cut by two points, from 44% to 42%. The standard rate tax band for individual earners was widened, from IEP 17,000 to IEP 20,000 per year. Personal tax-free allowances were also increased, by IEP 800 for single earners, bringing the total to IEP 5,500 from IEP 4,700. For married couples, personal allowances were increased by IEP 1,600, bringing the total to IEP 11,000 from IEP 9,400.

The Pay As You Earn (PAYE) tax allowance was also increased to IEP 1,000. Significantly, earnings below IEP 144 per week are now exempt from income tax. Employees also benefited from a reduction in their PRSI social security contribution from 4.5% to 4%. The ceiling for employer PRSI contributions, which was previously IEP 36,000 per year, was abolished. Finally, employers benefited from a four-point reduction in corporation tax from 24% to 20%.

Working time

There were no major changes in the duration of working time in 2000, with average collectively agreed normal weekly working hours remaining at 39.

Job security

Employment-related collective bargaining in Ireland primarily takes place through national agreements. Successive national agreements have facilitated significant employment creation, and as a consequence, unemployment has declined substantially. As at December 2000, unemployment stood at 3.7%.

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 regions. More recently, four Territorial Employment Pacts (TEP s) sponsored by theEuropean Commission have been introduced. The TEPs complement and coordinate the area-based schemes.

Whilst national agreements have afforded particular prominence to employment and employment creation, and job security is a topic for discussion under a "workplace partnership clause" in the PPF, employment has yet to emerge as a significant issue within collective agreements at either the sector or company level. Sectoral bargaining is virtually non-existent in Ireland, and collective bargaining at company level is rarely concerned with employment creation. Consequently, there are few explicit employment security agreements.

Training and skills development

There are a number of initiatives contained in the PPF relating to training, adaptability and employability. The PPF incorporates a commitment to evaluating Active Labour Market Programmes (ALMP s). A particular emphasis is placed on increasing training provision and resourcing. There is also a commitment to developing a raft of measures to promote "life-long learning". This includes "all forms of learning, whether formal or informal, with the aim of improving knowledge, skills and promoting personal fulfilment". An important emphasis is placed on strengthening the link between the education system and the world of work. An important recent training innovation is the development of a government-funded enterprise-based training network called "Skillnets". Skillnets is an independent company whose board is comprised of government, employer and trade union representatives. The project involves collaboration amongst companies to develop training networks in different sectors. It also incorporates trade union involvement.

Although training is a topic for discussion under the "workplace partnership clause" in the PPF, few collective agreements at company level place an emphasis on training and development. The majority of agreements tend to focus on traditional issues such as pay and terms and conditions.

Legislative developments

The most significant legislative development in 2000 was the introduction of a statutory national minimum wage (NMW) on 1 April (IE9907140F). The NMW was set at a rate of IEP 4.40 per hour. It was enacted through the PPF and the National Minimum Wage Act 2000. There was a recommendation that the rate should be increased to IEP 4.70 from July 2001 and IEP 5.00 from October 2002.

Further, the Parental Leave Act 1998 was extended in July 2000 (IE0008217N) after the Irish government moved in July 2000 to comply with a finding by the European Commission that the act was too restrictive. Parents of children who were born between December 1993 and June 1996 are now entitled to 14 weeks' unpaid parental leave, thus removing the cut-off date of 3 June 1996 contained in the original legislation.

The organisation and role of the social partners

There were few substantial changes to the organisation and role of the social partners in 2000. The main issue during the year was the negotiation and introduction of the PPF, and in the following months, the role of the social partners in rescuing it by negotiating a pay review (see above under "Pay"). However, a significant development on the trade union side was the decision by the Association of Secondary Teachers Ireland (ASTI) in January to leave ICTU, freeing it to pursue claims outside the PPF (IE0005212N) (see below under "Industrial action")

Industrial action

There was significant industrial conflict during 2000, particularly in the public sector (IE0004149F). Indeed, industrial conflict in the public sector has been perhaps the most intractable issue in Irish industrial relations in recent times, and brought the PPF close to breaking point in 2000. This is inextricably linked to the fact that the ongoing economic boom is fuelling rising expectations amongst workers, who expect a fair share of the rewards while the boom lasts. Alongside these expectations, conflict has also been provoked by the increased "commercialisation" of some areas of the public sector, and a related concern by workers to protect or improve their pay and terms and conditions of employment.

The most high-profile examples of industrial action in 2000 were a 10-week train driver's dispute (IE0008154F) and an teacher's dispute which was still underway at the end of the year (IE0011224N). The train drivers' dispute involved about 100 members of the independent Irish Locomotive Drivers' Union (ILDA), who refused to work to the terms of a new pay and hours deal. The teachers' dispute involved 18,000 members of ASTI , who were seeking a 30% pay increase, on the basis of a perception that the terms of the PPF are inadequate. More generally, there is a feeling amongst teachers that their living standards have slipped relative to other occupations. The government has rejected the teachers' claim, however, because it is determined to keep the lid on public sector pay, and save the PPF. The situation at the end of the year was one of deadlock.

Other examples of industrial action included a dispute over low pay at the state-owned airline, Aer Lingus, involving cabin crew, catering staff, and baggage handlers (IE0011223N).

National Action Plan (NAP) on employment

Regular engagement has taken place amongst the social partners and the government in relation to the preparation and monitoring of NAPs. It is stated in the PPF that employment plans will be the main channel for consultation on overall labour market policies: "The Employment Action Plans (EAPs) and the operational programmes under the National Development Plan (NDP) will be the principal means for progress [on labour market policies] and, in terms of both preparation and monitoring, substantive and timely engagement with the social partners will take place".

The involvement of the social partners in the NAP overlaps considerably with their role in developing employment-related policy under the PPF. The PPF is comprised of five operational frameworks, which closely correspond with the four EU Employment Guideline pillars of employability, entrepreneurship, adaptability, and equality. The five PPF frameworks are:

1. living standards and workplace environment;

2. prosperity and economic inclusion;

3. social inclusion and equality;

4. successful adaptation to continuing change; and

5. renewing partnership.

The social partners have actively contributed to all of these areas. For example, with regard to framework four, the social partners have worked closely with the government in exploring and developing the various aspects of a knowledge-based economy. Furthermore, in relation to framework five, the social partners and the government have been seeking to diffuse partnership more widely at enterprise level.

Equal opportunities and diversity issues

The PPF contains a wide range of equality measures, describing equality of opportunity and the elimination of discrimination as "key aspects of a modern, open, inclusive society". The programme supports practical policies and measures to promote equality through:

• a progressive legislative framework which eliminates discrimination in employment;

• institutions to combat discrimination and to provide redress and support to people experiencing problems;

• further measures to tackle equality issues; and

• a system of "equality proofing" and ongoing monitoring mechanisms.

A specific measure contained in the PPF is that, in response to the challenges arising from the implementation of the Employment Equality Act 1998 (IE9909144F), and in order to promote equal opportunities in the workplace, a "framework" will be established, comprising representatives from IBEC, ICTU, public service employers and the Department of Justice, Equality and Law Reform. This structure, which will have a specific budget, will assist in the development and implementation on a voluntary basis of equal opportunity policies at enterprise level and provide encouragement, training, information and support to employers and employees and their representatives. It is recommended that equal opportunities policies/practices be developed and implemented, on a voluntary basis, at enterprise level by agreement between employers and unions. Issues identified as appropriate for discussion at enterprise level include:

• policy statements/equality programmes;

• positive action programmes;

• policies on sexual harassment, harassment and bullying at work;

• racial equality policies; and

• guidelines to implement support mechanisms at work for victims of domestic violence.

The PPF contains a number of measures to support childcare and family life and to improve the "work-life balance" (IE0009155F). In particular, it is stressed that "policies to support childcare and family life are a cornerstone of future social and economic progress". Objectives in the PPF include:

• increasing childcare places in both the private and community sectors;

• increasing out-of-school hours childcare services provided by community groups and school management; and

• further national fiscal and social policy measures to reconcile work and family life. This involves the promotion of "family-friendly" policies at enterprise level, such as job-sharing, parental leave, flexitime, homeworking, and term-time working.

The management of the "work-life balance" has become an increasingly important topic of debate in Ireland as a result of significant changes in the social and economic context. The pressures associated with dealing with the conflicting demands of work and personal responsibilities has generated increased worker interest in "employee-friendly" working arrangements. Employers, meanwhile, have began to pay increased attention to the management of the "work-life balance" in response to recruitment and retention problems in a tight labour market that is moving towards full employment. It remains to be seen, however, to what extent measures to improve the "work-life balance" will be diffused across the economy.

Information and consultation of employees

There were no major developments in Ireland during 2000 in the area of employee information and consultation. However, preparations were made to amend the national legislation implementing the EU Directives on transfers of undertakings (77/187/EEC, amended by 98/59/EC) and collective redundancies (consolidated in 98/59/EC). This followed the issuing in 1999 of a reasoned opinion by the European Commission, arguing that European Court of Justice case law during the 1990s meant that the Irish legislation, introduced in 1977 and 1980, needed to be adjusted. The government thus prepared amendments (subsequently enacted in January 2001 - IE0102230N) introducing new mechanisms for the consultation of workers in firms which do not recognise trade unions, as well as access to the Rights Commissioner's appeal mechanism.

New forms of work

New forms of work, such as teleworking, have been the focus of increased attention and debate in Ireland, and are promoted in the PPF (see above under "Equal opportunities and diversity issues").

The commitment contained in the PPF to introduce legislation on part-time workers by June 2000, in order to comply with EU Directive 97/81/EC on part-time work, was not met. Nevertheless, the government stated its intention to have the legislation in place by the end of January 2001. Significantly, a code of practice may be drawn up by the Labour Relations Commission on the improvement of opportunities for part-time workers.

Other relevant developments

In view of the pressures and tensions generated by economic growth and membership of the "euro-zone", the Irish government and the social partners have begun to pay increased attention to the promotion of new forms of financial participation, such as profit-sharing and gainsharing (IE0007153F). The PPF contains a number of provisions relating to the diffusion of financial participation at enterprise level. There is a "partnership clause" that builds on the previous national agreement, Partnership 2000 (P2000), and provides for the voluntary establishment and deepening of financial participation: "The government and the social partners acknowledge the role of Employee Share-Option Trusts (ESOTs), gainsharing, profit-sharing and other financial employee incentives in developing and deepening partnership and in increasing performance and competitiveness." Furthermore, a consultative committee involving ICTU, IBEC and appropriate government departments and agencies, was established under the PPF to prepare proposals on financial participation initiatives, particularly in relation to taxation issues.

By the end of the year, however, financial participation schemes were not very widely diffused across the economy, and were mainly confined to large companies in the information technology and pharmaceuticals sectors. It remains to be seen whether the "workplace partnership clause" in the PPF can facilitate a wider diffusion of financial participation. As was the case under the rather loosely worded partnership clause in P2000, there is a renewed emphasis on the voluntary nature of partnership initiatives. That is, employers are obliged only to engage in discussions on partnership topics, and nothing more.

Outlook

At the beginning of 2001, the issue that is most preoccupying the social partners is whether the "adjusted PPF", and indeed, the Irish model of social partnership, will be able to contain burgeoning wage demands and pressure for a more equitable distribution of wealth. At present, it is possible only to surmise what the implications might be, but there seems little doubt that there will be further wage pressure as the economy moves closer to full employment. Much will depend on future trends in inflation, wealth redistribution and industrial conflict.

In terms of the outlook for inflation, while the reductions in indirect taxes in the 2001 budget may help to reduce inflation slightly in the short term, some of the other budgetary measures look set further to fuel domestic inflationary pressures by adding to consumer spending in an economy that is already overheating. In particular, a further decrease in the top rate of tax looks set to contribute to additional house-price inflation. Significantly, in a tight labour market, tax cuts - particularly for high earners - no longer serve to moderate wage pressures or encourage more people to enter the labour market. Rather, they serve to increase the demand for labour at a time when there has been a significant slowdown in the supply of labour. Whether this fuelling of domestic inflationary pressures will jeopardise the stability of the economy to any marked extent depends - to a significant degree - on the nature of external events. The government appears to have taken something of a gamble that is dependent upon a favourable external deflationary scenario consisting of a gradual appreciation of the value of the euro and a decrease in oil prices. If these two factors "come good", and there are signs that this may now be starting to occur, then inflation could fall in 2001. The government's own estimate for average inflation in 2001 is 4.4%. It is important to qualify this, however, because even if a favourable external climate materialises, there is still the question of the extent to which inflationary pressures from domestic sources will increase in an economy that is overheating.

In relation to the distribution of wealth and resources, although the "adjusted PPF" and the budget will undoubtedly contribute to an improvement in the living standards of low-income groups, it is still the case that the distribution of income disproportionately favours high-income groups. The government has shown little inclination to close the gap between rich and poor. In particular, the two-point cut in the top tax rate has served to exacerbate existing inequalities. In this context, it seems likely that there will be some pressure for a more equitable distribution of wealth.

In relation to industrial conflict and the future of the "social partnership" model, it is difficult to assess at this juncture whether the "adjusted PPF" and the budget package will help to dampen the burgeoning wage militancy that has recently been occurring, particularly in the public sector. There is a possibility that the raft of measures contained within the overall package - such as the pay increases, tax cuts/reforms, the reinforced "peace clause", and the fast-tracking of the public service benchmarking process - may help to dampen wage demands somewhat and prevent further outbreaks of industrial conflict, at least in the short term. The "peace clause" is still voluntary, however, and it remains to be seen whether the compensation package can prevent industrial unrest amongst workers and unions – such as the ASTI teachers' union – which decide to press for pay increases outside the confines of the PPF. There may also be tensions in the future over the application and interpretation of the "inability to pay" clause contained in the pay review. Thus, in the current industrial relations climate, the most optimistic scenario would appear to be "relative industrial peace". Whatever happens in the short term, there are still a number of obstacles and tensions that have not gone away, particularly those issues which have an impact on the quality of people's lives, such as income inequality and a lack of affordable childcare provision.